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A Guide On How To Purchase Structured Settlements

Updated on March 24, 2013

Structured settlements – what exactly are they? They refer to payments when a lawsuit is settled where the lump sum is paid over a period of time in a structured manner. The payments in this structured settlement are usually done by purchasing some kind of an annuity plan and it is this that guarantees those timely payments. The payments in structured settlements can be done according to the wishes of the recipients regarding the amounts and the time scheduling.

Let’s take a look at who can avail of structured settlements. They can be divorce structured settlements where the aggrieved party is awarded a lump sum that is disbursed over the years and this could be in equated monthly payouts. Or, it could be a lump sum that is put aside for a child where the money will be drawn out for the child’s expenses and education when needed by the person who is given charge of him. It could mean accident structured settlements where accidents claims can be awarded in a lump sum to be given to the person in a time-specified manner.

Structured Settlements – The Pros

If you are looking to buy structured settlements, you probably realize that there are quite a few restrictions that you need to know about, not to mention the requirements that are mandatory. The advantages of structured settlements are that they are tax free in most cases – and even if tax has to be paid on them, they drastically reduce your tax burden. It could also be advantageous because very often people tend to go on a buying spree when it comes to a lump sum of money that is given and structured settlements protect against the squandering away of the money. It also means that no matter what happens to the person who provides the money, the structured settlements will ensure the financial safety of the recipient.

Structured Settlements – The Cons

Structured settlements could at times be a disadvantage when you are looking for a large sum of money for a medical need or a deposit for a house or a sudden journey. With structured settlements, you just have to wait for your money to come in periodically. You might also feel that you could have invested the lump sum better and earned a lot more money.

Buy Structured Settlements With Care

If you want to purchase structured settlements, you might want to do so cautiously to get the best out of them. First off, make sure you have a good and reputed broker – look around and ask around before you make a decision. Make sure you acquaint yourself with all the legalities – the federal as well as the state laws governing structured settlements so you get rid of the possibility of any legal problems that could arise. It helps if the company you are dealing with is a National Structured Settlements Trade Association member. Also, get an attorney to look over everything before you put your final signature on that structured settlements deal. If you purchase structured settlements that are good, then you’ll find it easier to sell structured settlements like these if you have to. There are companies that purchase structured settlements by paying a lump sum. Selling structured settlements has to go through a certain procedure and some states have certain restrictions so you must be aware of those. Also, you might not be able to transfer the structured settlement if the insurance company that disbursed the annuity has certain clauses that forbid it.

So when you purchase structured settlements, take time to check out all the factors concerning it, including the possibility of selling it at some point of time, so you are not totally bound by the payments. Make sure you are not being cheated when you work out the structured settlement scheduling and also check on the commissions that the annuities charge. You should do comparisons because some insurance companies can charge a high amount. You could also look at the possibility of splitting the annuities among various companies so you operate a number of structured settlements at the same time.


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