What is the Purpose of Structured Settlements?

What is the Purpose of Structured Settlements?

There are many reasons and ways people can get a structured settlement from winning the lottery to being injured in some sort of accident and winning a cash award. Any award can be paid out in all cash or they can be paid over time via an annuity that pays cash on a monthly basis over time. The latter example is a structured settlement where a person receives their monetary award in the form of recurring payments over time. The company that is paying the award can buy an annuity that will then provide the payee regular installment payments (typically monthly or quarterly) depending on the needs of the individual and the amount of the settlement. These payments can stretch out from just a few years on the low end all the way up to twenty or thirty years or more. Again, it just depends on the circumstances and the amount of the award.

Primary Benefit: The most common benefit of receiving a structured settlement rather than all cash is to ensure that one is guaranteed to have financial stability over a long period of time. Often an injured party may not be able to return to work and the annuity is set up to provide them income and financial resources to take care of their needs. Alternatively, there is some inherit risk to anyone that receives a huge lump sum cash award at the outset to spend the money unwisely (and quickly) and then be left with no means to support themselves.

Negative: There are also a few drawbacks to receiving a structured settlement which include you not having much flexibility. The primary problem is that when setting up annuity payments for someone for the next twenty or thirty years it is very difficult to foresee what all the financial needs and circumstances may be. So even a well planned out settlement may not account for an unexpected expense that can be financially devastating. In this case the annuity recipient can not go back and revisit the original settlement to get more cash. Their payments are fixed and cannot be adjusted. This makes for some unfortunate circumstances unfortunately and what led to the rise of the industry to buy structured settlement payments.

Buyers: Once people with settlements ran into financial problems and realized that their original agreement may not account for all their future needs is when companies came in to fill this void. Factoring companies will buy structured settlement payments and pay lump sum cash to the recipient. Not only can one receive a cash payment but they also have the option to sell all or just a portion of their future payments. This provides the flexibility to get some cash that is needed today will ensuring future payments to take care of needs down the road.

If you are interested in selling your payments you can talk to an expert and get a free quote to find out how much your payments are worth by click on the link below. Be sure to share as much information as possible and ask many questions about the process so you are fully informed.