Aug 31
adminStructured Settlements Disadvantages, Settlements, Structured
Structured settlements are generally used to compensate individuals who have been awarded a huge sum of money. They are most commonly used when an individual himself has been seriously injured or disabled due to the negligence of another individual or organization. They are also very frequently used to pay out jackpot lottery winnings. Instead of paying a huge lump sum amount of cash, structured settlements are generally paid out over a spanned period of time. Payments are also issued monthly, quarterly, semi-annually or annually. These payments are strongly backed by an annuity distributed through various life insurance companies. Structured settlement payments are tax-exempt and hence tax free.
There are various types of structured settlements in all. Each is designed and structured to suit an individual’s financial requirements. Some are paid out for a specific period of time, while others are paid out for the remainder of the recipient’s life. When structured settlements are paid out over a period of time, these payments are referred to as “Designated Period” or “Period Certain Annuities”. What this means is the recipient will be receiving a fixed amount of money at a specific time monthly, annually for a predetermined number of years. If the recipient dies intermittently before the structured settlement is paid in full, the remainder will be distributed to the designated beneficiary (of the party or the individual). Life annuity structured settlements are paid to the recipient for the remainder of their lifetime. It’s important to note in many cases “life” might be actually referring to a certain number of years based on the individual’s life expectancy as determined by the company. Also referred to as “Period Certain”, this form of structured settlement annuity will have a transfer to the beneficiary if the recipient passes away prior to the decided number of years.
One might get Lump sum payment at a future date through Lump sum annuities rather than the traditional Structured Settlement payment. This type of structured settlement is inviting the people who have children or some form of beneficiaries. The funds can be arranged and ordered to be paid out when the child enters college or whenever the benificary might enter a period of financial necessity and helps to pay for educational expenses. There are two modes of lump sum annuities called “Lump Sum” and “Life Contingent Lump Sum.” The first allows transfer of the annuity to a designated beneficiary, while the second one does not. Life annuities generally provide monthly structured settlement payments for entire life period. The two types of life annuities available are — “Life Only” and “Joint and Survivor.” The first kind offers no chance to assign a beneficiary, whereas the second continues payments to the beneficiary for the remainder of their life. Last, but least, is the Temporary Life Annuity. This type of structured settlement pays in regular periodic payments for a specific number of years. The annuity term ends when the recipient expires, as there is no beneficiary provision in the agreement.
Even though structured settlements provide long-term financial commitment, there are a few known drawbacks. One of the main drawbacks is once the papers are signed, there is no way to modify or change them. If unexpected expenses are incurred, money cannot be withdrawn from the structured settlement account. Since this documentation is more complex than expected, the attorneys should be well-versed with the subject of contention and preferably also a certified structured settlement broker. If structured settlements documents are not properly drafted and created through the complete set of litigations involved will be a head ache process to the recipient of the structured settlement and will have a sleep less nights.
One may or may not use his or her structured settlement payments as collateral for a loan. The reason is that the federal law is designed to provide these benefits to one on an income tax-free basis also prohibits from assigning or encumbering them.
Again, the federal law that assures the payments one receive are on a tax-free basis, also prevents converting payments into a “lump sum” settlement.
No one except the individuals specified in the Settlement Agreement can be made the payees on your checks that you receive from the structured settlement company. Exceptions may be made as the consequence of a court order.
Aug 31
adminStructured Settlements Knowing, Sell, Settlement, Structured
Knowing when to sell a structured settlement is difficult as everyone’s circumstances are different. One person may determine they need to sell when someone thinks it is not necessary. To know if it is time to sell your structured settlement, you need to look at your personal details and evaluate your circumstances.
Do you need a lump sum of money? This is the primary indicator that it is time to sell a structured settlement. You may have bills that are overdue and those small checks that are sent just are not cutting it. However, you need to look at your circumstances. Be sure you do not use your lump sum of money to catch up on bills just to be in the same boat once the money is gone. Selling a structured settlement will be of most benefit if you have unusual circumstances arise – such as the birth of a new child or a medical emergency. In these instances, a lump sum of money will bail you out of a jam and allow you to get back on track.
Another way to know it is time to sell a structured settlement is when circumstances arise in which you would benefit greatly from doing so. You may not need the money now, but having it in hand may be very useful under the right circumstances. An example would be an opportunity to invest in an IPO or, even better, to open your own business. You may decide to pay off your mortgage or eliminate your unsecured debt. Any of these examples would be a great reason to sell your structured settlement for a cash payout.
Selling a structured settlement is a personal choice. After reading these examples, listen to your intuition to know if it is the right time for you.
Aug 25
adminStructured Settlements Settlement, Solution, Structured, WinWin
Today, long-term structured settlement are more accepted as a common form of it payments. Instead of a lump-sum payment, the structured settlement for the injured party is a steady source of receivable payments over an agreed length of time. With this type of settlement, a few advantages for both the injured and the at-fault parties. The injured party may be disabled and requires constant medical care. With regular periodic payments, it somehow guarantees available source of funds to cover the medical expenses over the time period. On the other hand, the paying party can pay for the settlement by just purchasing an annuity from an insurance provider. This requires an upfront payment and in return will accrue interest. This over a period of a few years will produce bigger long-term yield from just a minimal investment. Because of such advantages, this allows for a great deal for both the paying and the receiving parties. A structured settlement, thus, is a proven win-win solution in this case. There are also disadvantages with this type of payment. One of them is that there are restrictions on structured settlements and such limitation is not for everybody. Accepting a structured settlement is accepting a structured deal. Because of its structure, you cannot return it for a lump sum payment after agreeing with this type of payment. Because of such restriction, you simply cannot use the guarantee as collateral for a car or home loan. With such little flexibility for such type of payment, major expenses like buying home or other unexpected expenses should be provided with other financial solutions as this source of payment cannot be cash advanced nor back up a mortgage. With such demand of a big amount at certain points in our lives, there is still a way to liquidate a structured settlement payment as an answer to its problem with flexibility. The answer is that you can now sell your structured settlement to a third party. There are investors right now who are interested in purchasing structured settlements. As an investment vehicle, these investors like financial companies are willing to pay you a lump sum cash as a trade for signing over your succeeding annuity payments in the future to them. Only be aware that when you sell your structured settlement payments, these investors wish to make money on the transaction. Before deciding on such a decision, seek professional advice. After all, recipients of these payments are now protected with government regulations. Those are just the benefits of this type of settlement and how its disadvantage of inflexibility was answered with the option to sell your annuity. Just do your part by doing some further research.
Aug 22
adminStructured Settlements Payment, Sell, Settlement, Structured
The first step to selling a structured settlement payment is to have an idea of the amount to be sold and finding a suitable buyer. The internet is the best resource for obtaining quotes and information on buyers. The information that buyers require to conduct a sale includes the state of seller’s residence and the insurance company. If a seller wishes to proceed, he is to submit copies of the settlement agreement and annuity policy.
One can also avail the services of structured settlement brokers who are in a position to lead a person to favorable deals. However, sellers should beware that the brokers are not into an exclusive contract with an underwriter.
Annuitants can access immediate cash by selling off either a part or the whole of their structured settlement to settlement companies. However, there is a cost involved with the process as companies that companies that pay cash upfront deduct to account for tax and their own profit. In fact, selling a structured settlement should be avoided as the actual amount received is far less than the amount that one would have actually obtained in the normal course of events.
Usually, the seller does not incur any out-of-pocket costs while selling a structured settlement payment. The funding company pays for the legal expenses and any upfront costs incurred. The process of selling a structured settlement payment can take up to two months to complete. In order to ensure a smooth sale, one should conduct the sale in consultation with a tax advisor and a legal professional who has the experience of selling structured payments.
Sellers should try and understand the underwriting process followed by a buying firm; this will help them to obtain clarity on the amount that they will receive from the sale of their structured payments. Upon finding the sale to be in favor of the seller and his dependants, a court will issue an order to the insurance company to send payments to the buyer in future. The transaction is non-taxable for the buyer and the seller.
Older Entries
RSS