So You Are Thinking About Getting Cash For Your Structured Settlement

By: Frank ReCouper
Submitted: 2007-01-17 16:17:15
Print this article | Tell a friend | For publisher |

Rating:

 

So you are thinking about getting cash for your structured settlement. Then there are some questions that you need answers to before cashing your structured settlement annuity. First, find out how long the broker has been in the structured settlement industry. Given the level of difficulty in the industry, the broker should have a solid background.

You should also consider checking to see if there are any lawsuits being filed against their company
- contact your local Department of Consumer Affairs.
Talk at length with the broker, ask him / her questions and get a feel for how knowledgeable they are. Trust your gut feeling! Steer clear of those who offer much more money or can get it faster than others. If it sounds too good to be true, then it is.

How Long will it take to get the Structured Settlement Money
If you have been told that you can get your money within a few days – do not commit! In fact, it may take a month and a half or longer depending on the following:

1. A Court Order is required. It is now required by all states for a court order to be issued. If there is no court order, a tax equal to forty percent must be paid on the total amount of payments being sold. Do not fret, this is a good thing – it makes selling your settlement a little safer.

2. The Insurance Company – This includes both the issuer and the owner of the annuity. These things do not happen overnight. It takes time when dealing with companies.

3. What kind of payments do you have (quarterly, semi, annual, or are they a lump sum)? Different funding companies have their own requirements and it’s critical for your broker to know these requirements. Do your homework on the broker you choose - you will get your money faster and with a lot less hassle.

4. Check your Insurance Companies Rating? Make sure the Insurance Company has an A+ rating! Ultimately you will get a higher profit margin when your settlement is sold to larger financial companies. If a company has a lower rating then they may have to sell off settlements at a lower profit margin resulting in a lower price to you.

5. In addition to the above you will need the necessary documentation such as copies of the following: The annuity, the settlement agreement and release, photo ID, recent check and application. These are some of the things to consider. For now it gives you a good idea of what’s required.

What will Cashing Out Cost Me? Most likely you are going to be some what disappointed in the amount you receive. Total up all the remaining payments and know that cashing out will offer you much less than that. They based the structured settlement on a certain amount of money put into an annuity and then that principal amount, plus interest paid out, equaled the settlement amount. Consider other options before taking this one.

What is a structured settlement?
A structured settlement is an agreement in settlement of a lawsuit involving specific payments made over a period of time. Physical injury and workers compensation claims are awarded an annuity or payments made over a period of time. Peruse our site to make the best decision possible about your structured settlement.

Why Were Structured Settlements Created?
Historically, damages paid because of an injury lawsuit came in the form of a single lump sum. This kind of payment, especially in catastrophic injury cases, often placed the injury victim (or family) in a difficult financial position: With the victim focused on adapting to a new lifestyle, there often was not the time to manage large sums of money. That can lead to serious trouble. A person who loses funds intended to cover a lifetime of medical care runs the risk of losing medical care and independence.

That's why, in 1982, a bipartisan coalition of legislators in Congress came together to pass legislation that amended the federal tax code. Their action, The Periodic Payment Settlement Act of 1982 (Public Law 97-473), formally recognized and encouraged the use of structured settlements in physical injury cases.

Scenario: You were injured in an accident a few years ago that left you in the care of a hospital for a few months. After leaving the hospital you endured an excruciating year and half of physical therapy. You hired legal counsel to handle your case and sued the person - or insurance company responsible for the accident. Your lawyer assures you that you will be awarded a substantial compensation for your injuries. Your legal counsel and their insurance company work out a structured settlement with a payout that will last for several years.

Even though your compensation is substantial, you will only receive a portion up front to cover medical expenses. The money paid is going to be dispersed as an annuity, or payments made over a period of time. As you can imagine, the periodic payments are not sufficient compensation for your needs now.

Now that you have decided to sell your structured settlement you will need to take some things into consideration. Ask yourself “Is there going to be a tax consequence?" As of January 23, 2002 a new law that governs such sales, does not impose any tax liability for selling a structured settlement. Another consideration when selling your structured settlement is selling only a portion. Sell a portion that will meet your current needs, and leave the rest in an annuity so that you will still receive some sort of monthly income. A financial emergency or other unexpected expense may come up requiring you to access and sell a structured settlement. Just keep in mind that the settlement was meant to be dispersed over time and selling the structured settlement may result in financial problems down the road.

Article source: Expert Articles