Structured Settlement Advance Loans & Payouts
What Is a Structured Settlement?
A structured settlement is an annuity that is set up on behalf of the individual so they receive guaranteed future payments that stem from a lawsuit settlement. Only injury victims are eligible for structured settlements. Many people who win personal injury lawsuits often accept the award as a structured settlement because it’s tax-free and it is a larger settlement than receiving an immediate lump sum. The structured settlement agreement governs the terms of the settlement and the annuity contains the amount the victim will receive over time.
If you have experienced a personal injury, filed a lawsuit and won or decided to settle out of court, you might be receiving a structured settlement payment over time rather if you didn’t elect the upfront lump sum. Some examples of a personal injury case where this may happen can include:
- Car accident or motorcycle crash
- Workplace accident
- Pharmaceutical drug side effects
- Slip and fall
Structured settlements were first used in Canada following a massive lawsuit over thalidomide, a drug many pregnant women took in the 1950s and 1960s to soothe morning sickness. Thalidomide was later found to cause the congenital disabilities and phocomelia. Structured settlements have become a common alternative to lump sum payments since the 1970s, primarily because:
- Significant increases in some personal injury awards
- Changes in the Internal Revenue Code allow the recipient to have tax liability waived (subject to certain conditions)
A structured settlement guarantees the recipient tax-free income installments over the life of the settlement. Many structured settlement contracts allow a beneficiary to be named. In the case a recipient experiences an untimely death those payments would revert to the designated individual. Structured settlements are a financial asset, that can be sold or assigned through the court order process.
Selling a structured settlement annuity may be helpful if the holder faces:
- Medical expenses
- Home purchase or renovations
- Education expenses, such as college tuition
- Pressing financial obligations
- Time-sensitive business or investment opportunities
Pros and Cons of a Structured Settlement
Structured settlements have grown in popularity because of their many benefits, but there are also negatives to opting out of a lump-sum deal. It’s important to recognize all of these points of view and speak with an attorney who can advise you before deciding whether or not to get a structured settlement.
Pros can include:
- Structured settlements are a guaranteed flow of income over the life of the annuity, which is often decades.
- Structured settlements are tax-free.
- Payments cannot be affected by the changes in the stock market.
- Structured settlement payments are a valuable asset and can be valued and sold in a competitive marketplace.
- In the event the recipient dies, structured settlement payments can be deferred to a beneficiary.
- Structured settlements are often a welcomed compromise in a lawsuit, with advantages to both the plaintiff and the defendant. Those who don’t want to pursue long-term litigation may prefer a structured settlement.
Cons can include:
- Although personal injury settlements aren’t taxable, other parts of a plaintiff’s award — such as punitive damages and recovered attorney’s fees — can be taxed.
- Structured settlement payments are not flexible once established. If your circumstances change and you need a larger monthly payment or a lump sum for an emergency, you cannot access the funds.
- A judge must approve all sales of structured settlements. If the judge doesn’t approve of your reasoning, you can’t sell it.
- If you withdraw from your structured settlement early or incorrectly, surrender fees and IRS penalties may apply.
Luckily, some of the cons of structured settlements can be mitigated if the annuity holder sells part of or all of their future structured settlement payments. Structured settlement annuity buyers can provide sellers with an immediate lump sum of cash in exchange for some or all of their future structured settlement payments and a fee.
What You Are Selling
Keep in mind that you are not selling the actual structured settlement. The actual settlement is typically an annuity that is owned by the insurance company, which holds the money and disperses it to you in accordance to a contract. When you sell part or all of your structured settlement, you are actually selling the right to receive payments, which is then transferred to the funding company.
Structured Settlement Process
Establishing a structured settlement is a legal process. It starts in court — the plaintiff is a victim of an injury and sues another person or group who they believe is responsible for damages incurred.
The plaintiff may be awarded money as compensation for their injury, either as mandated by the court or as negotiated by the lawyers before the end of the trial. They have the right to a structured settlement and may elect one, meaning the defendant will pay the plaintiff with a structured settlement and annuity contract and the plaintiff will receive installments of the full award over an extended period. Often, negotiating a structured settlement out of court releases the defendant of any further liability from the plaintiff.
Defendants often purchase an annuity for the full amount of the settlement from an insurance company. This purchase fulfills the defendant’s financial obligation to the plaintiff and makes the insurance company responsible for facilitating the structured settlement agreement with a qualified assignment.
If the plaintiff later decides they need a lump sum of cash rather than installments of their settlement, they can approach a company like CBC Settlement Funding to sell all or part of their structured settlement annuity. Selling your structured settlement is also a legal process that our skilled team of professionals is ready to walk you through — we understand how intimidating court proceedings can be for first-time sellers, so we break down the selling process into easy steps.
The present value of a structured settlement annuity depends on several different factors, including the total amount and timing of future payments, current interest rates and the creditworthiness of the insurance company that issued the structured settlement annuity. A judge must also sign off on a structured settlement sale before it is finalized, so the plaintiff must present a reason for cashing in their structured settlement annuity.
The company purchasing the structured settlement annuity may make an offer on the annuity, including a discount rate comparable to interest on a loan, after reviewing these factors. Once both parties accept the offer, the company will file a petition in its state court to receive the assignment of the annuity payments in exchange for an upfront lump sum to the annuitant, should the judge approve the assignment.
Get Cash from CBC Settlement Funding
If you decide selling all or part of your future structured settlement payments is the right choice for your financial needs, CBC Settlement Funding can provide you with a lump sum cash advance for all or part of the total amount. CBC Settlement Funding is accredited by the Better Business Bureau with a A+ rating and we pride ourselves on providing a superior level of customer service.
If you’re not sure whether selling your structured settlement annuity is right for you, you can contact one of our customer service representatives for more personalized information. Our customer service staff will listen to your unique situation to provide a customized cash options to fit your financial needs.