5 Tips for Selling Structured Settlements

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Sell Your Structured Settlements – Why, When and How!

With a structured settlement, you do not simply get money at a regular interval to cover your basic living costs and other expenses like medical costs; you also have the option to sell the right at any point of time to get a lump sum amount to meet up sudden needs.
At the same time, you can also settle for periodic payment options to cover occasional costs like education, marriage if you have other means to support you in regular life.
In reality, a structured settlement offers you enough flexibility to plan your income depending on your financial conditions.
To add to this, the amount you receive on a regular interval is completely free of federal or state tax. Whereas if you had taken a lump sum amount and invested them otherwise to earn a monthly income, you would have ended up in paying a big part of your earning as tax. For the last comment, we assume that the concerned person have invested the amount wisely.
These are reasons enough that people in general love to get a secured structured settlement instead of a onetime lump sum amount.
Nevertheless, here comes the crux – why, when and how do you sell your settlement in an urgent need!
Say, you settled with your company for a monthly coverage option but all of a sudden, you got yourself deep in soup and needed some liquid cash urgently.
What would you do if you do not have any other option to support yourself with a lump sum amount! If this is not enough, you may find some people who sell their settlement to get lump sum amount to start their own business or to build their portfolio.
If there is no option left, you can sell the right of your structured settlement and Government allows you the provision to do so.
Many companies purchase the structured settlement rights at a discount price. The amount you can get depends on your attorney’s negotiation skills and market reputation of your previous employer and other conditions. Often the settlement purchaser demand for a higher discount rate not only to cover all the risks involved in the process but also to draw a bigger profit margin.
There is a common misconception that you must sell all the annuities at one go. However, here you have all the flexibilities to sell your annuities partially and thus you can sell only as much as needed to overcome the immediate expenditure. The rest can be left, as it is, to cover your regular expenditure.
The first thing you need to do is to hire a professional financial advisor and/or an attorney to get the best deal for you. An attorney can guide you further through the legal procedures like court oversight, consumer protection statutes and legal approvals for selling structured settlements.

Preparing to Meet With a Buyer of Structured Settlements

Once you have made the decision that selling your structured settlement is an option you want to consider, you should begin to prepare yourself for the selling process. In particular, this means preparing to meet with a buyer of structured settlements. Because this is uncharted territory, there are certain steps you should take to better equip yourself for this meeting.


The first phase of groundwork is to educate yourself on the selling process. Although the buyer will happily provide this information to you, it is a better idea to have an idea what you are walking into beforehand. The reasons for this are numerous – one, you do not want your knowledge to hinge on a buyer’s honesty or forthrightness; and two, you want to know if you are getting the raw end of the deal. Having the proper information and being educated on the process will better improve your chances of getting a higher offer to begin with, as the buyer knows you are serious, and gives you the tools to know when to walk away from a deal.


You should also have an idea what you want out of the sell; in other words, how much do you want to be paid for your structured settlement? This may sound simple, but oftentimes, people do not know what to ask for and, therefore, take the very first offer on the table. They let the buyer dictate the price because they are not adequately prepared for a negotiation. Granted, some companies may be inflexible in their purchase terms, but you never know until you ask. Of course, if this is the case, you always have the option to walk away and go to a company that is willing to work with you and meet some, if not all, of your terms.

Get Cash Flow For a Structured Settlement

There are various companies that offer a lump sum payment in exchange for cash flow streams generated by structured settlements. Beneficiaries of structured settlements often have to sell settlements when faced with an urgent or near-term liquidity need.

The process of selling structured settlements begins with understanding one’s requirements and the immediacy of the need. This can be done with the help of a financial advisor. In fact, in several states in the U.S, it is mandatory to take legal advice before selling a structured settlement. Brokers who are knowledgeable about the court procedures involved in the sale of a structured settlement can be of great help. Brokers are in contact with numerous settlement companies and upon understanding a seller’s unique requirements they can guide the seller to the most appropriate settlement company. Either with the help of brokers or by searching online, one can select a financial institution that appears to offer the best price for the structured settlement at minimum cost and in as less time as possible. Sellers should also check the prospective buyer’s credentials, the rate of interest they offer, and their record for prompt payments.

Sellers are usually required to fill an application form that provides the buyer with necessary information such as amount required, nature of the structured settlement, and the insurance company. Upon approval of the application, the buyer forwards closing documents to the seller. These should be studied and understood by the seller with support from his financial advisor. Once the provisions mentioned in the closing documents are met, the funds are released to the seller. The insurance company is made aware of changes in ownership of the structured settlement. The receipt of cash flow by the seller is subject to court approval. The court assesses the seller’s circumstances and then decides whether the sale is in the best interests of the seller and his dependents. A court approved sale of structured settlements is tax-free for the buyer and seller.

The cash flow received in exchange for the structured settlement is minus the buyer’s fees and other expenses such as broker commissions, application fees, and legal expenses. These costs are not out-of-pocket expenses for the seller nevertheless they should be carefully considered with respect to different buyers and the maximum amount that can be obtained by the sale of a minimum number of structured settlements.

How to Get Cash For a Structured Settlement

Often, owners of structured settlements are faced with a liquidity crisis that necessitates the sale of a part of the structured settlement. The reasons for selling a structured settlement can include an emergency medical expense and business opportunities. Structured settlements are sold to buyers directly by the seller or through a broker.


Buyers of structured settlements usually have a number of alternatives to offer to sellers so that they can choose the best possible option for selling either a part of or their entire settlement. It is possible to sell a few years’ worth of structured settlements and at the same time enjoy the benefits of regular payments through the remaining structured settlements.


It is in the interest of the seller to take the advice of a financial advisor and a lawyer who can guide him regarding the various legal requirements and tax requirements that often vary from state to state. Apart from state laws there are federal regulations too that govern the sale of structured settlements. Certain insurance companies do not pay the annuities to anyone except the original beneficiary. The buyers are bound by law to give a break-up of the value of settlement sold, the amount paid, and the difference therein. A court sanctions the sale of a structured settlement only if it is convinced that the sale is in the best interests of the seller and his dependents. A court-approved sale of structured settlements is tax-free for both the buyer and the seller.


The costs involved with obtaining a structured settlement vary with the buyers. If a broker is involved in the sale, he is paid a commission by the buyer, which in reality is funded by the seller. However, availing the services of a broker can also be beneficial as it exposes prospective sellers to the maximum number of buyers. Brokers can impart their knowledge to the lawyer or financial advisor of a seller; this ensures that the sale process happens smoothly. Sellers should check out multiple companies so that they can have a positive experience with an honest buyer and get as much cash as possible from the sale of their settlement. In the sale of a structured settlement, there are no out-of-pocket expenses for a seller; the buyers deduct their portion and the cost of the legal expenses before paying the lump sum.

Financial Security through Structured Settlements

Structured settlements have become a natural part of personal injury and worker’s compensation claims in the United States, according to the National Structured Settlements Trade Association (NSSTA). In 2001, life insurance members of NSSTA wrote more than $6.05 billion of issued annuities as settlement for physical injury claims. This represents a 19 percent increase over 2000.

A structured settlement is the dispersement of money for a legal claim where all or part of the arrangement calls for future periodic payments. The money is paid in regular installments—annually, semi-annually or quarterly—either for a fixed period or for the lifetime of the claimant. Depending on the needs of the individual involved, the structure may also include some immediate payment to cover special damages. The payment is usually made through the purchase of an annuity from a Life Insurance Company.

A structured settlement structure can provide long-term financial security to injury victims and their families through a stream of tax-free payments tailored to their needs. Historically, they were first utilized in Canada and the United States during the 1970s as an alternative to lump-sum payments for injured parties. A structured settlement can also be used in situations involving lottery winnings and other substantial funds.

How a Structured Settlement Works
When a plaintiff settles a case for a large sum of money, the defendant, the plaintiff's attorney, or a financial planner may propose paying the settlement in installments over time rather than in a single lump sum.

A structured settlement is actually a tradeoff. The individuals who were injured and/or their parents or guardians work with their lawyer and an outside broker to determine future medical and living needs. This includes all upcoming operations, therapy, medical devices and other health care needs. Then, an annuity is purchased and held by an independent third party that makes payments to the person who has been injured. Unlike stock dividends or bank interest, these structured settlement payments are completely tax-free. What’s more, the individual’s annuity grows tax-free.

Pros and Cons

As with anything, there’s a positive and negative side to structure settlements. One significant advantage is tax avoidance. When appropriately set up, a structured settlement may significantly reduce the plaintiff's tax obligations (as a result of the settlement). Another benefit is that a structured settlement can help ensure a plaintiff has the funds to pay for future care or needs. In other words, a structured settlement can help protect a plaintiff from himself.

Let’s face it: Some people have a hard time managing money, or saying no to friends and family wanting to "share the wealth.” Receiving money in installment can make it last longer.

A downside to structure settlements is the built-in structure (no pun intended). Some people may feel restricted by periodic payments. For example, they may want to buy a new home or other expensive item, yet lack the funds to do so. They can't borrow against future payments under their settlement, so they’re stuck until their next installment payment arrives.
And from an investment perspective, a structured settlement may not make the most sense for everyone. Many standard investments can provide a greater long-term return than the annuities used in structured settlements. So some people may be better off accepting a lump sum settlement and then investing it for themselves.

Here are some other important points to keep in mind about structured settlements: An injured person with long-term special needs may benefit from having periodic lump sums to purchase medical equipment. Minors may benefit from a structured settlement that provides for certain costs when they’re young—such as educational expenses—instead of during adulthood.

Special Considerations

- Injured parties should be wary of potential exploitation or hazards related to structured settlements. They should carefully consider:

- High Commissions - Annuities can be highly profitable for insurance companies, and they often carry very large commissions. It is important to ensure that the commissions charged in setting up a structured settlement don't eat up too much of its principal.

- Inflated Value - Sometimes, the defense will overstate the value of a negotiated structured settlement. As a result, the plaintiff winds up with much less than was agreed upon. Plaintiffs should compare the fees and commissions charged for similar settlement packages by a variety of insurance companies to make sure that they’re getting full value.

- Conflict of Interest – There have been situations where the plaintiff's attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing he would receive a referral fee. In other cases, the plaintiff's lawyer has set up a structured settlement on behalf of a client without revealing the annuities are being purchased from his own insurance business. Plaintiffs should know what financial interest their lawyer may have in relation to any financial services being provided or recommended.

- Using Multiple Insurance Companies – It’s advisable to purchase annuities for a structured settlement from several different companies. This offers protection in the event a company that issued annuities for a settlement package goes into bankruptcy and defaults.

Benefits of Selling A Settlement

A structured settlement is specifically designed to meet the needs of the plaintiff at the time it’s created. But what happens if the installment arrangement no longer works for the individual? If you need cash for a large purchase or other expenses, consider selling your structured settlement. Many companies can purchase all or part of your remaining periodic settlement payments for one lump sum. This can boost your cash flow by providing funds you can use immediately to buy a home, pay college tuition, invest in a business or pay off debt.

If you’re considering cashing out your structured settlement, contact your attorney first. Depending on the state you live in, you may have to go to court to get approval for the buyout. About two thirds of states have laws that limit the sale of structured settlements, according to the NSSTA. Tax-free structured settlements are also subject to federal restrictions on their sale to a third party, and some insurance companies won’t assign or transfer annuities to third parties.

When selling your structure settlement, check with multiple companies to make sure that you get the highest payoff. Also, be sure the company buying your settlement is reputable and well-established. And keep in mind that if the deal sounds too good to be true, it probably is.

You Can Get Cash For Your Structured Settlements!

Structured settlements are financial packages or financial agreements permitting a settlement to be paid through an annuity via regularly scheduled installments either for a fixed period or for the lifetime of the claimant. Because it is tailor-made for individual cases, the structured settlement may also include some immediate payment to cover special requirements.

The payments are typically funded by annuities, reinsurance, or occasionally U.S. government obligations. The structured settlements are mostly setup for lawsuit settlements, insurance settlements, lottery awards, casino and jackpot winnings and contest payments.

Structured settlements have not always been available. In 1982, Congress passed The Periodic Payment Settlement Act of 1982 (Public Law 97-473), as a way to make large settlements more agreeable to parties and provide certain protection to victims. It also encouraged people to use them by granting them tax-free status.

As a result, many people now choose a structured settlement agreement over a lump sum payment, and courts often award them in civil actions where there will be long-term costs of living and the necessity for obtaining cash payments at some point in the future. Structured settlements- When created?

Structured settlements are not appropriate in all kind of cases. Since structures allow settlement funds to grow income tax-free and to be preserved to meet future financial needs, any liability case can be suitable for a structured settlement.

However, the following are cases in which structures should always be considered-

Structured settlements are designed for many types of cases though including:

- All catastrophic cases including paralysis, brain damage, severe burns, loss of limb or severe injury cases.

- Wrongful death cases where a surviving family will need a regular income to replace that of the lost spouse/parent.

- Permanent or temporary disabilities that will take extensive recovery time.

- Most of Worker’s compensation cases

- Most of cases with a reserve or value of $50,000 or more, for example lottery or casino awards.

- Guardianship cases where there are minor children or another person who is judged to be incompetent such as a person with psychological, emotional, or mental handicaps.

Structured settlements can be formed in many different ways, and their structure is basically determined by the financial needs of the claimant. The simplest structured settlements are created with an even distribution of cash on a given interim for the term of the agreement. Such a settlement could include a payment every month for 15- 20 years as an example.

A properly developed structural settlement agreement also includes the time value of money because by design, they do not pay interest. The interest is calculated in as a part of the payment. In essence, the structured settlement incorporates a fixed interest rate that is also completely tax-free as it is part of the settlement.

Benefits of a Structured Settlement-

Benefits to Claimants:

1. Choice: Allows the claimant a choice at settlement. Benefits can be received based on needs rather than a lump sum which has to be invested at risk, incurring fees.

2. Tax-free: Structured settlements provide a steady stream of cash to claimant that is completely free of tax liability, both at federal and the state level

3. Regular payment stream: A structured settlement annuity provides regular payment stream to claimant.

4. More Secure: Maximum security since periodic payments are funded by annuities or reinsurance issued by the largest, most secure life insurance companies.

5. Structured Settlements are cheaper: Another benefit to structured settlements is that they are often arrived at without the risk and time loss of going to court.

Benefits to the defense:

1. Bridge Gaps: Helps bridge gaps between plaintiff and defendant.

2. Reduces litigation costs: For many reasons, defendants who believe they could have liability will make an offer of a structured settlement to minimize their costs.

3. Reduce settlement cost: Substandard age rating can significantly reduce settlement cost

4. Structured Settlements are cheaper: Because they are often arrived at without the risk and time loss of going to court.

You can sell Your Structured Settlements!

Now you can sell your future monthly payments and be free of the restrictive schedule of disbursement imposed by your structured insurance settlement. There are some finance companies those will pay you a large lump sum of cash now, rather than you receiving smaller monthly payments for the remainder of the payout.

You may like to sell your structured settlement because some of the following reasons:

1. Your life situation changed since your structured settlement was created.

2. You have an emergency situation or a special opportunity occurred in your life which requires cash you do not currently have.

3. You want to start a new business but do not have the cash needed.

4. You need money for a special event in your life like the wedding of your child.

5. You have outgrown your current home but don't know where you'll find the money to buy a larger home or add on to your existing home.

You also have the options to sell your settlement to suit your requirements as followings:

- Cash payouts in full: Full Payment refers to a plan where the individual sells all the remaining future payments at a discounted present value for a lump sum payment.

- Partial buyouts: Partial Payment refers to a plan where the individual sells a specific number of future payments at a discounted present value for a lump sum payment.

-Shared payment plans: Shared Payment refers to a plan where the individual sells a portion of their future payment(s) at a discounted present value and keeps a portion.

I personally believe that most important reason to sell your structured settlement today is that you take advantage of the financial principle of the Time Value of Money, which means that a dollar is more valuable to you today than it will be in the future; you get your money before inflation kills its value.

Deal with a company that will structure the transaction based on your specific financial requirements and only acquire the portion of your payment stream that is necessary for you to fulfill your needs.

About the Author:

Paul Sherman is a Legal Funding Consultant. He offers free, professional, and independent advice to plaintiffs (incl. business owners) & Attorneys. To get Structured Settlement funding & Lawsuit loan please visit http://www.easylawsuitfunding.com

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Get Cash Flow For a Structured Settlement

How to Get Cash For a Structured Settlement

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