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Structured Settlements                                     Online Request For Quote

 

FREQUENTLY ASKED QUESTIONS
You may scroll through all the answers below or you may click on
any individual question and go directly to its answer

  1. What is a structured settlement?
  2. Which cases would most likely use a structured settlement?
  3. Why would anyone want to sell their structured settlement?
  4. Do I have to go back to court to have the sell approved?
  5. Don't the insurance companies object?
  6. What do the laws say about transfer of the settlement payment?
  7. How long does it take to get my money?
  8. What information does the judge typically need to review the case?
  9. Do the sellers need to get independent financial advice?
  10. What costs will the annuitant bear if the court denies the transaction?
  11. Can the annuitant sell only a portion of his or her payments?
  12. Are there tax consequences to the structured settlement or the assignment?
  13. Can this funding be used for workman's compensation settlements?
  14. How much money will I get for my payments?
  15. Is this funding available in all 50 states?

ANSWERS TO QUESTIONS

  1. What is a structured settlement?
    Very simply put, a structured settlement is a financial tool primarily used to settle a personal injury claim. The injured party or plaintiff accepts a long term payment stream in exchange for releasing the defendant from any liability. The vast majority are negotiated out of court.

    This payment stream is set up as an annuity that is being paid by an insurance company. Section 104(a)(2) of the Internal Revenue Code clarifies that the full amount of the structured settlement payments is tax free to the victim. By contrast, the investment earnings on a lump sum payment are normally fully taxable.

  2. Which cases would most likely use a structured settlement?
    The NSSTA states that "Independent surveys show that the more serious the injury, the greater the liklihood that a structured settlement will be used." This is undoubtedly because these cases are usually much larger lump sum payments. Generally speaking, the following cases often use the structured settlement:
    • Persons with temporary or permanent disabilities
    • Guardianship cases that may involve minors or persons found to be incompetant
    • Workers compensation cases
    • Wrongful death cases where the surviving spouse and/or children need monthly or annual income
    • Severe injury, especially with long-term needs for medical care, living expenses and support of family
  3. Why would anyone want to sell their structured settlement?
    The structured settlement more often than not meets the needs of the payee as originally planned but the court can not anticipate future events and the original intent of the structured settlement may no longer serve the interests of the plaintiff. The original settlement never predicts divorce, early death, medical emergencies, or even changes in financial conditions. They certainly never predict (although often the case) that the personal injury award is insufficient to cover the effects of the injury, resulting in more or sooner than expected medical expenses.

    Not all structured settlements can be sold. No court will approve the sale of all future settlement payments under all conditions. Some unfundable conditions include payments to minors or their guardians, payments intended for medical necessities or payments made to the disabled or unemployable where the structured payment is their only source of income. The most common accepted reason for selling future payments is some form of financial emergency or need where the injured party does not have access to traditional financial sources.
  4. Do I have to go back to court to have the sell approved?
    YES. Federal law now requires court approval. Both federal and state laws require that the transfer of structured settlement payment rights be determined by a court to be "in the best interest" of the injured party while considering the support and welfare of his or her dependents. The court must be given full disclosure of all contract details and interested parties must be notified. In some cases the injured party must appear before a judge but usually a personal appearance is not required.
  5. Don't the insurance companies object?
    A few insurance companies object to these transactions, but most do not. Our funding sources have working relationships and agreements with most insurance carriers and know in advance which venues they desire as well as the representations, warrants, and stipulations they require in each court order. As a result, they can prepare orders in advance with the proper language expected by each company, ensuring an orderly transfer without contentious and costly court battles.
  6. What do the laws say about transfer of the settlement payment?
    With the passage of federal law HR 2884, which took effect on July 1, 2002, the injured party under the structured settlement now has the right to sell his or her payments, without tax consequences, via a court review process. The court review process is designed to protect the rights not only of the injured party, but also the insurance company and the investor purchasing the rights to the payments.
  7. How long does it take to get my money?
    The experienced funding sources have developed very efficient underwriters and attorneys who are very capable in working with the courts and insurance companies. The industry average for receiving approval and funding of cash is 90 days. The court approval process has the greatest impact on the time required.
  8. What information does the judge typically need to review the case?
    The judge will require complete disclosure of all information about the transaction and this will generally include the following:
    • The discount rate applied to the payments
    • The retail value or replacement cost of the payments being transferred
    • Evidence that all interested parties have been sent notice of the pending transaction
    • Names and ages of all dependents
    • Personal testimony by the injured party about the need to sell the payments
    • Testimony from any interested party who may oppose the transaction
    • A copy of the contract, the original settlement and the annuity policy
  9. Do the sellers need to get independent financial advice?
    Sellers should consult with an independent financial advisor of some sort. Some states have made this a mandatory requirement while others require the seller to sign a waiver if he chooses not to seek independent legal or financial advice.
  10. What costs will the annuitant bear if the court denies the transaction?
    NONE. First of all, the funding sources for these transactions have become very good at knowing what it takes to get approval and the success rate of proposed transactions is over 90%. However, in that rare case where the injured party's petition is denied, the funding source assumes the entire cost.
  11. Can the annuitant sell only a portion of his or her payments?
    YES. The best funding sources all work with the injured party to ensure the transaction is structured to meet his or her needs. Typically they strive to leave as much as possible of the injured party's monthly payments by purchasing only a portion of each payment or a portion of the total payments available. Actually, most investors prefer that the injured party save some of their future payments and only sell those necessary to meet immediate financial needs.
  12. Are there tax consequences to the structured settlement or the assignment?
    First of all, HR2884 made it clear that there are no tax consequences on the payments granted under the original structured settlement. This is based on the concept that a settlement for personal injuries simply returns, or attempts to return, through monetary relief, the injured party back to the position they were in before the injury. Since there is "no gain", but rather just a return to "normal", the transaction has no taxable basis.

    In addition, on June 10, 1999 the IRS issued Private Letter Ruling 119273-97, which confirmed that an individual's sale of their structured settlement payments could not create a tax liability to that individual.
  13. Can this funding be used for workman's compensation settlements?
    NO. Nearly all states have laws that specifically prohibit the assignment of workman's compensation benefits, and the laws that govern structured settlement transfers specifically say that such transfers cannot contravene existing laws.
  14. How much money will I get for my payments?
    This is often the wrong question. The first step should be for you to decide how much money you need now and the funding source can then give you different options to determine how much of each payment or how many future payments you would need to sell to receive that amount. Sometimes, however, it does make sense to sell all the future payments and that option is also available.

    The factors that impact the value of your payments are the financial rating of the insurance company making the payments, the size of your settlement and how far into the future the payments extend.

    You can receive a free estimate of the future value of your payments by completing our simple Online Submittal Form .
  15. Is this funding available in all 50 states?
    With the recent passage of Colorado's bill 39 states now have transfer statutes in place. Individuals living in states that do not currently have a transfer statute are often permitted to file their petitions in the state where their insurance company is headquartered. It is, therefore, rare that a proper venue cannot be found to file a petition for transfer. For a current list of states that have transfer statutes click on the bar below.

 
Structured Settlements                                     Online Request For Quote