The term, structured settlement is becoming increasingly popular. Both investment businesses and individuals evince keen interest in purchasing or selling structured settlements. Insurance companies and law firms compete with each other and spend millions of dollars advertising in TV, magazines and newspapers. What makes structured settlement so very popular?
Look at the advantages structured settlement offers. One, structured settlements provide cash at regular intervals. In fact, structured settlements can be a source of income for life. Secondly, payments in the form of settlements are normally tax-free and thirdly, the state as well as federal laws protects the payment. Like two sides of a coin, structured settlement has disadvantages too.
Read further to gain comprehensive information about structured settlements. Find out if structured settlement is what you want. Understand the nitty-gritty before deciding to purchase or sell structured settlement.
An explanation of structured settlement in financial terms would mean - a financial obligation of the offender to the victim or to the surviving relations. The offender could have caused physical injury to the victim or committed an act that has resulted in heavy damages to the victim. The offender and the victim will meet to discuss what it entails to meet financial obligations of the victim including providing for medical expenses.
A structured settlement by annuity may be suggested, the other choice being receiving a lump sum payout. The duration or how long the assistance will be required, the severity of the problem and the forecasted rate of inflation may be discussed. The lawyers of both parties will be participants and deal on behalf of the party they are representing. Their intentions would be to settle for the best possible deal in favor of their respective client.
A structured settlement agent specialist in annuities will calculate the long term value of the settlement. The calculations are arrived at based on present-day value. The party or the offender will then acquire an annuity to fund the settlement. And, the victim will receive a steady stream of payments over time. The sum of all payments will be greater than if the amount had been paid as a lump sum. The paying party benefits too. As the payments are purchased as an annuity, the offender pays less than the sum of all payments.
Structured settlements provide financial protection during incomprehensible situations of life. There are instances in life that are far beyond comprehension. A sudden event or happening that completely throws life out of gear challenging one's grit and determination. A bitter truth that is hard to accept is that a crisis can befall anyone anytime. Yes, life is indeed full of uncertainties.
For instance, imagine the hardships family members would face following an untimely death or serious injury of an individual or spouse, especially if the person's earnings were pertinent. Besides the emotional trauma, the family needs to face financial challenges of coping with lost income. Besides, if seriously injured or incapacitated there would be a substantial increase in expenses related to caring for the injured. It is here that structured settlement is likely to command serious attention and consideration.
An individual who decides to own a structured settlement annuity is bound by an agreement wherein the insurance company agrees to pay a predetermined amount of cash for a fixed time in case the individual meets an accident. Circumstances when structured settlement holds good include the following.
Disadvantages of structured settlement
Structured lump sum settlement
Structured settlement and lump sum payment, both terms are widely used in context with legal suit awards. Post lawsuit, if a person wins a small award the compensation is usually made as a one-time lump sum payment. On the other hand, if the award is large specifically for an injured person, there is an option of receiving one lump sum payment or receiving payment in smaller amounts spread over a period of time.
With huge amount of cash-in-hand, lump sum payment has advantages and disadvantages.
Purchasing structured settlement
Over a period of time, individuals who had opted for structured settlement may desire to sell part or all of their future payments for a lump sum of money. There are various reasons why such a decision is arrived at.
Then, the annuitant may decide to sell full or part of future payments for a lump sum of money. The structured settlement is available for sale at a discounted price. When purchasing structured settlement there are various points for consideration. Certain legal requirements and restrictions can affect the buyer. For a safe deal, here are critical points to ponder.
The purchaser could be an individual, corporate entity, foundations or trusts that get to enjoy benefits such as:
Sell structured insurance settlement
In the best interests of annuitant, selling structured settlement should be avoided. In nine out of ten cases, it has proved to be detrimental especially to disabled individuals, minors, workers compensated for loss. Reason being, the annuitant is likely to lose up to half of the long-term value of the structured settlement. The entire process can take a minimum of three months.
Under dire circumstances, if compelled to sell, make use of structured settlement selling guideline.