This article will go over on how the process of selling a structured settlement works. Structured settlements are scheduled payments of compensatory amounts adjudged or awarded as a result of a wrong done. Simply put, the payment is for the damages inflicted by one which is paid in installment instead of one lump sum. As a result, the paying party would be absolved of any future liability, unless the settlement schedule is not observed.
While this ensures a specific amount at a certain date over a period of time, there are times when the personal circumstances of the recipient would utilize the value of the structured settlement as an asset that can be exchanged for value. This may be due to a sudden emergency or if the condition of the injured party suddenly improves.
The sale of these assets is not an easy to undertake as there are major factors that need to be considered as well as processes to be followed in order for there could be a legal transfer made of this kind of asset. The safeguards instituted by law as well as the practices currently in place ensure that all the effort and the value that goes into the structured settlements would not go to naught.
The Sale of Structured Settlements
As previously discussed, there are times that a structured settlement would be considered as an asset and thus be exchanged for value. It must be remembered that a structured settlement is a personal obligation to be performed with the force and effect of law as it was approved by a court with jurisdiction over the matter. There are also laws which govern the operation and enforcement of structured settlements. Thus, there are peculiarities that need to be addressed when one decides to sell structured settlements to another party.
Before selling the structured settlements that are awarded to an individual, the following specifics need to be addressed:
a) There is a need to have court approval before the sale is to be made, as the absence of such approval would mean the invalidity of the act of selling structured settlements;
b) There is a need to properly address all matters in the governing law of structured settlements where the award was granted. This would mean compliance with laws and all regulations in force in the state where the settlement was formalized;
c) There is also a need to acquire the approval of the insurance company that issued the annuities for the structured settlement. The company may refuse to sell structured settlements under its ambit for reasons of non-assignability of the settlement agreement;
d) There are also taxation implications when one chooses to sell structured arrangements awarded to them;
Undertaking the Sale of Structured Settlements
Because of the legal nature of the structured settlement, selling it off as an asset is not an easy process to undertake. The following is a simple process to determine if selling structured settlements would prove to be the right decision in the long run.
- Determine if the value of the structured settlement would address all the financial demands in the future. This means, there must be a review of the value received as against the cost paid out. When the value received is below the actual cost, then it may be time to review as to propriety of the settlement being retained or opt for the sale of the structured settlement as an asset.
- Determine the market value of the structured settlement. This is done through the engagement of a financial advisor to assist the recipient of the payouts as to its valuation not just in present terms but in future terms. The option of selling structured settlements partially must also be observed in order to allow financial flexibility for the recipient in the long run. Another aspect is reviewing the current market rates for the
- Determine the legalities involved in selling structured settlements. This would go into obtaining court approval, compliance with local and state regulations on these kinds of sales as well as the tax implications of the sale of the asset. This would ensure the validity of the transfer of title over the asset.
Once all these determinations have been made and finalized, the recipient would have the necessary information on hand to make a decision on the sale of the structured settlement. Once a decision has been made, the following are the quick steps to do when selling structured settlements one owns or somebody related.
Quick Processing of Sold Structured Settlements
The ideal turnaround time to sell structured settlements has no hard and fast rule. The following are some of the pointers that one needs to avoid in order to have one’s settlement is paid out.
a) Have complete documentation. To avoid any future issues and delays, it is best to have complete documentation. This includes a copy of the decision on the case, a copy of the agreement, a copy of the annuity, copies of all the approvals and signed copies of the sale agreement.
b) Review the offer for the structured settlement. It is best to have both a financial expert as well as a lawyer review the terms and conditions before signing off to sell structured settlements in one’s name. This would avoid any future legal complications should the structured settlement be sought rescinded in the future.
c) Get the best offer. In selling structured settlements, it is best to take a number of offers instead of just retaining one. This ensures that the best value for the plan to be sold off would be received. Comparing and contrasting the different offers would not be bad but would actually force the best offer to come out.
Selling structured settlements is not an easy decision one makes as one would be foregoing future income for an upfront payment. After the long process of obtaining a financial settlement for injuries or damage sustained, selling it off must be done for the right reasons and done under the proper circumstances to prevent any issues in the long run.
For more information on selling structured settlements refer to our guide on structured settlement cash.