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Structured Settlements: Why Would A Company Purchase Structured Settlement Rights?

Updated on August 24, 2015

The idea of selling cash seems somewhat contrary, but in truth it happens all the time—stocks and bonds are bought and traded, investors put up capital for a later return…there are innumerable ways that money gets exchanged for money. Put in this light, it is not so strange to consider that an investor or buyer of structured settlement payments might want to purchase structured settlement rights. Still, there has to be something in it for them, or the practice would not exist.

So what is the benefit for the buyer of annuity and structured settlement rights? Does their benefit means that the practice is somehow underhanded? Is there benefit for you in selling structured settlements?

What's In It For Them, The Structured Settlement Purchaser?

What's in it for an investor or company to purchase structured settlement payments is an investment opportunity. It may be a lesser known opportunity, and it may be one that is met with initial skepticism, but it is a real opportunity indeed. By buying structured settlement annuities, the investor can front the money to provide you, the current recipient, with a large lump sum of cash to meet your financial wants or needs. In exchange, that investor, group of investors, or structured settlement company will become the recipient of some or all of your annuity payments until the obligation to them is fulfilled; if payments remain, they will again be paid to you. The investor(s) can receive only what is negotiated and contracted to them.

To fully answer the question, however, it should be clear that the purchase of structured settlement payments is not an equal exchange of pound for pound or dollar for dollar. Your rights will be bought at a discount rate to allow the buyer to make money for their investment. To state it very simply, the structured settlement buyer agrees to pay you in a large lump sum of cash an amount of money that is lower than the amount you would receive if you waited to collect all your payments personally; the structured settlement broker then waits to collect your full payments (or portions of some payments depending on your agreement) for the allotted number of payments, and thereby makes money on the deal. In effect it is the luxury of time that helps the investor make money—a luxury you may not feel that you have if, for you, money in the short term is worth more than money in the long term.

Is There A Dark Side To The Purchase Of Structured Settlement Payments?

The purchase of structured settlement payments and the exchange of one sum for another is perfectly legal. It has been challenged, evaluated, and ruled upon by many courts of law. And those legal challenges have led to laws and regulations in (to date) 46 U.S. states and many locales in other countries such as the UK and Canada. In and of itself, buying annuity payments is another form of investment and is not a shady practice.

However, like all things, there is always the potential for an unscrupulous broker to take advantage of an ill-informed seller, which is why it is important to research the company and learn your facts before entering into a contract for the purchase of structured settlements. On the bright side, though, the courts and regulations serve as an added seller protection, in most cases requiring that a local court of jurisdiction approve the sale before finalization. The fact that there are many competing structured settlement buyers is also of benefit, allowing you to "shop around" as you might for a mortgage or any other loan or financial vehicle.

Is There A Benefit To Me If I Sell My Structured Settlement Payments?

There certainly is great potential for you to benefit from selling annuity payments if it is done with care and you work with reputable buyers. The purchase of your structured settlement payments could provide you with much quicker access to your money, once again putting you in control of your money, your finances, and your life. There is something of potential benefit to all parties involved with forthright structured settlement sales.

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      guy 8 years ago

      good article !

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      Nancy 9 years ago

      An excellent time in the states for this article.