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FAQ – Companies That Purchase Structured Settlements

If you are considering contacting a company that will purchase structured settlements, then you should read this article first. Here, you will find answers to the most frequently asked questions associated with any decision to sell structured settlements.

So, read further to become better informed and avoid getting scammed.

What Is A Structured Settlement?

This method of settling lawsuit disputes includes a financial instrument, much like an annuity, that allows lawsuit settlements to be paid as a stream of income instead of a lump sum. Typically, these benefits are paid for a fixed period of time (period certain payments) or until the victim's death (lifetime payments).

However, the payments can be "structured" to include both an initial lump sum payment as well as a periodic payment of income. Even though these type of arrangements are primarily set up as a result of a personal injury lawsuit, this settlement option has been used in conjunction with employment disputes, discrimination cases and contractual disputes.

Why Are Settlements Structured?

Settlements might be structured for a variety of different reasons, attempting to take into account the potential future needs of the plaintiff and provide a reliable source of income.

In these instances, the plaintiff or his guardian will purchase structured settlements to ensure the plaintiff has a reliable stream of income throughout his or her lifetime.

Unfortunately, this set up can quickly become a burden due to a lack of flexibility and inability to adapt to life's events. You might need the ability to sell structured settlements to provide the financial flexibility to expand the financial options for you and your family.

In rare circumstances, some companies are willing to write structured settlement loans for short term cash needs. But because these require the same level of judicial review, they are not common.

Does The Company Have To Purchase Structured Settlements In Their Entirety?

Absolutely not.

In fact, the most common scenario involves a seller who needs a specific lump sum for a particular purpose. If the lump sum is small enough, the company desiring to buy the annuity will offer to purchase a portion of the stream of income payments as opposed to th whole thing.

A reputable company that wants to buy structured settlements will work with the seller to determine the best way to obtain the lump sum needed while maintaining a degree of flexibility. The company will take the information provided by the seller and apply the information to a structured settlement calculator to arrive at a quote for the seller to evaluate and review.

How Long Will It Take To Get My Money?

The seller typically received his or her cash within four to six weeks after paperwork is completed. The variance in time is cause because each seller has unique circumstances that may postpone or delay payment including, missing paperwork and the need to get court approval.

The company will assist the seller in expediting the process.

Will I Have To Pay Taxes On The Money I Receive?

It depends.

While federal law hold that money coming from a pain and suffering settlement as tax exempt, state laws may vary from state to state. The preferential treatment given to personal injury payments is codified under Internal Revenue Code Section 5891 (2001).

However, if the damages were paid in conjunction with an employment dispute, the lump sum could be taxable income. Sellers should consult with an accountant, lawyer or tax professional to determine the tax treatment of the money received.

Will My Annuity Carrier Penalize Me If I Cash It In?


Even though some internal policies prohibit such transfers, Internal Revenue Code Section 5891, makes such transfers legal.

You will need to consult with an attorney to determine your contractual obligations under the annuity contract.

Purchase Structured Settlements With Confidence

Now that you have some answers to the most common questions asked by clients, you can approach several companies that purchase structured settlements.

Sometimes, the company that offers the most cash for your annuity is not the best choice. Instead, the decision to sell should be made after evaluating all available information.

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