Chances are if you’re reading this article, you’re contemplating whether or not to sell, transfer or factor some or all of your structured settlement. The purpose of this series is to provide you with information that will assist you in making this decision. Of the five important steps before you sell your structured settlement, the most important one by far is to do your due diligence. This is not a decision to be taken lightly regardless of how many advertisements you have seen or heard that lead you to believe otherwise. Depending on the type of structured settlement you have, there may be legal and contractual restrictions that make it difficult or even impossible to sell them. Additionally, the tax considerations alone are an important factor when considering this course of action.
If you or someone you know is the recipient of a structured settlement and are considering the option to sell, it is imperative to understand the legal restrictions that may apply to the settlement. In general, a structured settlement is most often negotiated to benefit both the claimant and the defendant. Congress passed the Periodic Payment Settlement Act in 1982 to regulate the legal process of these types of settlements. Once the settlement has been negotiated, the terms cannot be changed. Depending on the state you live in, there may be state laws as well as federal laws that restrict the sell and heavily regulate the transfer of structured settlements. It is also important to note that there may also be contractual language that applies to the sell or transfer of the settlement.
In order to encourage defendants to settle with claimants, the Periodic Payment Settlement Act of 1982 included a provision that attached significant tax benefits to structured settlements. The law states that annuity owners and providers do not owe any taxes as a result of these transactions, if you choose to sell your structured settlement payment you will lose this tax benefit. Before deciding to sell a structured settlement, it is imperative for the seller to understand the tax consequences of receiving a lump sum payment as opposed to the scheduled payments. In step #2, seek legal advice, we will more thoroughly examine the need to consult an attorney as an essential step to arm yourself with the necessary information required before the sell of a structured settlement.
If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.
