Structured Settlements: Funding Your Payments

Generally, injured parties found themselves impoverished and without medical care as a result of careless spending, unprincipled administrators or voracious relatives. Annuity settlements came about in consequence of many individuals being given huge amounts of cash for injuries. If it is not possible to invest the money yourself, then you have to arrange for someone else to do it. It can be a burden to abruptly come into a lot of cash. The money should be invested in some way, and invested wisely. Such state of affairs often works out badly, and a lot of victims of work-related injuries find themselves penniless in a short time instead of being comfortable for survive.

In a case relating physical harm and lawsuits relating a responsible party, a structured settlement might be recommended as an alternative to all of the cash at once. The responsible party and victim will get together to discuss what the victim may require regarding care or aid, and to decide the length of time that medical attention will be needed. A present-day value is determined and a structured settlement broker specialist in annuities will execute the essential calculations to determine the long-term value of the payments. The party that pays the damages will then buy an annuity to fund the settlement, which will pay the accident victim steadily over the agreed-upon time of the settlement.

Is it possible for a victim to sell a structured settlement? There are many entities that like to buy structured settlements, lottery annuities, and other long-term settlements.

Any one of investors that makes an offer to purchase your structured settlement is interested in doing so for investment purposes. Buyers wish to make money on the purchase, and for them, that profit will be earned over a long time.

Intermittently, it may be feasible to sell your annuity, although laws may differ depending on where you live. If you agree to accept a settlement that includes an annuity, it may not be exchanged for a lump sum payment, and you may not use your settlement as security for a loan.

You have to shop around for the best contract, as different companies may offer extensively different amounts for your settlement. The sale must be arranged in court and certain insurance companies won't allocate them to a third party.

Be careful of scams; you will wish for an attorney to make sure that you actually get your cash for the transaction. When and if you decide to sell your settlement, talk about it with a capable legal representative.

Therefore, the worth of your payments in current dollars may be half of the total value or even less, depending on how the annuity was designed. If you put up for sale, be sure to understand that the total sum that you are going to be offered will probably look like quite minute.

The worth of your payments was determined by a number of factors - the length of time you are to be paid, the specifics of your trouble, and the expected rate of inflation over the months or years you will be paid. The party to blame that is funding your payments is obtaining an annuity, and the amount that they pay up to set up that annuity is but a little bit of the total amount you will ultimately receive.

When all's said and done payment plans of this type are quite changeable, and can be helpful where the injured party requires an income for scores of years.

taken from http://www.content4reprint.com/finance/structured-settlements/funding-your-payments-in-structurered-settlements.htm

Stone Street Capital

New York Structured Settlements Education Series

Questions/Misconceptions About Structured Settlements

Beware of Structured Settlement Buyers

Sell Structured Settlement

Why are structured settlements useful

A structured settlement once agreed by you to receive, you cannot exchange it for a lump sum payment, and you may not utilize your settlement as security for a loan. In some situations, you may be able to sell your structured settlement, but laws differ from state to state.

The value of your payments in present-day funds may be half of the total value or even less, depending on how the settlement was designed. Once you part with your money, be attentive that the total amount that you are going to be offered for your settlement may come into view attractive tiny.

The answerable party that is paying you is purchasing an annuity, and the cost of funding that annuity is but a small part of the amount you will receive over the period of your settlement. The market value of your annuity was determined by many different things -the amount of time you are to be paid, the specifics of your state of affairs, and the predictable rate of inflation over the months or years you will be paid.

Talk about it with a reputable attorney, after you decide to part with your payments. You will need to go to court to make easy the sale and some insurance companies can not assign them to an investor. You should shop for the best terms, as different investors may provide very different offers. Be cautious of scams; you will want an attorney to make certain that you get your funds for the transaction.

Nine times out of ten structured settlements are quite useful, and can be used just about any time where the victim or injured party requires regular cash for a long period of time.

In scenarios involving harm and a suit involving a party to blame, a structured settlement may be negotiated as an option to payment all at once. The party to blame and victim will meet to discuss what the victim needs in terms of care or support, and to talk about how long that assistance will be necessary.

A contemporary market worth is determined and a structured settlement broker or an insurance company representative will perform the necessary calculations to determine the long-term value of the settlement. The answerable party that pays the damages will then purchase an annuity to pay for the structured settlement, which will pay the injured person a stable stream of payments over time. It can be hard to suddenly come into a large amount of money.

The payments must be invested where it can earn more, and invested sensibly. If you will not handle the funds on your own, then you have to find someone to do it for you. Such conditions usually end in financial calamity, and many survivors of injury found themselves broke after just a few years instead of being comfortable for live.

A huge number of survivors wound up poor without sufficient care as a result of untamed spending, unscrupulous administrators or money grubbing relatives. Structured settlements came about as a result of many people being paid considerable sums for personal injury.

Is it possible for a victim to sell a structured settlement? There are many investors that buy annuity payments, annuities from lottery winners, and other annuities.

Subsequently, buyers wish to earn money from the arrangement, and for them, that profit will be earned over many years. Whichever party that intends to purchase your payments is aggravated by investment purposes.

Taken from http://www.content4reprint.com/profile/brunodepeno-18324.htm

Structured Settlement - A Glossary of Terms

Here we have compiled a glossary of terms covering both structured settlements and annuities to give you a comprehensive understanding of those components.

Annuitant
The term used to describe the annuity contract holder, i.e., the person who buys the annuity.

Annuity
A contract between a client and an insurance company where the client receives periodical settlement payments for a specified length of time.

Annuity with compounding benefits
An annuity where a fixed percentage of increase is added to each year of payment.

Beneficiary
A person or persons who “benefit” by receiving the payments of a policy holder who has died. This is also referred to as a “contingent payee.”

Benefit
Money paid to a policyholder by his or her insurance company.

Claim
A claim for a payment or payments from an insurance company by a policyholder.

Claimant
The person requesting for a payment or payments as a policyholder.

Contingent Payee
A person or persons who “benefit” by receiving the payments of a policy holder who has died. This is also referred to as a “beneficiary.”

Defendant
A person or company defending legal action from any other person or company.

Deferred Annuity
An annuity where payments are deferred until a predetermined point in the future.

Employment claim
A claim against an employer for wrongful dismissal, sexual harassment, racial prejudice or other such complaints.

Fixed annuity
A tax deferred annuity fixed at a rate of return during the term of the contract, usually until the annuitant dies.

Flexible Premium Annuity
A tax deferred annuity that allows for contributions at any time.

General liability
An insurance claim for damages or injuries resulting from patronage of a private company.

Guaranteed benefit
A structured settlement that guarantees the payments of money regardless of whether the claimant is living or dead. This is sometimes referred as a “lifetime annuity.”

Immediate Annuity
An annuity that starts paying out immediately, usually within one month of purchase.

Life only Annuity
A structured settlement designed to pay-out only in the duration of a claimants life. Payments will cease if the claimant dies.

Lump sum
A one-off single payment or a payment in one go/total.

Medical Malpractice
The term used to describe improper medical treatment where the patient receives insufficient treatment to the detriment of the patient’s health, well being or even resulting in death.

Medical trust
An account operating as a trust which covers a claimant’s medical expenses.

Non-qualified Annuity
An annuity that is first subject to taxation.

Normal life expectancy
The age of which a person may be expected to live, based on life insurance actuarial tables.

Personal Injury Claim
A claim made by a person who has suffered personal harm or injury to the body or mind, including accidental injury or sickness.

Plaintiff
A person or company who takes legal action against any other person or company.

Premium
The total cost of an annuity contract.

Qualified annuity
An annuity that is not subject to taxation.

Quote
The set cost of an insurance policy determined by an insurance company.

Settlement Agreement
A stage of settlement where all involved parties are in agreement with one another and satisfied with the outcome of the settlement.

Straight/straight life annuity
A tax deferred annuity fixed at a rate of return during the term of the contract, usually until the annuitant dies.

Structured Settlement
A form of settlement that pays benefits in periodic installments instead of in one lump sum or a one-off payment.

Tax Sheltered Annuity
A tax-exempt annuity usually only offered to employees of tax-exempt organizations such as hospitals, schools and some charities for example.

Term Certain Annuity
An annuity where the term of the contract duration is specified and certain, i.e. for 10 years, or 15 years for example.

Variable Annuity
An annuity contract that gives the client complete control over the annuity meaning he or she can spend the money on any number of different investments of his or her choice. This also means they are liable for all losses and not the insurance company.

Workers Compensation
Payments paid to an employee or the employee’s beneficiary from the employer as a result of injury or death caused in the work place that is the fault of the employer.

FAQ's of Structured Settlements

Structured Settlements

I hope that information like what is pasted below will help in your decision to sell your structured settlement. This is general information regarding structured settlement to help you make a much more definite decision. Do take the time to read as much about the sale of structured settlement so that you can get the best and most out of the sale of the structured settlement. The first question you might have: Should I sell my payments? The answer to that one is difficult. The question you might want to ask yourself is: Do I need the money now? For example: to buy a house for your family, money for your child's education, a business opportunity or to keep from filing bankruptcy in order to keep your home. Any good reason would make sense. To go on vacation or buy an Acura Legend might not be in your best interest. If you have other money sources to explore, I suggest using those options first. Using you structured settlement should be a last resort. What is it going to cost me?If you add up all your settlement payments and figured your settlement is worth that amount today, you might be disappointed with the amount the broker will offer you. Your structure came about because a certain amount of money was put into an annuity and then that principal, together with the interest is paid out over a period of time. (for example: $1,000. invested at 7.2% will double in 10 years, meaning if your payments adds up to $2,000. over 10 years only $1000.or an amount less than the $2000. was paid to buy that benefit.) So when you speak to a broker, it may look like you are only getting less than the sum of your payments. Simpler answer: the present value (today's value) that's the $1000. will be discounted to cover costs to do the deal and the rest is sent to you. I know it's confusing, It took me awhile to understand, when it was first explained to me. How long will it take to get my money?  You may have been told by others, 3 days,a week to 10 days. Not true - this is to get you to committed to them. Truth is - 2 months or longer - it depends on a number of things: a. The Insurance Company - (both issuer and owner of the annuity) - some companies are very difficult to deal with as you may have already experienced. b. MOST STATES NOW NEED COURT ORDERS. UPDATE: New law makes all structured settlement payment sales subject to a court order. If no court order, a tax equal to 40 percent will have to paid on the total amount of payments being sold. This is good, making selling your settlement sale safer. (For more information click here.)  c. Do you have monthly, quarterly, Semi or annual payment or are they lump sum payments?Different funders have different requirements and it is important for your broker to know those requirements. You will be able to obtain your money sooner with a lot less frustration if you have a knowledgeable broker. d. Is your Insurance Company an impaired rated company? - most funders sell off these cashflows or settlements much like mortgages to large Wall St. type financial companies and a couple of other insurance companies. They buy up these settlements in large blocks of a million dollars or more. These companies tend only to be interested in A+ rated ins. company backed annuities. So the Funder may have to hold the settlements of lower rated ins. companies or sell them off at a lower profit margin, therefore a lower price to you e. All the above applys to pricing plus having the necessary documention such as a copies of the following: The annuity, the settlement agreement and release, photo ID, recent check and application. see Settlements The above are a few of the considerations, there are more, but I think you get the idea.  How do I get the best deal? Not so easily. The best price today, can mean that when or if you sell off more payments in the future, you may find you didn't make such a good deal. Example: You could sell for the best price today, later in a year or so you may want to sell more payments, some funders will only honor their own address change, in which case, any other Funder buying additional payments will not be protected or guaranteed to receive those additional future payments. Call me or email me to explain that one, I know its hard to understand. Some funders will not buy the last payment.  How do I know if I'm dealing with a knowledgeable broker? There are brokers who say that they will shop for the best price and I'm sure they try to do that. The only problem is, "best price" isn't the only consideration. All things being equal Experience seems to prevail along with creativity, ingenuity and plain hardwork. Most brokers I have dealt with are honest; however most have little or no experience in this area of expertise. Graduates from those one week courses that point out that they are "certified" need at least one to two years of experience first. Few brokers do that many structured settlements or have the opportunity to gain the much-needed practice to convert annuities to lump sum payments. It took me a number of years to understand the process and I have 28 years background in the financial community. Questions to ask the broker: How long have you been in the structured settlement environment? What did you do before you came in the business? The broker should have some kind of a financial background, it's that difficult a business and getting more difficult every day. Trust your instinct, talk with the broker of your choice, get a sense that they are aware of the complexities. If it sounds too good to be true, you are right, meaning if they are offering a lot more money than other brokers, or can get the job done a lot sooner they may not be aware of the complexities that your settlement conversion may entail. You need to choose someone who is a good problem solver, as well as ethical.  There are few things that come easily, most of the time it takes a lot of diligent hardwork. I hope I haven't confused you more than when you started reading this.The important thing to remember is that with competent advice you can and will get the money you need. That is why I get such satisfaction out of this business.Over the years, I have received letters from clients telling me how I helped them to achieve some of their life's goals such as buying a new home, starting a successful business venture or getting out of a difficult situation. I hope we can share a positive experience in a similar way. There are good informed brokers out there. I suggest you take some time to explore all your options and select the right one for you. My goal is to help you get a fair price for your settlement, and to help you obtain your money in the shortest amount of time.

Cash Payment For Your Structured Settlement

As a result of a personal injury, medical malpractice, or workers' compensation case, you are the beneficiary of a structured settlement. Now you see ads promising "cash for your Structured settlement", and you are wondering, should you cash out? well, you could,,,,,, but before you do please.... very, very, carefully examine all your options..... and figure out if selling your structured settlement is in your interest.  

What is Structured Settlement, definitions......

Definitions

A definition of “structured settlement” can be found in Internal Revenue Code Section 5891(c)(1) (26 U.S.C.), which states that a structured settlement is an "arrangement" that meets the following requirements:

• A structured settlement must be established by:
  • A suit or agreement for periodic payment of damages excludable from gross income under Internal Revenue Code Section 104(a)(2) (26 U.S.C.); or
  • An agreement for the periodic payment of compensation under any workers’ compensation law excludable under Internal Revenue Code Section 104(a)(1) (26 U.S.C); and
• The periodic payments must be of the character described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c)(2) (26 U.S.C. ) and must be payable by a person who:
  • Is a party to the suit or agreement or to a workers' compensation claim; or
  • By a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with Internal Revenue Code Section 130 (26 U.S.C.).

It is important to note that the language immediately prior to Internal Revenue Code Section 5891(c)(1) states that the definition that appears there is "for the purposes of this section". Internal Revenue Code Section 5891 entitled "Structured Settlement Factoring Transactions" deals with the excise tax imposed on the "factoring discount" (see IRC 5891(c)(4)), when there is a purchase of structured settlement payment rights and the exceptions to the excise tax. A number of structured settlement industry commentators have been observed attempting to broaden the express language that appears in the Internal Revenue Code.

taken From Wikipedia, the free encyclopedia

What is a Structured Settlement, Another detailed explanation ...

A structured settlement is a financial or insurance arrangement, defined by Internal Revenue Code as periodic payments; a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada after settlement for children affected by Thalidomide. Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sum settlements. The increased popularity was also due to several rulings by the IRS and an increase in personal injury awards. The IRS rulings changed policies such that if the requirements were met then claimants could have federal income tax waived.

Structured settlements have become part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Structured settlements may include income tax and spendthrift requirements as well as benefits and are considered to be an asset-backed security. Often the periodic payment will be created through the purchase of one or more annuities, which guarantee the future payments. Structured settlement payments are sometimes called “periodic payments” and when incorporated into a trial judgment is called a “periodic payment judgment." This is also called a coupon for a regular bond.

(From Wikipedia, the free encyclopedia)

Shopping for offers and Consulting a Lawyer

Shop Around For Offers

Remember, do not take up the first offer you receive for the sale of your structured settlement, if you are approached about it, or if you find yourself a buyer. Almost always, there is a benefit in consulting different brokers or buyers in regards to your settlement. Just be sure that you are working with a reliable lawyer who has an established reputation.

Consult A Lawyer

In regards to your structured settlement it is always wise to consult a reliable lawyer before agreeing to the sale. Doing this has a number of benefits, like ensuring that your rights are protected. The lawyer can also help when you are not in control of a situation, for example if a company which purchases your settlement is, for some reason, not able to collect the payments from the insurance company which issued the annuities in your settlement package. A lawyer will be able to tell you if the terms of the purchase agreement are reasonable, and may also be able to advise you as to whether the offer made for your settlement is adequate. 

Tax Consequences

A typical structured settlement is designed with a single mindset, to provide significant tax advantages to the injured plaintiff. Because of this there can be significant tax consequences associated with selling part or all of a structured settlement settlement. For example, while the payments made under the structured settlement were not taxed, you should expect to have the lump sum amount received through the sale of the structured settlement to come with a tax deduction.

Restrictions on Structured Settlements

Two Thirds of the states have laws restricting the sale of structured settlements. Then there are also the additional federal regulations that apply to the sale of structured settlements. A court approval will have to be obtained for the sale for the sale, and most states have statutes in effect which regulate the transfer process.

Being that as it is the insurance companies that issue the annuities for the structured settlement may refuse to cooperate with the sale of a structured settlement, citing policy language and asserting that payments cannot be assigned.

Sale of a structured settlement

Quite a few people who have obtained a structured settlement through their personal injury or workers' compensation claims, wonder if they should try get a sale for their structured settlement in return for a payment in lump sum. This may be a number of things, relatively modest curiosity, piqued by an advertisement announcing "The money is yours!", a promise of a cash on the spot payment,or it may be based upon a more dire need for funds. However, the sale of a structured settlement is not so easy and not always possible. Then of course you have to decice if the sale of a Structured settlement is an economically wise decision.

Your Structured Settlement Should Work For You
The best time to decide whether a structured settlement is right for you or not is before you consent to such one such structured settlement. You may wish to press for a lump sum amount, for periodic lump sum payments in addition to smaller annual payments, or for a lump sum payment that can be issued at a future date when you anticipate a particular need. If a package in consented upon that is in your best interest at the outset, you will be able to maximize the value of your settlement and get the greatest tax benefit from the structured settlement.

Remember that companies which purchase structured settlements intend to profit from the purchase of your structured settlement. Their profit comes out of the structured settlement payments you would otherwise be receiving.

Another aspect of the sale is the fact that if your future earning capacity has been impaired as a result of your injury, you should consider your future needs when you are making any decision regarding the sale of your structured settlement.

Special Considerations

In relation to the settlement, being on guard for potential exploitation when entering into a structured settlement would be considered very wise.

Excessive Commissions – For Insurance companies, annuities that come with the structured settlements can be very highly profitable, and more often than not, carry very large commissions. Ensuring that commissions charged in setting up a structured settlement don't consume an inappropriate percentage of its principal, would have to be considered as one of the most important on the structured settlement check list.

Overstated Value - Over stating the value of a structured settlement, after negotiating a particular settlement, is fairly common. The result is that the plaintiff, while accepting the settlement, agrees to a much lower dollar value than that agreed upon. Defendants have been known to supposedly pay the complete amount of the settlement, later acquiring significant reimbursements from the annuity companies used. Comparing the fees and commissions charged for similar settlement packages by various insurance companies should be looked into, This confirms the best value of the settlement. A plaintiff may wish to make it a condition of the settlement that the defendant will actually pay the full value of the settlement in setting up the structured settlement, and that any rebates received by the defendant for annuities included in the settlement be payable to the plaintiff.

Self-Dealing - Cases are also known, where the plaintiff's lawyer is also in the insurance business, setting up a structured settlement on a client’s behalf without disclosing that the attorney is purchasing the annuities from his own business, or is pocketing a large commission on the annuities. Accepting a referral fee in relation to the clients account is also known. This is done by referring the client to a particular financial planner to set up a structured settlement. It is good to know the financial interest the lawyer has in regards to the services sold or recommended.

Expectancy of Life – Unfortunate, yes, but receiving a large personal injury or workers' compensation settlement means a shortened life expectancy as a result of their injuries. Life expectancy should be considered with any structured settlement and an annuity where payments will cease upon death should be considered. Sometimes it will make sense to insist upon an annuity that pays a minimum number of payments, or one that will pay a balance into the plaintiff's estate, such that the value of the settlement is not lost to an insurance company upon the plaintiff's untimely death.

Using Multiple Insurance Companies – Purchasing annuities for a structured settlement from several different large companies, dividing the settlement for larger settlements, makes sense in the case of a large settlement. This provides one with protection in the event that a company that issued annuities for your settlement package goes into bankruptcy - even in the event that one of the companies defaults in part or in full on your settlement payments, you would still receive full payment from the other companies.

Taken from the ExpertLaw Library http://www.expertlaw.com/library

Selling a Structured Settlement

It is more than likely that if, you have a structured settlement plan, you have been approached by a company interested in purchasing your structured settlement plan, or curiosity about selling your structured settlement may have crossed your mind. Selling your structured settlement for a lump sum amount theoretically sounds good, except, about two thirds of the states have enacted laws restricting the sale of structured settlements. Tax free structured settlements sales to a third party are subject to federal restrictions.

Some insurance companies will not assign or transfer annuities to third parties. This is done to discourage the sale of structured settlements. This of course does not mean you cannot sell your structured, but depending on where you live, it may not be possible to sell the structured settlement.

Keeping in mind, companies buying your structured settlement payments are looking for a profit, so expect a very low offer. Approaching a number of companies will be much more beneficial in relation to the sale of the structured settlement, to obtain an offer in your favor. Making sure that the company that wants to buy your structured settlement is established, well-funded and reputable is what one should be looking for, not a one time buyer, who could go bankrupt before they pay up all that is owed to you.

You may need to have a judge approve the buyout. Consulting a lawyer for the structured settlement deal would be something to consider before entering into an agreement.

Taken from the ExpertLaw Library http://www.expertlaw.com/library

Potential Disadvantages of Structured Settlements

There will always be people who enter feel trapped, when they enter into a structured settlement, because of the periodic payments. These people may wish to purchase an expensive item, like a house, yet because the of the structured settlement, they cannot borrow against future payments under this kind of settlement.

Some people do better by simply investing by themselves, the lump sum amount of money they receive.

There are a lot of standard investment that pay greater dividends in the long term than the annuities used in Structured Settlements.

Taken from the ExpertLaw Library http://www.expertlaw.com/library

Benefits of a Structured Settlement

Tax Avoidance is one advantage of a structure Settlement. Significantly reducing the plaintiff’s tax obligations is possible with an appropriately set-up Structured settlement. In some cases Structured Settlement may also be tax free.

When funds are necessary to pay for future needs, a structured settlement can help a plaintiff from having settlement funds dissipated. Now, if you are someone who is simply not good with money or one of those who can’t say no to relatives who want to “share the wealth” then a structured settlement can protect you from yourself. Large Settlements can easily get exhausted without structured settlements.

Minors definitely benefit from a structured settlement, which provide for certain costs during their youth. With a Structured Settlement can be used as an additional disbursement for college or other educational expenses. The Structured Settlement can be carried on into their adult life in a few more disbursements.

Injured people who have long term special needs may benefit from Structured Settlement by having periodic amount of money to purchase medical equipment and/or modified vehicles.

Of course, in some situations it would be better for the severely disabled plaintiff to set up a special needs trust, rather than a Structured Settlement.In this case it would be better for any plaintiff who is receiving, or expects to receive, Medicaid or other public assistance, or the guardian or conservator entering into a settlement on behalf of a disabled ward, should consult with a disabilities financial planner about their situation before choosing any particular settlement structure or similar option.

Taken from the ExpertLaw Library http://www.expertlaw.com/library

What is Structured Settlement

A "Structured settlement" is when a large sum of money is paid in installments by the plaintiff to settle a case, instead of paying the amount at one time. This can be done by the defendant, the plaintiff's attorney or a financial planner consulted in association with the settlement. Structured settlements are more often than not created through the purchase of one or more annuities, which guarantee the future payments.

The parties can provide payment for the Structured Settlement in a number of schedules, including but not limited to annual installments over a number of years or periodic lump sums every few years.


excerpts from the ExpertLaw Library http://www.expertlaw.com/library