FAQ
What is a structured settlement?
When someone has a lawsuit and they settle the case, it can result in a settlement that is structured. This means that the person will receive payments over time instead of a lump sum all at once. Therefore, the term “structured settlement” is used. The person’s settlement is not paid at the time of settlement but it is “structured” over a certain time period. Typically, some amount will be paid at the time of settlement, but the majority of the payout is paid out for years, usually in monthly payments.
Why sell your structured settlement payments?
For those people who are receiving monthly payments over time often find that the payments are not always sufficient to meet current needs. If someone needs a significant amount of cash now, it is often beneficial for that person to sell their future payments to receive funds now to meet their needs.
How do I sell my structured settlement payments?
We are here to help. Start by calling us at 833.879.7727. We will walk you through every step. Typically, we will need to gather information and then prepare a quote for you. It is important to know how much money you need, how much your payments are and how often you receive the payments. We will need to get some documentation from the company that sends the payments to you. After we have the information, we will call you and give you a quote. If you decide to move forward, we will send you paperwork to sign and then start the court approval process. We work very quickly and efficiently. If you are in a hurry, then you can rest assured we will get everything done as quickly as possible.
Can a Structured Settlement Be Inherited?
Structured settlements are often paid through annuities that are held and administered by insurance companies. Whether a structured settlement can be inherited depends on whether the annuity contract specifies “life contingent payments” or “guaranteed payments.”
Life contingent payments last only as long as the person who was awarded the settlement is alive. If the person who was awarded the settlement dies, the insurance company does not send future payments to their heirs.
Guaranteed payments are dispersed according to the schedule in the annuity contract no matter what. The person who was awarded the settlement can designate a beneficiary to receive the payments if they die before the payout is finished.
If you are the named beneficiary of a loved one’s structured settlement, and they have passed away, you will have to submit a claim to the annuity issuer so the rest of the agreed payments can be disbursed to you. The money from a qualified structured settlement will continue to be exempt from income taxes even after it has been inherited.
In addition, a structured settlement can have a “commutation rider” included in its contract. This means when the settlement is inherited, all or some of the future payments are converted into a lump sum of cash for the beneficiary.
A commutation rider can make inheritance much simpler.
Without a commutation rider, a beneficiary has to go through the process of selling future payments in order to get cash sooner than scheduled.
What Happens to a Structured Settlement During Divorce?
How a structured settlement is handled during a divorce depends on the approach your state takes to asset division. States divide assets according to either “equitable division” or “community property.”
If you live in a state with equitable distribution, and you received the settlement before you were married, it is likely you will keep the settlement.
According to community property, on the other hand, anything either spouse owned before and during the marriage is considered property of the union and can be subject to division.
In any state, the division of assets doesn’t mean the settlement check itself gets divided. Typically, the spouse who doesn’t keep the settlement will get a different asset to balance out the overall division of assets. If you have a settlement and are facing divorce, you may want to hire a lawyer or mediator with experience handling complex assets.
Do I Have to Sell All of My Payments?
No. There are several options when it comes to selling your structured settlement payments, including selling some of your payments or all of them. Each person’s situation is unique, and regardless of how much of your settlement you want to sell, a judge has to approve the sale. You should discuss your options with your accountant or attorney before choosing how much to sell.
Why Is Court Approval Necessary?
Before the industry was regulated, some factoring companies took advantage of people who were not informed of the nuances of selling their structured settlements. To prevent this from happening, the United States government passed several laws — such as the Federal Periodic Payment Settlement Act of 1982 —that mandate court approval for the sale process. Mandating court approval ensures the sale is in the consumer’s best interest and a factoring company is not taking advantage of the person’s ignorance.
What is an Annuity?
An annuity is a financial contract between an insurance company and a buyer — typically an investor or retiree. In exchange for a lump sum or monthly payments toward the principal, an insurance company will pay out income through a series of payments or a one-time lump sum.
An annuity is meant to provide a guaranteed stream of income through a set period of time or until an annuitant’s — or an annuity owner’s — death. Annuity savings are tax-deferred and can accumulate interest over time.
What Does it Mean to Be Tax-deferred?
Annuities have a tax-deferred status, meaning that while interest accrues on the savings, they are not taxed until withdrawn. This status helps to increase the amount of earnings in an annuity account.
What Happens to My Annuity When I Die?
A unique benefit to an annuity is the death benefit. Should an annuity owner die before their annuity disburses all payments, the remaining assets can transfer to a spouse or surviving beneficiary. If you choose not to have a beneficiary, upon your death all remaining annuity assets will be surrendered to the issuing insurance company.
Can I Sell My Annuity?
In the event you need cash now for a financial emergency, medical expenses or other debt, an annuity can be sold for faster access to cash. Annuities can be sold in their entirety or in part for a lump sum.
A partial annuity sale still guarantees periodic payments, minus the portion sold. And in this scenario, annuity savings still accrue interest. Selling the entirety of your annuity contract empties your investment and any chance of receiving steady income. However, you will have access to a large lump sum with ample flexibility.
I’ve Sold My Annuity Contract. What Now?
Selling an annuity requires you to surrender the rights to your annuity contract. If you choose to sell a portion or all of your annuity, you will no longer have access to the funds sold.
In addition, selling an annuity contract does not guarantee a payout of the full value of your initial investment. Annuity buyers will purchase your annuity at a discounted rate, which can be as low as 50 percent of your initial value. This rate is based on the market conditions, the amount of payments you are selling, their value and how soon insurance companies will receive payment.
Will I Still Owe Premium Payments After it is Sold?
No, you will no longer owe premium payments on an annuity sold in its entirety. A partially sold annuity is still subject to payments. Once the transaction is complete, the new annuity owner assumes all rights and responsibilities to their investment.
Will a Beneficiary Have to Pay Taxes on the Annuity?
Yes, annuity payments disbursed to a spouse or beneficiary will be treated as taxable income.
What’s the Difference Between Immediate and Deferred Annuities?
An immediate annuity contract disburses a stream of income payments immediately after the initial purchase. Deferred annuities also guarantee a payout stream, but will disburse at a later time.