Cash Payments or a Structured Settlement?

In traditional settlements, compensation for damages has usually consisted of a single cash payment. Alternative arrangements know as structured settlements were created in the 1980's. Under these arrangements the beneficiary would receive cash structured settlement payments on a periodic basis. This guaranteed stream of annuity payments could be paid over a period of months, years or a complete lifetime.

Selling Future Payments

Many individuals receiving a stream of monthly payments under a settlement agreement don't realize that they can sell all or a portion of their annuity payments and be paid a cash sum. Access to this money could provide funding to meet the current life needs of your family instead of waiting for a future stream of inflexible payments structured over a period of a year or more. This process of entering into a contract to sell ones legal right of receiving future structured payments to settlement companies in exchange for the present value of the money is called factoring. A large number of companies now offer cash for a structured settlement payment. When evaluating your options, try to work with financially sound companies that are competent and ethical.

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Settlement Companies

In recent years, a complete settlement funding industry has been created. Companies will offer to pay for the rights to receive future annuity payments under structured agreements. These companies offer customers the benefit of direct access to cash.

To gain immediate access to their money, a person can sell their right to receive all or part of their future structured annuity payments to a settlement buyer. The factoring company acquires the right to receive future structured settlement monies in exchange for a cash payout. Reasons to sell a series of payments include gaining access to financial capital during a family emergency. Some people choose to repay a debt or to use the cash for investment purposes such as starting a business or buying a home. Others use the money to fund an entire college education.

What Is a Structured Settlement Payment?

Formally recognized by the federal government since 1983, structured settlement payments are specified in voluntary settlement agreements between and injury victims and defendant(s). A settlement payment or annuity comes as the result of a contract between a victim and a defendant whereby the injured victim receives a stream of tax-free settlement payments as an annuity tailored to meet their future needs instead of receiving one lump sum. Once a structured settlement payment agreement is reached, the plaintiff cannot make changes.

Structured settlement payments are used more frequently these days because they offer substantial benefits to all parties involved in the structured settlement agreement. Victims receive tax-free payments and defendants get an end to litigation as the result of reaching a structured settlement agreement.