A settlement paid in such a way where the defendant, the plaintiff's attorney and a financial representative agrees of paying a settlement in installment instead of paying a huge amount at once is called a structured settlement. This usually happens when a plaintiff decides to settle the case through a large amount of money. Most of the time, a settlement is done by purchasing one or more annuities that guarantees the future payments needed to be made.
Paying for a settlement simply depends on how both parties agreed the payments to be done. For example, the settlement can be paid through annual installments within a few years, or in periodic lump sums once every couple of years.
One benefit of having a settlement 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 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 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.
There are insurance companies who have a policy of no assigning or transferring annuities to third parties as well as discouraging any sale at all. However, you can still sell structured settlement for as long as the state you live in allows it.
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 you will sell your settlement to is well established, reputable, and well funded. You do not want trust your money to some mediocre and unreliable entity who can just easily disappear and go bankrupt even before paying you the entire buyout money.