1. What is a structured settlement and how does it work?

A structured settlement is an arrangement where a settlement from a personal injury or wrongful death claim is paid out over time, such as monthly, annually, in lump sums or in some combination thereof.

2. Who is responsible for making the ongoing settlement payments?

After a settlement agreement is made, the defendant or responsible party (the “annuity owner”) will purchase an annuity contract from a life insurance company (the “annuity issuer”) to fund the structured settlement. Although the annuity issuer will be the party actually making the payments, the annuity owner will remain responsible for making sure the payments are made.

3. Why would I want to sell my structured settlement payments?

Structured settlements are established for many different reasons and are intended to take into account the potential future needs of the individual and provide a reliable source of future income. Unfortunately, this setup can quickly become a burden because of a lack of flexibility and an inability to adapt to life’s changing events. Selling part or all of your structured settlement payments can provide the financial flexibility you may need to provide options for you and your family

4. How much will I receive for my future payments?

There are several variables involved in determining how much you will receive. The key factors in determining this amount are: how many payments you would like to sell, how much these payments are worth, how far in the future the payments are due, the risk of the insurance company not paying and current interest rates.

5. Why is court approval necessary?

The majority of the states have enacted a model Structured Settlement Protection Act, which requires an annuity recipient to obtain a court order approving the assignment of structured settlement payments. These laws were passed in order to protect you and make certain that the transaction is in your best interest.

6. Do I have to pay taxes on the proceeds from the transaction?

As long as the original structured settlement payments were tax exempt, the sale of the structured settlement payments does NOT create any tax liability and the purchase price you receive will not be taxable.

7. Can I sell just some of my structured settlement payments or do I have to sell them all?

You can sell some or all of your payments. If you only sell some of your payments, your insurance company will continue to pay you the payments you still own when those payments are due. The payments you sold will be paid to the purchaser when they come due. That’s why the payment price represents a discount — because the value to you now is greater than the value to the purchaser when the payments come due. The purchaser will base its offer on what the value of the payments will be when they are received.

8. How long does it take?

The process can take anywhere from 1-4 months depending on the court’s schedule. In some states, these transactions can be processed very quickly. In others, it can take longer.

9. Will I be punished by my insurance company for selling my structured payments? What if my agreement states that this type of transaction is not allowed?

Absolutely not. Some policies state that this type of transaction is not allowed or that the payments are not assignable. Fortunately, in 2002, President Bush signed into law Internal Revenue Code section 5891 permitting these transactions.

10. How old do you have to be to sell some or all of your structured settlement?

Once you turn 18, you’re considered an adult and can access your settlement. This means a new 18-year-old annuitant can decide to sell future payment rights — some of them or all of them — to a buying company for a lump-sum payment just like any other adult with a structured settlement or annuity. Any transfer must be considered fair and in the “best interests” of the seller, according to the court and the state’s Structured Settlement Protection Act (SSPA).