Cases settled out of court usually involve an agreement for a predetermined amount of cash to be paid out to one party for a fixed length of time. These recurring payments are called structured settlement annuity. This is usually the alternative to lump sum settlements.
The periodic payments can be made in installments of equal or varying values. These are basically long-term payments, because they could be made for the duration of the life of the claimant. This is why it is important to check the credentials of the annuity provider and make sure that it can fulfill the terms of the settlement.
The start date, duration and frequency of the payment are also specified in the settlement agreement. These are calculated based on the claimant’s monthly expenses, present age, extent of hazard in occupation and retirement plans. Under certain conditions, transferring of obligation from the insurance company making the payment to a third party is allowed.
In order for the structured settlement annuity to remain tax-free, the structure of payments should not be altered once both parties have agreed on it. However, it is difficult to guarantee that the payments will not lose their value over time because of inflation. Nor can the recipient expect that his financial situation will not change in time and that the payments will always fit the budget.
People sell structure settlement payments for these and various other reasons. Whether selling in part or whole, the lump sum they will receive allows them to take charge of their finances. They can use it in making other investments such as real estate purchases or as capital for a business venture.
There are plenty of companies advertising on the Internet, offering to buy structured settlements. Past payment records and working relationships with insurance companies are good indicators of the company’s ability to get the sale approved quickly. A competent settlement purchaser should have a solid reputation in these two areas.
It is also important to do business only with purchasers that are licensed, insured and bonded. With this, clients get their cash even if the company goes out of business. The free consultations offered by settlement purchasers are also good opportunities, not only for evaluating their suitability, but also for getting financial advice.
As with any major decision-making, it is essential to look into all possible options and weigh the pros and cons. For instance, a structured settlement annuity is beneficial for retirees or people with low earning ability, giving them a regular income without having to worry about managing it. People who sell structured settlement payments have more flexibility in terms of investment options since they have control of their own finances. However, this option makes sense only if they can manage their investment portfolio effectively.