Whereby a claimant agrees to resolve a personal injury tort claim by receiving some part of the settlement in the form of periodic payments on an agreed schedule, rather than as a lump sum
While not many are familiar with the concept of “structured settlement money”, for those who are, these settlements are increasingly being seen as a great means of obtaining financial security throughout one’s life, following a tragedy. Although they are tailored to meet the needs of different individuals, in some cases these needs may change and in such situations, people who own structured settlements do have the option of accessing their money sooner. This is why structured settlements are being acknowledged as a relatively good financial option.
If a person finds themselves caught up in a court preceding that results in the plaintiff being owed money, instead of giving the person a lump sum, there is also the alternative of giving an annuity structured settlement. This process would involve finalizing the amount as well as the needs of the plaintiff. The consultant assisting in the process will then use the money to buy annuity from a company offering life insurance.
“The annuity should not be managed by an insurance company associated with the party at fault“. By doing this, structured settlements investments will not be subjected to fluctuating market conditions, recession or any of the other risks that investments are prone to. This results in the plaintiff receiving a series of payments of a specified amount for a fixed period.
Benefits of Structured Settlement Investments
Since structured settlement investments are conducted by a third party company, it means that the wronged person will have no reason to constantly associate themselves with the entity that wronged them. Structured settlements issuing companies function in a way that covers protection of the owners as well.
“One main benefit of structured settlement money is that it doesn’t interfere with the ability of an individual to sign up for other forms of assistance“. So neither your Social Security, Medicare nor other benefits will be affected if you are going to receive a settlement.
Another plus point of structured settlement investments is that the income obtained from them is not liable to taxation. It is because of this main benefit that litigators always suggest that their clients should opt for structured settlements instead of asking for a lump sum pay-out after winning a case.
If you have a structured settlement, then you can choose to sell your payments as and when you wish to. Although structured settlements are drawn up keeping the needs of the respective person in mind, if these needs alter, one may find themselves in need of immediate money. When faced with such situations, selling future payments will allow the person to get access to the money that they are in need of.
After all, when the need for money is urgent, you tend to go to a whole host of unusual places to obtain it. Although most financial advisors will advise you not to cash in your annuities or structured settlements, if you really need the money, this can be seen as a reasonable alternative. However, there will be certain drawbacks – for instance, selling off your annuity can result in you having to face surrender charges that can go up to 10 percent. There may also be penalties at times.
“Structured settlements, on the other hand, are more useful as they provide income that is tax-free, for life“. Although having that regular monthly money arriving at your doorstep is nice, at times, if you are unable to make ends meet, you would want to get your hands on the whole lump sum.
One needs to make informed choices because there are always a large number of fake companies waiting to prey on people, especially those that are in a desperate situation and move through the process in haste. Luckily, there are a number of federal as well as state laws in place to protect a consumer from such companies. Nevertheless, the settlement holder should always be cautious when they are looking for purchasing companies to sell their future payments to. However, it is important to choose Right Structured Settlement Company for better results.
What Are The Steps Involved In Cashing In Your Structured Settlement Money?
To cash in your structured settlement money, the payee needs to first prove that they have a genuine need for the money. At the same time, the payee will have to mention the payout amount that they are asking for. This is because most states have laws that need to ensure that the transfer of the rights of the settlement really is in the best interest of the payee.
“The moment the holder of a structured settlement requests for the lump sum amount, the settlement along with the reason for cashing it out, will be investigated by a team of agents“. If everything seems acceptable, the settlement holder will be offered an upfront sum in order to give up the stream of payments. This will also be accompanied with a discount rate, which is usually around 6 percent to 29 percent. Since the discount rates are along the same lines as the interest that would be paid on a loan, getting a low discount rate is seen as a better deal.
Once the offer is accepted, the company will move to the state court to file a petition to get the structured settlements transferred. The final ruling will depend on the judge, who takes into account the settlement holders need for the money, the discount rate and the reputation of the structured settlement company. The entire process can be done within 62 to 90 days.
While many cash in the entire amount, sometimes, a settlement holder may sell just a part of their payments in order to meet their financial needs. However, there needs to be a disclosure statement made which mentions both the discount rates being provided as well as other information that will help the agents make an informed decision.
However, the process of cashing in your structured settlement money can get quite complex, particularly because the amount is a sum of different factors and these factors are seen as being far more sensitive now than they were before. “This is why people consider cashing out their structured settlement money only as a last option“.