The first pitfall occurs if individuals “over-structure” when they settle their personal injury claims. An appropriate settlement plan should include an analysis that justifies periodic payments and anticipate changing circumstances and liquidity needs.

A second pitfall occurs if settlement documents include anti-assignment clauses, which do not specifically reference and permit transfers pursuant to IRC 5891 and state structured settlement protection statutes.

A third pitfall occurs if individuals settling personal injury claims with periodic payments do not understand:

  • their periodic payment contractual rights; and
  • the role and requirements of state protection statutes.

A fourth pitfall occurs when individuals sell structured settlement payment rights without first discussing alternatives with financial advisors.

A fifth pitfall occurs when individuals sell structured settlement payment rights without soliciting and comparing multiple offers and inquiring about commutation options.

A sixth pitfall occurs when individuals compare multiple offers without assistance from advisors who are knowledgeable about transfers and can help negotiate favorable terms including but not limited to price. These terms include the amount and allocation of expenses.