If you have successfully settled a lawsuit as a plaintiff, you may be wondering just exactly how you will receive payment. If the defendant is financially able, you may receive your payment in a lump sum.

On the other hand, you may receive your award in the form of installments paid by the defendant over time until the settlement is completely paid in full. These longer term payouts are sometimes called structured settlement annuity.

This payout may be formalized as an insurance product that is purchased by the defendant to guarantee regular payment to you for a specific period of time. Structured settlements are popular in personal injury cases such as those involving automobile accidents and medical malpractice.

What are the Pros and Cons of a Structured Settlement?

An award against a defendant can lead to serious and long-lasting financial problems. With a structured settlement, a defendant may be able to spread out that financial burden over many years.

There can be several benefits to a plaintiff as well. There may be tax implications for a lump sum payment versus a structured settlement. Additionally, having a damage award broken up into a series of payments can be a good idea for people who feel there is financial security in a long-term payout from an insurance company or for individuals who might need long term care.

However, a structured settlement does not offer the same control and flexibility as does a lump payment. As the successful plaintiff, perhaps you would like to use your settlement immediately to pay off certain expenses or to purchase a home.

With a structured settlement, once the terms of the payout are in place, there can be serious repercussions for withdrawing early. In other words, if you have an emergency, there may be early withdrawal penalties that could significantly reduce the money that will be paid to you in lump sum.

What Should I Do Before I Sell My Structured Settlement?

Perhaps you need a lump sum payment now to deal with an emergency or to buy a house. Whether or not you are free under your settlement agreement or state and federal laws to sell your structured settlement, it is important that you get the advice of qualified professionals so you understand what the financial, tax and legal risks are for doing so. The good news is that once you get to this point, the sale is pretty straightforward.

You just have to find a financial company that buys these types of financial products. You should ask for free quotes and then compare quotes from different buyers before you commit to anything.

You should do your research to make sure you have settled on a reputable buyer. In assessing if you have found the right buyer, ask yourself if you are absolutely clear about the amount of money you will receive from the sale.

Have you agreed to sell all or just a portion of your settlement payment? Have you considered the full value of the current annuity versus what the buyer is offering to buy it for? Are you feeling pressured by the buyer to sell the annuity for less than it’s valued based on your research and after consultation with professionals?

How Do I Sell My Structured Settlement?

Your research has led you to a reputable buyer. You have agreed to the terms for selling your structured settlement and have put these terms in writing. Once the sale is final, you will receive your lump payment in very short time and you can begin to spend it as you see fit.

Keep in mind that there are some state and federal regulations and safeguards in place that both you and the buyer need to be aware of in order for the sales agreement to be enforceable. For example:

  • You should receive professional advice about the pros and cons for selling the structured settlement for a lump sum payment.
  • If you change your mind after signing the sales agreement, you may have a short window to cancel it.
  • Interested parties (i.e. insurance company or beneficiaries) will need to be notified of the sale.
  • The buyer should provide information about any fees or expenses associated with the sale.
  • Court approval of the sale will be required and failure to obtain court approval can have serious tax implications.

Should I Consult With An Attorney Before Selling My Structured Settlement?

Selling your structured settlement has broad implications for you. Besides the settlement contract itself, you may be restricted from selling your settlement award by law, or otherwise required to satisfy certain regulations before you may be entitled to receive a lump sum.

Each state’s legal requirements will be different and there are federal safeguards in place as well. Consult with a local personal injury attorney in your state who regularly advises on such issues to ensure that you are fully aware of your rights and responsibilities before selling your structured settlement.