Structured settlements are often used as an alternative to
lump sum payments in the settlement of personal injury tort lawsuits. A
structured settlement is often offered to a claimant to settle a lawsuit with a
defendant or an insurance agency. In the agreement, the defendant offers a
series of payments over a specific time to the claimant. In return, the
claimant dismisses the lawsuit. To fund the obligation, the defendant purchases
an annuity and assigns the rights of collecting payments over to the claimant.
This allows the claimant to receive periodic payments from the annuity. The
annuity is most often purchased through a life insurance company.

Recipients of structured settlements might find themselves in a short-term cash
flow crisis, where they need money in the short-term. The solution to this
financial crisis is to enter into a structured settlement factoring
transaction. Basically, this form of transaction allows the recipient of a
structured settlement to transfer the rights to receive future payments to a
buyer. In return, the seller will receive a lump sum of money for transferring
their settlement rights to the buyer. In this transaction, the buyer will have
the right to receive all future payments from the annuity. The seller will
forfeit all rights in return for a sum of money. It’s important to note that
the seller can sell all or just some of the future payments of their structured
settlement. The sale is often determined by the amount of short-term cash the
seller needs to ease a short-term cash flow problem.

The transparency of structured settlement factoring transactions has become
clearer with the passing of the State Structured Settlement Protection Act of
2000. This legislation was enacted to help protect individuals entering a transaction
involving a structured settlement. The bill requires that the factoring
companies make full disclosures to the recipients as well as a judge’s approval
on the sale of a structured settlement. This legislation requires full
disclosure of all fees to be charged in the event of a breach of the
transaction. It’s important to note that companies that do not get court
approval for the purchase of structured settlements will face a punitive
exercise tax through the Internal Revenue Service.

For those who are interested in selling or buying structured settlements, it’s
best to go through a company that specializes in brokering structured
settlement factoring transactions. These companies typically provide a
marketplace where a seller can receive multiple quotes from different companies
interested in buying annuities and structured settlements. Working through a
structured settlement factoring company will help the seller get the most money
for their settlement.

When selling a structured settlement, it’s often best to sell to the company
that is offering the lowest discount rate. The discount rate of the structured
settlement annuity is a metric that is used by the buyer to determine the value
of the future payments of the annuity. The structured settlement transactions
are typically priced using the discount rate. The discount rate used for
factoring depends on how many payments are left and the length of time
remaining for the payout. That’s why it’s best to get several quotes from
several different buyers through a structured settlement company.