What is a structured settlement company?

Structured settlement purchasing companies, also known as factoring companies, provide services to those who sell their structured settlement payments. These companies offer deal owners lump sums of cash in exchange for rights to future payments or parts of future payments. A Structured Settlement Annuity (SSA) provides periodic tax-free payments over a period of time, specifically designed to meet the needs of the injured party. Specialized consultants facilitate the liquidation process and help design and negotiate the structure.

Typical settlement scenarios include a personal injury case, a workers' compensation case, medical malpractice, and wrongful death lawsuits. By 1985, the National Structured Settlement Trade Association was formed to preserve and promote structured settlements for injury plaintiffs through education. The law served as the federal government's acceptance of the IRS ruling and extended restrictions to state governments, prohibiting them from taxing income from structured settlement of personal injury cases. Before legislation, settlements were awarded as lump sums, and plaintiffs were often burdened with the task of managing the money themselves.

If the settlement is structured to pay for a fixed guaranteed period, the annuity can normally be inherited for the rest of the guaranteed installments. The settlement is then spread out into a series of periodic payments over an agreed period of time rather than a one-time payment in most cases. Your lawyer is likely to have helpful opinions and will negotiate the terms of the agreement on your behalf. Most structured settlements stem from personal injury, wrongful death, or workers' compensation claims.

The key difference between adults and minors is that minors cannot control their settlement payments, so parents are in charge. A structured settlement guarantees the payee tax-free installments of income for the life of the settlement. Statutory settlements can be paid in a single lump sum or through a structured settlement in which periodic payments are made through a financial product known as an annuity. Since the structured settlement annuity is essentially an income annuity, inheritance is treated as such.

You can “collect” your future structured settlement payments by selling them to a factoring company at a discount if you need immediate cash. Basically, you sell your settlement payments at a deep discount through a settlement transfer in exchange for a lump sum of cash. In 1982, Congress passed a law stating that plaintiffs in personal injury, wrongful death, and workers' compensation claims could receive their settlement awards as tax-free income payment streams through a structured settlement annuity.

Minnie Wuestenberg
Minnie Wuestenberg

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