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Understanding the Structured Settlement Sales Process

The ads of singing people who “need money now” seem so joyful, you want to run right out and sell that structured settlement.  After all, why wait for your money over a period of months and years?  And the people in those ads are so happy, the process must be easy and the right thing to do.

In fact, the sale of structured settlements is a controlled process that is governed by state law.

Structured settlements were first used in Canada some 30 years ago, but quickly grew in popularity in the United States.  They are very popular for settling personal injury lawsuits, because they allow the defendant to purchase an annuity for less than the full amount of the lawsuit settlement.  The amount placed in the annuity earns interest and is able to pay the plaintiff over time.

The sale of a structured settlement is called a structured settlement factoring transaction.  In 2002, because the IRS and Congress perceived abuses by the factoring industry and a loss of potential tax revenue, Internal Revenue Code Section 5891 was enacted to provide a severe excise penalty for any structured settlement factoring transaction that was not pursuant to a state court proceeding. 

As a result of IRC 5891, every state now has laws governing the structured settlement sales process.  If you’re selling your structured settlement, it’s important that you find your state’s law regarding the process and become familiar with it.  You don’t have to be a lawyer, but get an understanding of the basics.  Depending on the state where you live, the structured settlement buyer may be required to pay for you to get advice from a lawyer or financial advisor, for example. 

An Internet search can lead you to the appropriate statute for your state, which you can download and read for yourself.  Your state’s structured settlement process likely requires you to hire an attorney to get his advice, also.  Be sure to hire an attorney of your own choosing who has experience in structured settlement sales.  Most importantly, don’t let the buyer of your settlement “recommend” or send you to a “preferred” attorney – s/he won’t be independent, and may not look out for your needs.

Though the process of selling your settlement may seem frustrating, it is actually designed to protect you.  A structured settlement is intended to provide for your needs over a long period of time, so selling that settlement is not a decision to enter lightly.

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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