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4 reasons for you to take a structured settlement


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Photo credit: Immediate Annuities Annuity Meseum


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The list of the 4 reasons for you to take a structured settlement follow the article below

Structured Settlements

Very often, individuals who receive a structured settlement do not wish to wait for years to obtain the cash and would rather have it all in one go. Settlement purchasing companies help people to get cash instantly; the cash can be obtained at any stage of the execution of the structured settlement. A person who receives the lump sum is free to use it any way he desires - for education, home, or car.

It is not uncommon for a recipient of a structured settlement to run into a financial difficulty or come across an investment opportunity that promises better returns than a structured settlement. At such times, individuals consider getting cash for their structured settlement and use the money to build their own portfolio of investments. An advantage of getting lump sum cash is that it acts as a hedge against inflation.

Companies that purchase annuities do so at a discounted rate, at the very minimum, the discount is equal to the existing bank rates. Sometimes, purchasers may require a higher discount in order to cover the risk involved and make a profit. One should ideally take the help of a financial advisor who can professionally assess an individual's income, assets, and monetary obligations. This helps to put into perspective future security as assured by a structured settlement against a lump sum payment.

Companies that purchase structured settlements offer to do so in a number of ways so that an individual can sell different amounts of an annuity. The flexible plans can be tailored according to an individual's requirements; this allows one to enjoy both a lump sum at hand for immediate needs and regular payments from the annuity. The course of action to be taken while selling a structured settlement depends upon the immediate needs that could include paying off debts, child's college fees, debt consolidation, or a business venture. Cash for structured settlements can be obtained as a full payment, partial payment, or a shared payment.

A full payment involves receipt of a lump sum for the entire annuity. It is an option when high debts have to be repaid. While selling an annuity that is due well into the future, one should be careful because they do not result in as much money as those annuities that are due sooner. This is because the value of money depreciates due to inflation.

Partial payments can be useful if a limited amount of money is required for consolidating debts or repaying a loan. A given number of payments can be sold off for a lump sum in a partial payment. With a shared payment, one can sell of a portion of a lump sum that is due in a short time. A shared payment enables one to pay off expenses that are going to be incurred in the near future; these may include education fees or the cost of a new vehicle.

Individuals who intend to obtain cash for their structured settlements should obtain the necessary court approvals for the purpose. One should ensure that the transaction complies with state and federal restrictions. Before deciding upon a buyer, one should research a few companies and look out for the best deal possible. It is also important to check the credentials of a prospective purchaser.

Story credit: Structured Settlements Guide

roll of money locked in a padlock

Photo credit: Master Edge

4 good reasons for you to take a structured settlement

1. To pay off credit cards with high interest rates

2. To pay down a home mortgage to reduce monthly payments

3. To pay for children's college tuition

4. Emergency expences due to medical problems or an accident

Special Considerations

Any person entering into a structured settlement should be on guard for potential exploitation in relation to the settlement:

Excessive Commissions - Annuities can be highly profitable for insurance companies, and they often carry very large commissions. It is important to ensure that the commissions charged in setting up a structured settlement don't consume an inappropriate percentage of its principal.

Overstated Value - Sometimes, after negotiating a particular settlement figure, the defense will overstate the value of a structured settlement. As a result the plaintiff, in accepting the settlement, in fact obtains a significantly lower dollar value than was agreed upon. Some defendants have nominally paid the full amount of the settlement, knowing that they would later obtain significant rebates from the annuity companies they used. Plaintiffs should consider compariing the fees and commissions charged for similar settlement packages by a variety of insurance companies, to make sure that they are in fact getting full value. A plaintiff may wish to make it a condition of the settlement that the defendant will actually pay the full value of the settlement in setting up the structured settlement, and that any rebates received by the defendant for annuities included in the settlement be payable to the plaintiff.

Self-Dealing - There have been cases where the plaintiff's lawyer is also in the insurance business, and sets up a structured settlement on behalf of a client without disclosing that the attorney is purchasing the annuities from his own business, or is pocketing a large commission on the annuities. Similarly, there have been situations where the plaintiff's attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing that the financial planner will be paying the attorney a referral fee in relation to the client's account. Make sure that you know what financial interest, if any, your lawyer has in relation to any financial services sold or recommended by the lawyer.

Life Expectancy - It is unfortunate, but many people who receive large personal injury or workers' compensation settlements will have a shortened life expectancy as a result of their injuries. It is important to consider life expectancy in association with any structured settlement, and to consider whether it is appropriate to enter into an annuity where payments will cease upon death. Sometimes it will make sense to insist upon an annuity that pays a minimum number of payments, or one that will pay a balance into the plaintiff's estate, such that the value of the settlement is not lost to an insurance company upon the plaintiff's untimely death.

Using Multiple Insurance Companies - For larger settlements, it often makes sense to purchase annuities for a structured settlement from several different companies, dividing the settlement between those companies. This can provide you with protection in the event that a company that issued annuities for your settlement package goes into bankruptcy - even in the event that one of the companies defaults in part or in full on your settlement payments, you would still receive full payment from the other companies.

Story credit: ExpertLaw

Copyright 2017

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