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  1. What is a Structured Settlement?

    A structured settlement is a financial arrangement that pays out regular tax-free payments on an agreed schedule rather than single payment of money in most cases of personal injury. This arrangement is very helpful when a claimant suffers permanent and serious injury. Structured settlements provide a continuous, stable source of income to a plaintiff.

  2. History of a Structured Settlement

    Structured settlements were first used in the 60’s, in Canada after a settlement for Thalidomide-affected children and were widely used in personal injury or product liability cases. Pregnant women took Thalidomide to relieve the symptoms of pregnancy sickness. Unfortunately, Thalidomide had tendency to deform fetus. Because of that, various suits showed the need for a financial arrangement that would provide benefits for the lifetime for the children affected. Structured settlements helped to reduce legal and other costs by avoiding trial.
    Structured settlements in the United States became widely used in the early 70’s when insurers started considering future medical treatments on injuries or medical malpractice cases and were looking for an alternative to single payments of money. The higher popularity of structured settlements was due to certain changes in the insurance policies which resulted in an increased interest rate and higher personal injury awards. In the 1970’s, structured settlements were considered risky because tax implications for claimants and insurers were not resolved. However, the establishment of a federal tax code recognizing structured settlements helped to increase their utilization in personal injury cases today.
    The way this worked in the United States before is one party sued another, a settlement was reached, and the defendant accepted to compensate claimant over time. After that, the defendant, together with an insurance company, purchased an annuity policy from another insurer. This policy made payments to the original claimant. However, in 2001, Congress issued a law helping to create a legal way for those receiving tax-free payments under a structured settlement to sell their payments no matter if the annuity policy was written in such a way as to not allow a future sale.

  3. Structured Settlement Utilization Today

    Structured settlements are a $5 billion industry on the secondary market according to industry statistics. They are widely used because of their benefits, efficiency, safety and convenience. Structured settlements are the part of the statutory law of few common law countries such as Canada, United States, Australia and England. These days, attorneys, with the approval of a court, work with insurance companies to utilize structured settlements as a way to compensate victims involved in personal injury claims. Once a claimant and defendant resolve a claim by settling it with a certain damages amount, the periodic compensation arrangement begins.
    Some structured settlement recipients may want to transfer their periodic payments over time in order to receive a lump sum. These days, 48 states in the United States have their own structured settlement transfer laws. The laws vary from state to state, but all of them require that the judge rule that the sale is in the best interest of the seller taking into consideration the welfare of the dependents. The flexibility of the laws allow judges to weigh the seller’s financial conditions against the need to sell the future payments.
    There are various tax implications of structured settlements, although in general, structured settlement payments are free of federal or income taxes. That is why it is very important for a payee to negotiate the best terms when signing an initial structured settlement agreement.
    These days, structured settlements are widely used for minor injury claims. This is because of the numerous benefits of the structured annuities, such as increased protection and financial security provided to a child.

  4. Types of Structured Settlement

    There are different types of structured settlements, including Life with Period Certain or Life Annuity, A Temporary Life annuity, Lump Sum/Life Contingent Lump Sum Annuity, Life Only/Joint Survivor Annuity, step annuities, enhanced structured income and more. Here are some differences between the most common of them:
    ● Life with Period Certain or Life Annuity is paid in periodic payouts for an established number of years or for life, based on the life expectancy of the payee. The beneficiary of the payee is paid for the remaining scheduled number of years in case if a payee dies prior to the assigned number of years.
    ● Temporary Life Annuity compensates a victim periodically for an assigned amount of years until a payee is alive. In case of temporary life annuity, payee’s beneficiaries will not be receiving funds after payee dies.
    ● Lump Sum/Life Contingent Lump Sum Annuity allows to set up an annuity with a lump amount for a future date. Payee can set it up for some years into the future. Payee’s beneficiaries will not get any funds after payee dies, in case of this type of structured settlement.
    ● Life Only/Joint Survivor Annuity pays monthly payments to a payee for life. In case the payee’s beneficiary survives him or her, the beneficiary will receive monthly payments for the rest of his or her life, after payee dies.
    Most of these structured settlement arrangements are designed to suit the needs of a claimant in regards to how often the payments are made, if a claimant needs to get a lump sum payout in advance before the periodic payments begins or during the payment period, that is called factoring.

  5. Importance of Structured Settlement

    Why are structured settlements important and more efficient than other assets or lump sum? The answer is very simple: because most of the people are financially imprudent. It is interesting to note, that financial imprudence is part of human nature and for most people it is difficult to control spending.
    Those who have personal injuries usually need funds for good reasons, including medical treatments and bills. Structured settlements were created and are widely used because they help to protect injured victims from spending their lump sum of money and becoming dependent on their families or government.
    According to a recent study of an American life insurance industry, after receiving a large lump sum of money from insurer, lottery or inheritance, 25% of recipients spend all the funds in 2 months; 50% of recipients spend all the funds in one year. 75% of recipients spend all their money in two years and only 10% of recipients have something left within 5 years.

  6. What Qualifies as a Structured Settlement?

    Why do people receive structured settlements and what qualifies as a structured settlement? The most common types of structured settlements are personal injury claims, workers’ compensation claims, wrongful death or medical malpractice cases. The damages that fall outside the usual scope of personal injury, sickness or wrongful death are called “unqualified” structured settlements. They are used for claims that involve sexual harassment, racial discrimination or wrongful termination.

  7. Benefits of Structured Settlement

    Why should someone try to qualify for a structured settlement in cases of personal injury? There are many benefits of structured settlements. Since 1983, the federal tax code has provided injury victims a great financial incentive to settle claims with a structured settlement. There are few major benefits of structured settlements. The main benefit is that future payments are completely exempt from federal and state income taxes and taxes on interest, capital gains or dividends. Moreover, payments can also be set for future needs, guaranteed for life and in some cases, transferred to a beneficiary. Another major benefit of structured settlements are that they are not dependent on economic or equity market conditions. In addition, payee does not need to worry about spending all the money too fast, as can happen in the case of receiving a lump sum.

  8. Qualification Criteria of the Structured Settlement

    Not all the victims of accidents or other personal injuries can gain these benefits, as he or she may not be in the “constructive receipt” of the structured settlement. Payments from a structured settlement must be determinable, fixed and not deferred or changed by the claimant.
    Besides the benefits of structured settlements, there are some disadvantages too. One of them is huge inflexibility. The claimant gets a periodic fixed payment without the possibility to control or modify it in case of changing needs and conditions. Some people who are receiving periodic structured settlement payouts may eventually decide they need more money in a short term than the periodic compensation provides over time. There can be many reasons for that, such as unexpected medical expenses, the need for better housing or education expenses. To meet these changing needs, a structured settlement recipient may want to sell their periodic payouts for a lump amount. Transfer of a structured settlement is a tax-free transaction to protect the unexpected financial needs of the payee. Consequently, in the 90’s a secondary market for these payouts developed to provide some liquidity to compensation recipients looking for single money amount payout after their settlements were finalized.

  9. When is a Structured Settlement Appropriate?

    In addition to qualification criteria, there are specific cases when structured settlements are appropriate. The examples include:
    ● A claimant is a minor
    ● Cases involving serious injuries, such as spinal cord or head injuries, wrongful death, serious burns, multiple fractures, loss of limbs, injuries requiring continuous medical care.
    ● A victim will have an expensive cost for his or her future medical care
    ● A victim has poor financial knowledge
    ● A claimant has a history of addiction to drugs, alcohol or gambling
    ● An accident has left a surviving family members in need of a stable periodic income
    ● A victim has no need for a lump sum
    There are more examples and cases of when a structured settlement is appropriate – everything depends on individual situations.
    It is interesting to note, that these days, an increasing amount of structured settlements are being utilized for non-physical injury claims, such as employment cases, property damage, real estate or business transactions and other cases. In these “non-qualified” cases, settlement funds are not tax-free, but tax-deferred until the time they are paid.

  10. Transfer Implications of a Structured Settlement

    However, not all of the structured settlements are transferrable. Many of the structured settlements have conditions of the non-transferability of the periodic payouts. Everything depends on the individual situation and settlement and the court can deny the structured settlement transfer. Internal Revenue Code (IRC) in conjunction with most state laws requires that a court approve or deny a transfer of a structured settlement. Structured settlement transfer must be in the best interest of the seller, taking into account the welfare of any dependents. However, the “best interest criteria” is not well defined which allows court and judges to research each case subjectively. The laws of some states require that the court consider recipient’s health condition, seller’s need for medical treatment and the purpose of the intended use of the lump sum. The “best interest” is not always related to a financial hardship but can be in a seller’s best interest because it lets him or her to receive education, buy a new house or to pay unexpected medical expenses. Case-by-case “best interest” standards allow greater flexibility in resolving cases of transfers of the structured settlements.
    The payee’s failure to show an adequate appreciation of the proposed transfer and inability to provide detailed information and document the need for the amounts are the main causes for the structured settlement transfer denial by the court according to a “best interest” standard.

  11. Tax Implications of a Structured Settlement

    Structured settlements were considered risky because the tax implications for insurers and claimants were not resolved. However, thanks to changes in a federal tax code, these days structured settlements are widely recognized and utilized in personal injury claims.

  12. Establishment of a Periodic Payment Settlement Tax Act

    In the 70’s, the tax rules declared that payouts for personal injuries were exempt from income tax, but these rules did not specify how the payouts could be disbursed. In 1974, one accounting company found that as long as a victim didn’t have the actual receipt of the money, the payouts would be considered as tax-free. Moreover, since a defendant is not interested to pay compensation using his own funds, the interest of the annuity would also be tax-free to a victim. Five years later, in 1979, the Internal Revenue Service (IRS) came out with the ruling confirming that.
    In 1982, Congress established certain tax rules, called Periodic Payment Settlement Tax Act, to encourage the utilization of structured settlements in order to resolve personal injury cases. These rules and Internal Revenue Code (IRC) clarified that the entire amount of the structured settlement payouts is tax-free to a claimant.

  13. Importance of a Qualified Assignment

    Newly established Tax Act allowed defendants to enter to a “qualified assignment” and clarified the tax status for the defendants. Qualified assignment provides the payee with stronger financial security and the possibility for a defendant to close its books on the case. There are certain requirements for an establishment of a qualified assignment, such as:
    ● The payout stream can be excluded from the payee’s gross income for tax purposes
    ● The assignee accepts liability from the defendant
    ● Both claimant and defendant agree upon compensation schedule, which cannot be “accelerated, deferred, increased, or decreased”
    ● The personal injury must fall into a category of a physical injury or sickness
    ● A highly secured funding asset must be utilized to fund the compensation
    Tax code establishment made it easy to identify where liability or the responsibility for structured settlements should be.

  14. Tax Implications of the Structured Settlement Transfer

    Another important aspect of tax implications of a structured settlement is taxation of the structured settlement transfer. Many payees who are considering to sell their periodic structured settlement have questions about tax implications related to a transfer. Can the lump sum payout be taxed? The short answer is no. According to a Periodic Payment Settlement Act, it is forbidden for the IRS to tax income received from a structured settlement, no matter if payee gets his payments periodically or as a lump sum. However, there is an exception to this. The proceeds may be taxed in case if the original contract is changed. What are the tax implications in different structured settlement transfer cases? Here are the most common scenarios and outcomes:
    ● In cases of personal injury or wrongful death, payouts are tax-free. Both lump amount and periodic payouts in case of physical sickness, personal injury or wrongful death are free from state, local and federal taxes as well as any capital or interest gains, including the interest income received through the duration of the payouts. However, in case of personal injury, sickness or wrongful death, the payee has no right to modify an approved payment schedule. In case there is a change in the original contract, payouts become taxable income.

  15. Tax Implications of an Unapproved Structured Settlement Transfer

    Some structured settlement payees sell their annuities without the court’s approval or petitioning. There are taxes related to such transactions. In 2002, IRS in conjunction with the federal government began modifying state laws which resulted in charging some annuity purchasing companies a federal tax of 40% from the expected gross profit received on a transaction. This tax applies to these companies that buy structured settlement annuities without petitioning for a court’s approval. While payees can sell his or her payment rights to annuity purchasing companies, they will have to pay income taxed on all gains and even on the previously earned funds. It is highly advised for a seller to consult with Annuity Sold before selling a structured settlement.

  16. What is the Structured Settlement Protection Act?

    The Structured Settlement Protection Act (SSPA) protects the rights of structured settlement holders by providing transparency to the settlement transfer process. This act exists both on state and federal levels and it was established in 2002, shortly after the 9/11 disaster. Victims of the disaster received financial compensations for the terrorist acts and lawmakers wanted to ensure that payees received adequate information and details before transferring their structured settlements. The SSPA also restricts the ability of payees to have the insurance company that issued the settlement change the periodic payments to a different amount.

  17. Main Provisions of the Structured Settlement Protection Act

    Structured Settlement Protection Act includes various points helping payees understand the consequences of selling their structured settlement rights to annuity purchasing companies. Some of these points are:
    ● Seller has the right to cancel within a predefined amount of time. This amount of time is different across different states.
    ● Seller should get professional advice on the financial benefits and drawbacks of selling structured settlement rights and getting a lump amount.
    ● Most will seek independent professional advice from a third party
    ● In case the seller transfers his or her structured settlement rights without court’s approval, 40% tax will be applied.
    ● Each structured settlement transaction must be approved by a judge. A judge may allow or deny the transfer of a structured settlement, based on the “best interest standard”.
    ● Seller has a right to receive the detailed payment information, including fees, taxes and interests related to a structured settlement transfer.

  18. Structured Settlement Protection Act Across the States

    Different states in the United States have their versions of the Structured Protection Act. Some states have specific exceptions and aspects. For instance, in Louisiana, Structured Settlement Protection Act is almost the same as the federal act, however, it is more flexible in favor of those who want to sell their settlement rights. In West Virginia, the judge’s approval for transfer of a structured settlement is only required if the amount of the claim exceeds $40,000. Here are the most important differences in the Structured Settlement Protection Act between different states:

    ● In Alabama, sellers must get detailed legal and financial information before selling their structured settlement payment rights.
    ● In Alaska, the seller must get a professional help to fully understand the implications of the transfer and a buyer must provide key terms to a seller.
    ● In California, sellers cannot transfer their settlements if they are related to a worker’s compensation benefits. In addition, a structured settlement buyer must let the seller know that he or she has a right to receive legal advice, paid by a buyer if it does not exceed $1,500.
    ● In Delaware, Rhode Island, Pennsylvania, North Carolina, Ohio, Minnesota, Massachusetts, Maryland, Maine, Illinois, Idaho and Florida, the seller must get an independent financial advice.
    ● In Georgia, sellers only have 3 weeks (21 days) to cancel their transfer.
    ● In Hawaii and Kentucky, the purchaser is obligated to disclose the key terms to a seller
    ● In Indiana, Tennessee, New York, Nebraska, Montana, Maryland and Kansas, all the worker’s compensation related settlement transfers are prohibited
    ● In Michigan, payees are obligated to receive independent financial advice. Both seller and buyer must agree to the structured settlement transfer if documents prevent assignments of payouts.
    ● In Mississippi, Arizona, Colorado, Connecticut, Texas, Utah, Virginia, Washington, South Carolina, Oklahoma and New Jersey, buyers are obligated to advise sellers in writing to receive independent financial advice.
    ● In Missouri, the judge must ensure that payments made to seller match the fair market value.
    ● In New York, payees must be notified of their right to professional advice. Structured settlement transfer agreements may not obligate seller to pay the buyer’s attorney’s costs or federal taxes if a transfer is not completed.
    ● In South Dakota and Tennessee, buyers are obligated to advise seller to receive professional financial advice, but not necessarily in a writing form.
    The SSPA helps to protect both sellers and buyers and adds transparency and clarity to the secondary structured settlement market transactions.

  19. Structured Settlements: A Look at the Primary and Secondary Markets

    Primary market and secondary market are two different terms and have different meanings. Primary market is a market where securities are created; whereas the secondary market is the market in which securities are brokered among investors. Knowing the definitions of both markets is important for understanding how they work in relation to structured settlements and their transfers.

  20. The Primary Structured Settlement Market

    Before a structured settlement holder decides to sell his or her rights to a payment, it is crucial to have an understanding of what the primary market is and how it works. The primary structured settlement market is the place where structured settlements are originally negotiated and set up for payees. Usually, a payee, a structured settlement consultant and an attorney work together to establish an agreement and a settlement that considers the current and future needs of the recipient. Primary structured settlements are created to be beneficial to all parties. Additionally, they are tax-free and are creditor proof.
    In some cases, a structured settlement is not set up initially. In this case, the client receives the settlement all at once and is responsible for investing it appropriately for the future. That can be a burden because of the uncertainty and volatility.

  21. The Secondary Structured Settlement Market

    The secondary structured settlement market consists of various companies that buy structured settlement payment rights from payees. This market has a lot of participants and it is very important for the sellers of the structured settlement to identify what companies they can trust and work with.
    The secondary market is being overseen by Internal Revenue Code (IRC) in conjunction with the Structured Settlement Protection Acts of each of the states. These laws help to sell and transfer structured settlement payment rights with a judge’s approval.
    The purpose of the structured settlements is to provide long-term periodic payouts to payees and in reality, most payees do not sell their settlement payment rights. Nevertheless, around 5%-10% of structured settlement holders sell their payment rights because of their changed financial needs. When a payee deals with an unplanned financial challenge and decides to sell his or her structured settlement payments, the secondary market and numerous advertisements can seem too noisy and confusing. For that reason, laws of most of the states require that structured settlement seller receive independent professional advice.

  22. Dangers of a Secondary Structured Settlement Market Fraud

    As in any market, there are fraudulent players in the secondary annuity market. Many structured settlement holder’s fear of being scammed and thus, avoid selling their annuities. There are some effective ways to avoid fraud. But firstly, what is structured settlement fraud and why is it dangerous? Structured settlement fraud can occur in various forms. The most common are dishonest structured settlement buyers who convince customers to lie to a court about the way they want to spend their payments to get an approval for a transfer. Some buyers even convince sellers to falsify their residential documents to make it look like they live in another state with less strict settlement transfer laws. Some sellers might believe that buyers are just trying to fulfil their needs. However, in result, many victims of a structured settlement fraud lose money and remain devastated.
    Secondary structured settlement market fraud can be avoided. The best way to avoid it is to work with a structured settlement buyer, like Annuity Sold, who can provide sellers with previous testimonials from clients who have had a positive experience dealing with them in the past. Sellers have to make sure that a buyer company answers all the questions, provides transparency and protects seller’s interests.
    There are few organizations that are in charge of making both secondary and primary markets more transparent and fair. The National Structured Settlements Trade Association (NSSTA) is responsible for the primary structured settlement market and the National Association of Settlement Purchasers (NASP), is responsible for secondary market. These associations play a great role in structured settlement industry and provide adequate insights to its members and the public about structured settlement annuities. NSSTA and NASP organizations help to avoid fraudulent structured settlement deals.

  23. Pros & Cons of Receiving and Selling a Structured Settlement

    There are various advantages and disadvantages of receiving and selling a structured settlement. Before accepting any settlement agreement or deciding to sell structured settlement payment rights, it is very helpful to discuss all available options and outcomes with an attorney or an independent financial adviser.
    Pros of Receiving a Structured Settlement
    There are various benefits of receiving and holding a structured settlement, such as:
    ● The most obvious benefit of holding a structured settlement is the tax benefit. Most of the lump amount payments are not considered as income and are not taxed.
    ● Income received from a structured settlement is tax-free unless the payee decides he or she wants to control the funds.
    ● Unlike other assets, such as stocks, mutual funds and bonds, structured settlements are not dependent on changes in financial markets. Payments, in most cases, are fixed and guaranteed by the insurer who issued the settlement.
    ● Structured settlement allows payees to get their funds distributed throughout the time of their disability.
    ● In the case of the payee’s premature death, the agreement’s identified beneficiaries can continue receiving any future guaranteed tax-free payouts.
    ● In many states, structured settlements are protected by state insurance laws which make sure that the duties of an insurer will be covered in case of a bankruptcy.
    ● Structured settlements are managed by professionals. Adequate financial planning helps to ensure that payees receive enough money to cover their current and future expenses.
    ● In some cases, structured settlement periodic payments can be combined with a lump amount payout to cover immediate expenses of a victim, such as medical treatment and bills, repayment of debts and other.
    ● Payouts may be scheduled for almost any timeframe and can start immediately or be postponed for as many years as required. They can include future lump amount compensation or benefit increases.
    ● Structured settlements can be tailored to meet victim’s special needs and future demands
    ● Structured settlements may allow dedication of funds to the payment of any unanticipated advances in medicine. For example, if there are developments in medicine and a new cure is introduced, the payee can try it.

  24. Cons of Receiving a Structured Settlement

    Although there are a lot of advantages of structured settlements, it is also important to consider the drawbacks, including:
    ● The biggest disadvantage of a structured settlement is a lack in flexibility. As soon as key terms are finalized, there’s not much a payee can do to change them.
    ● Despite all the protections established for structured settlement holders, many payees fear the unexpected negative economic conditions in which their payments could become too small.
    ● If a payee gets too much control over the structured settlement process, the Internal Revenue Service (IRS) may evaluate the situation and take a decision to introduce taxing measures.
    ● A structured settlement usually costs insurers much less compared to a lump amount payment. However, not all of the insurance companies disclose the details about the payment to the payees. Without these details the payee’s lawyer may not be able to assess the situation adequately.
    ● Money of a payee is not immediately accessible in case of an emergency, and recipient cannot invest his or her funds in other investment tools that provide high rates of return.
    ● In some cases, a structured settlements are placed with dealers who do not have enough protection for financial insolvency.
    In general, a structured settlement can be a cheaper and faster way as compared to a lump amount payment. Moreover, structured annuities are usually well suited for various cases.

  25. Minors and Structured Settlement

    When a minor is injured, effects can be severe. Parents and a child can have various concerns, including financial, emotional and medical issues. A structured settlement provides a financially safe way to deal with these issues. Courts in the United States are usually very protective of minor claimants’ interests and needs. However, judges are often doubtful as to whether they should approve huge amounts of money when resolving a minor’s accident cases. They have to make sure that the money will be dedicated to meet the minor’s needs and that the child’s family is not victimized. A structured settlement is helpful in solving both issues and is more efficient than a lump sum payment.

  26. How Structured Settlements Work for Minors

    Structured settlements decrease the risk that anyone will misuse or withhold large amounts of money belonging to the injured child. According to the laws of most states, parents cannot take the funds from a large settlement on behalf of a child and use them for themselves. Usually, a part of the funds is set aside in a blocked bank account, accessible by the parent or a guardian by a court order. The purpose of this account is to pay for a medical treatment and other expenses which have incurred and will incur because of the accident. The remaining money is used to set up the structured part of a settlement, which will be paid periodically to a minor starting at the age of 18 for a scheduled amount of time or in perpetuity.
    There are many ways of designing a structured settlement for minors and it is important that parents or legal guardians discuss that with an attorney and a financial adviser.

  27. Main Concerns of Judges Dealing with Minors’ Structured Settlements

    When children are involved in the structured settlement claims, certain restrictions have to be put on adult parents or guardians. This is because minors are not allowed to control their money directly and some adults can misuse the funds and spend them inappropriately. These days, courts have a responsibility to determine the fairness of a settlement amount and administration.
    Judges often have some concerns when dealing with minor claimants and their structured settlements, such as:
    ● That the funds will be allocated wisely so that they grow over time
    ● That the minor has limited access to a total amount of money in order to avoid losing or spending it all
    ● The amount of periodic payouts can be tailored to increase over time, as cost of living increases
    ● That the minor gets a compensation he or she is due
    ● That the parents of the minor not use the funds for their own interest

  28. Benefits of Structured Settlements for Minors

    Minors usually benefit in accepting structured settlements in different ways. Here are some of them:
    ● Structured settlements for minors are tax-free
    ● Payments do not change when the stock market conditions change
    ● Funds are protected until it is necessary to meet a minor’s special needs
    ● Structured settlements for minors do not have maintenance or other fees
    Structured settlements are widely utilized when it comes to providing awards and financial security to injured minors. This is because of their tax-free conditions, favorable financial returns, protection of funds from misuse or creditors, and flexible payment schedules. Other payment options usually have fees attached, less protection and are not tax-free. For instance, in case of a guardianship account option, the court maintains some control over account, the funds usually earn some interest and the earnings are taxed yearly. Guardianship costs typically have setup fees and annual fees. In case of a trust option, annual trust fees and ongoing management fees exist and all gains are taxable. Trusts are typically managed by a bank trust, independent financial adviser or a trustee. Thus, the structured settlement option is a very good solution for those who want to avoid tax burden and various fees.

  29. Minor’s Structured Settlement Transfers

    Parents or guardians can sell structured settlements on behalf of minors, but it is extremely rare. In case if financial, medical or other life circumstances change drastically before a minor reaches 18 years of age, parents or guardians have a right to sell the structured settlement future payment rights. However, parents or guardians must prove that there is an immediate need for a cash and the minor’s needs would be covered more by transfer of a settlement than by receiving periodic payments in the future. Such cases are rare. However, when a minor reaches the age of maturity he or she can sell their structured settlement in the same way as adults can sell theirs.

  30. Pros of Selling a Structured Settlement

    Selling a structured settlement can be a right, life-changing solution in case of an unexpected financial challenges or expenses, such as, medical treatments, buying a new home or transportation, paying off debts, or paying for an education. Transferring and selling a structured settlement can greatly improve the payee’s standard of living. There are some pros of selling a structured settlement:
    ● Immediate access to a large amount of money
    ● Ability to repay your debts or to invest in business, real estate or education
    ● The funds payee receives never have to be paid back, as opposed to a bank loan
    ● There are no any hidden fees for selling a structured settlement
    ● There are no any penalties for selling a structured settlement for cash
    ● Seller can sell only part of the structured settlement and still get paid on a monthly basis

  31. Cons of Selling a Structured Settlement

    Selling a structured settlement is not always economically wise. There are some disadvantages to take into consideration:
    ● If a payee sells the entire settlement, he or she will no longer receive monthly payments
    ● Some structured settlement buyers can let a payee sell and transfer a structured settlement before a judge has approved a transaction. If a judgment is not returned in seller’s favor, he or she will end up owing back the funds at extremely high interest rates.
    ● Not all of the payees are able to handle large amounts of money. This can result in spending all the funds in a short amount of time.
    ● Most of the states require court approval for selling structured settlements
    ● In some cases, a lump amount received from a transfer of a structured settlement is taxed.
    ● There are fraudulent buyers in the market looking to profit at the expense of structured settlement holders.

  32. Organizations Involved with Structured Settlements

    The main organizations involved with structured settlements are The National Structured Settlements Trade Association (NSSTA), for the primary market and the National Association of Settlement Purchasers (NASP), for the secondary market. Both organizations are helping to ensure that primary and secondary structured settlement markets are fair, monitored and transparent.

  33. The Functions of the National Structured Settlement Trade Association (NSSTA)

    NSSTA was established in 1984, a year after the U.S. tax code changes making structured settlements more widely accepted, and since then, this association has been the leading voice of the structured settlement industry. More than 1,200 NSSTA members, such as attorneys, licensed consultants, insurers and other professionals who work with injury survivors, benefit from the activities of the association. Some of them include:
    ● Keeping the only Internet website dedicated to promoting the benefits of the structured settlement annuities
    ● Monitoring of various legal activities that impact the structured settlement industry
    ● Updates and legal analyses of state and federal court decisions, regulations, policies and laws
    ● Hosting professional certification and holding regular educational meetings
    Generally, NSSTA is the main structured settlement authority most of the involved individuals should know about. The role of this association in the industry is huge. NSSTA is committed to a strict code of ethics and excellence in the performance. The association maintains competence, fairness, and fidelity in the service. Although the members of NSSTA are mainly professionals involved in the structured settlement industry, regular citizens also can benefit from the association. If a regular citizen, holder of a structured settlement, decides to sell the annuity, he or she should look for a broker who is a member of a NSSTA. This helps to avoid fraudulent deals and to ensure that the broker will take care of the needs and interests of a seller.

  34. The Functions of the National Association of Settlement Purchasers (NASP)

    Established in 1996, NASP is dedicated to making sure that the secondary market for structured settlement is transparent, fair and competitive. The association helps to increase awareness about how the secondary market works.
    NASP is the only association related to a secondary structured settlements market. Since its establishment, NASP members have been working to educate the regulators and public about the benefits of settlement transfers, about how they are regulated and how they work in general. In 2001, the association issues the Model Structured Settlement Protection Act which is now used in 48 states.
    Many professionals involved in the structured settlement industry, such as attorneys, courts and judges, insurers and others look to NASP for reliable information about the structured settlement secondary market.
    In 2015, structured settlement markets were changing the focus of the future of the industry. Industry leaders worked together to create a future plan to overcome various challenges that impacted the performance of the primary and secondary markets. NSSTA and NASP will work closely on the elements of this plan and the future agenda to ensure that there are growth opportunities for structured settlement markets, that consumers are protected adequately, that educational options are expanded and are available to judges and new industry players, that the effects of the negative publicity are reduced.