A Financial Tip: Selling Structured Settlements

When a plaintiff settles a case with a large amount of money, usually the defendant, the plaintiff's attorney and a financial representative will come into an agreement of paying the settlements in an installment basis over time, instead of cashing out a big amount, one time. A settlement paid this way is called a structured settlement. Usually, a structured settlement is made by buying one or more annuities that guarantees the future payments to be made.

Paying for a structured settlement is quite flexible, depending on the terms agreed by the two parties. The settlement can be paid through annual installments within a few years, or in periodic lump sums every couple of years.

One benefit of having structured settlements is the ability to avoid taxes. With a proper set-up, a settlement like this can significantly reduce the plaintiff's tax obligations as an offshoot of the settlement itself. There are even cases when it becomes totally tax free.

A structured settlement can also protect the plaintiff from dissipating the funds meant to take care of future needs. There are times when structured settlements even protect the plaintiff from himself - there are people who are just bad with handling money, especially in overwhelming amounts; and there are some who can't refuse their relatives who wants to take part in the wealth money. Large settlement pays are usually exhausted quite easily and quickly.

People who have structured settlements are often approached by companies interested in buying the settlement, or may be curious if you have intentions to sell the structured settlement in return for a lump sum buyout. A rough two thirds of all states have laws which prohibit people to sell their structured settlement, while tax-free settlements are also subjected to a few federal restrictions on their sale to a third party.

Some insurance companies also have a policy not to assign or transfer annuities to third parties as well as discouraging any sale altogether. But, you can still sell structured settlement depending upon where you live and what the terms of your annuities are.

Always keep in mind that companies who buy structured settlements from people have only one goal - to gain profit from their purchase, that is why sometimes their offers are a bit low. You can however try approaching more than one company if you wish to sell a structured settlement, just to make sure that you get the highest payoff.

Make sure that the company who wants to buy your settlement is well established and well funded. You do not want to trust your money to some fly-by-night company disappearing or going bankrupt even before paying you the buyout amount.