People who are seriously injured in an accident might be eligible for a sizable financial award as compensation for pain, suffering, and lost wages. If it is your award, decide on taking it in one lump sum, or you may settle for the guaranteed distribution over a long period of time. We call this a “structured settlement.”
Whoever owes you the money usually purchases an annuity from an insurance company, and the insurance company pays you the financial award in installment payments. You receive the tax-free annuity payments over the rest of your life.
The structured settlement annuity helps you meet your continuing financial needs as the injured party: medical expenses, family support, and replacement income because you cannot work. To keep the investment sound and the distribution sure, an insurance company administers the annuity.
Despite what some people think, a structured annuity does not change your award. It just pays you installments. In time, you may decide that you need more money and want to sell all or part of the settlement payment/s for a lump sum.
Selling structured settlements helps you when you find the installments do not meet your needs because of inflation. You may suddenly need a large amount of money to finance a move or a child’s college education. In any case, the award was to you, and you own the annuity. So, consider your option to sell:
Identify your need:
• You need a percentage of the remaining payment/s.
• You need the value of a few payment/s.
• You need the entire value in the annuity.
What to do?
• Contact an attorney. Your existing annuity can be difficult, and the sale of the structured settlement can complicate this problem. For example, if you decide to sell a percentage of the award payment/s, the shares can get confusing. Contact an attorney who has experience working with structured settlements and can help you navigate the process with ease.
• Do homework: There are hundreds of websites representing buyers. Check the buyer that interests you with a call to the state Attorney General’s office and the Better Business Bureau. Doing the proper research will arm you with the knowledge you need to accept the right offer and to ensure that you are doing business with a reputable and trustworthy individual.
• Defer payments: Consider deferring payments. This gets you cash now and does not reduce your payment/s until later. Whatever you decide on, demand a written offer. If the buyer resists a written offer, continue shopping.
• Secure several offers: Shop around in search for the best offer and avoid dealing with only one company. You want to have several options at your disposal.
Follow your gut when selling structured settlements: Do not commit to anyone you are not comfortable with. Choose a buyer who is patient with you, explains the pros, cons, and paperwork. There needs to be some professionalism and respect. The award is yours to do with as you will, so you will want to be sure that you are working with a lawyer and buyer you can trust.
About the author: Alex White is an investor and personal finance expert. He enjoys blogging about what he does best.