Strategic Capital’s view on a Structured Settlement
Strategic Capital Staff
A structured settlement is an agreement that results from a personal injury claim. But what was ideal when the settlement was created may no longer be ideal today. That’s why some people choose to sell structured settlements for cash to pay for a variety of expenses, like medical care, education and home renovations.
Once they learned about the benefits of structured settlements, plaintiffs said that a primary reason that they would choose a structured settlement annuity is because it provides a reliable income for monthly expenses and guarantees financial independence. What may not be as clear to plaintiffs nowadays are the many options and the flexibility that a structured settlement offers.
Once a person receives the cash from the lump sum payment, he or she cannot simply change his or her mind and switch to a structured settlement payment. However, if an injured person chooses a structured settlement payment, he or she has the option at a later date to sell all or part of the settlement in the secondary market, for immediate cash, while still retaining a portion of the income stream.
Section 5891 of the Internal Revenue Code and the Structured Settlement Protection Acts at the state level give payees the option, with court approval, to transfer structured settlement payments from themselves to factoring companies who buy structured settlement payments. Given the flexibility offered by the buying and selling on the secondary market, structured settlement payments may be a better option for those people who are uncertain about whether to choose a structured settlement or a lump sum payment.
Not many people sell their structured settlement annuity payments. In fact, most people do not sell structured settlement payments. Those who do choose to sell structured settlement payments typically do so because their circumstances have changed, and they need the cash for a specific reason (it could be to pay for a medical procedure, it could be used for debt reduction, it could be used to pay for re-training or education, etc.). The cash that they receive is used as an escape valve, to help people reduce some of life’s pressures so they can deal with a problem or an opportunity.