News and Tips on structured settlement transfers.


Structured Settlement Concepts – Annuities

If you’re the owner of a structured settlement, you may hear the term annuity a lot in connection with your settlement.  What does it mean, anyway?

An annuity is defined as a financial product sold by financial institutions that is designed to accept funds and then pay out a stream of payments to the individual at a later point in time.  Annuities have lots of uses, but in the case of a structured settlement, they allow a defendant in a lawsuit to set aside an amount of cash less than the court-ordered amount.  The amount that goes into the annuity is invested, allowing the amount to grow until it is sufficient to make payments to the plaintiff over the course of several months or years. 

So why would a settlement be arranged like this?  Why doesn’t the defendant just pay you what he owes?  Most likely, the defendant doesn’t have that kind of cash on hand to pay the total lawsuit award, so the structured settlement allows him to satisfy your claim with the cash he has.  Typically the defendant will purchase the annuity through an insurance company.  The defendant pays in enough to be invested and make the future payments, and he’s done.

But there’s another purpose to the structured settlement annuity, and it’s meant to protect you.  If you’ve been injured in an accident, you may be disabled and unable to work.  The structured settlement ensures that you will have a steady stream of cash to pay your living expenses for a fixed amount of time.  It prevents you from spending everything right away, and because the payments come in intervals, there’s no chance the money will burn a hole in your pocket.  The structured settlement protects you from you.

However, you may be facing unforeseen circumstances, such as medical or legal expenses, or tuition, and need access to the full amount of your settlement now.  So, you may sell all or part of the structured settlement payment stream for a lump sum of cash.  Just remember:

  1.  You will get less in a lump sum than you would have received over time.  The buyer of your settlement will use a discount rate to reduce the amount of your total settlement to today’s dollars.
  2. Structured settlement buyers are companies looking to make an investment and turn a profit.  They are not in business to help you, so make sure that selling is your best and only option.
  3. The sale of a structured settlement will take some 45-60 days, or even longer depending on your state.  If you need money sooner than that, selling your settlement won’t help.
  4. Selling is forever.  Once the payment stream is sold, you will never have access to it again.  If living without your annuity is an unpleasant thought, don’t sell.

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.

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