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.

A settlement generally includes a lump sum of cash upfront (cash advance), once, to cover immediate expenses, followed by guaranteed, tax-free, periodic payments customized to meet the needs of the settlement winner. The key differences between these settlement options are in the areas of financial security and long-term taxation. The structured annuity emerged in 1983 after the Periodic Payment Settlement Act of 1982 was established. However, there are some downsides associated with choosing a structured settlement rather than a lump-sum transaction.

An assigned case is a qualified case, meaning that settlement proceeds qualify for tax benefits, and the defendant's payment obligation must align with the provisions of the Internal Revenue Code. Choosing between a one-time payment and a structured settlement can have long-term tax and personal consequences. 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. The Federal Periodic Payment Settlement Act of 1982 made court approval mandatory for all sales of structured settlements to ensure that the best interest of the consumer comes first and limit any party from taking advantage of the receiver of the settlement.

The key difference between adults and minors is that minors cannot control their settlement payments, so parents are in charge. 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. If you agree to take your compensation as a structured settlement, rather than receiving a large amount from the plaintiff, you will receive periodic payments over a fixed number of years. Before legislation, settlements were awarded as lump sums, and plaintiffs were often burdened with the task of managing the money themselves.

A structured settlement is a unique opportunity to resolve a personal physical injury claim, including wrongful death, with tax-free benefit payments.

Minnie Wuestenberg
Minnie Wuestenberg

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