Purchase Structured Settlements

A structured settlement is an agreement to make payments over time in exchange for a release of liability, usually resulting from a personal injury or other form of tort claim.Structured Settlement  Annuity payments can be inflexible and often fail their intended purposes, particularly in cases when individuals receiving structured payments are faced with a financial emergency.
Liquidating a portion of a structured settlement is oftentimes at best the most beneficial option, or at worst the only solution to a critical financial need. We buy structured settlements.

Settlement Capital Corporation’s experience with the purchase of structured settlements and individually owned annuities is the most extensive in the industry. SCC can purchase all or a portion of a future payment stream to meet a customer's emergency financial needs for:

• medical expenses
• debt elimination
• education costs
• new business opportunities
• new home or automobile purchases.

SCC advises its customers to sell only that portion of a payment stream necessary to satisfy a current need. And, we develop each payment transaction around the customer’s specific financial needs by offering a variety of purchase options:

• Lump sum payoff
• Partial lump sum payout
• Restructured payment stream

SCC’s underwriting criteria among the strictest in the industry, ensures the quickest possible transaction with the highest return for its customers.

Potential Disadvantages of Structured Settlements

Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home, or other expensive item, yet be unable to muster the resources because they can't borrow against future payments under their settlement.

Some people will do better by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.

Benefits Of Structured Settlements

One significant advantage of a structured settlement is tax avoidance. With appropriate set-up, a structured settlement may significantly reduce the plaintiff's tax obligations as a result of the settlement, and may in some cases be tax-free.

A structured settlement can protect a plaintiff from having settlement funds dissipated, when they are necessary to pay for future care or needs. Sometimes a structured settlement can help protect a plaintiff from himself - some people simply aren't good with money, or can't say no to relatives who want to "share the wealth", and even a large settlement can be rapidly exhausted. Minors may benefit from a structured settlement as well, such as a settlement which provides for certain costs during their youth, an additional disbursement to pay for college or other educational expenses, and then one or more disbursements in adulthood. An injured person who has long-term special needs may benefit from having periodic lump sums with which to purchase medical equipment or modified vehicles.

In some situations, it will be better for a severely disabled plaintiff to set up a special needs trust, rather than entering into a lump sum or structured settlement. Any plaintiff who is receiving, or expects to receive, Medicaid or other public assistance, or the guardian or conservator entering into a settlement on behalf of a disabled ward, should consult with a disabilities financial planner about their situation before choosing any particular settlement option or structure.

Structured Settlement Factoring Transactions

(a) Imposition of tax

There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.

(b) Exception for certain approved transactions

(1) In general

The tax under subsection (a) shall not apply in the case of a structured settlement factoring transaction in which the transfer of structured settlement payment rights is approved in advance in a qualified order.

(2) Qualified order

For purposes of this section, the term “qualified order” means a final order, judgment, or decree which—

(A) finds that the transfer described in paragraph (1)—

(i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and

(ii) is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents, and

(B) is issued—

(i) under the authority of an applicable State statute by an applicable State court, or

(ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.

(3) Applicable State statute

For purposes of this section, the term “applicable State statute” means a statute providing for the entry of an order, judgment, or decree described in paragraph (2)(A) which is enacted by—

(A) the State in which the payee of the structured settlement is domiciled, or

(B) if there is no statute described in subparagraph (A), the State in which either the party to the structured settlement (including an assignee under a qualified assignment under section 130) or the person issuing the funding asset for the structured settlement is domiciled or has its principal place of business.

(4) Applicable State court

For purposes of this section—

(A) In general

The term “applicable State court” means, with respect to any applicable State statute, a court of the State which enacted such statute.

(B) Special rule

In the case of an applicable State statute described in paragraph (3)(B), such term also includes a court of the State in which the payee of the structured settlement is domiciled.

(5) Qualified order dispositive

A qualified order shall be treated as dispositive for purposes of the exception under this subsection.

(c) Definitions

For purposes of this section—

(1) Structured settlement

The term “structured settlement” means an arrangement—

(A) which is established by—

(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104 (a)(2), or

(ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104 (a)(1), and

(B) under which the periodic payments are—

(i) of the character described in subparagraphs (A) and (B) of section 130 (c)(2), and

(ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

(2) Structured settlement payment rights

The term “structured settlement payment rights” means rights to receive payments under a structured settlement.

(3) Structured settlement factoring transaction

(A) In general

The term “structured settlement factoring transaction” means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration.

(B) Exception

Such term shall not include—

(i) the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution in the absence of any action to redirect the structured settlement payments to such institution (or agent or successor thereof) or otherwise to enforce such blanket security interest as against the structured settlement payment rights, or

(ii) a subsequent transfer of structured settlement payment rights acquired in a structured settlement factoring transaction.

(4) Factoring discount

The term “factoring discount” means an amount equal to the excess of—

(A) the aggregate undiscounted amount of structured settlement payments being acquired in the structured settlement factoring transaction, over

(B) the total amount actually paid by the acquirer to the person from whom such structured settlement payments are acquired.

(5) Responsible administrative authority

The term “responsible administrative authority” means the administrative authority which had jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.

(6) State

The term “State” includes the Commonwealth of Puerto Rico and any possession of the United States.

(d) Coordination with other provisions

(1) In general

If the applicable requirements of sections 72, 104 (a)(1), 104 (a)(2), 130, and 461 (h) were satisfied at the time the structured settlement involving structured settlement payment rights was entered into, the subsequent occurrence of a structured settlement factoring transaction shall not affect the application of the provisions of such sections to the parties to the structured settlement (including an assignee under a qualified assignment under section 130) in any taxable year.

(2) No withholding of tax

The provisions of section 3405 regarding withholding of tax shall not apply to the person making the payments in the event of a structured settlement factoring transaction.

Structured Settlement Basics

A structured settlement for workers' compensation or physical injury tort claims is a special provision under the United States Internal Revenue Code [Sec. 104(a)(1) and (2), respectively] that exempts all payments from current year income taxation, whether received as a lump sum or over a period of time. If the entire settlement is taken as a cash lump sum, that amount is excluded from current year taxable income, but the first dollar earned on the award becomes a taxable event. The structured payments must be determined at the time of settlement and incorporated into the settlement agreement and release, not afterwards when it is too late. Once the cash is either actually or constructively received by the claimant, the benefit of tax free growth is lost forever.

Conversely, if the total settlement amount is taken as a cash lump sum, the growth from an investment will be subject to federal and state income taxes, which reduces the net performance of the investment by the marginal tax rates, which can approach 50%.

Selling Structured Settlements

At some time during the period you are being paid for your structured settlement, you may decide that you wish to sell it, or you may be approached by a company that is offering to buy your settlement. Can you sell your structured settlement? How much will you receive?

The value of your settlement was determined by a number of factors - the amount of time you are to be paid, the severity of your situation, and the expected rate of inflation over the months or years you will be paid. The party that is paying you is purchasing an annuity, and the amount that they pay up to establish that annuity is but a fraction of the amount you will receive over time. That money is invested, and the interest it accrues over the years allow it to grow large enough that it might have a series of monthly or annual payments withdrawn.

Once you agree to accept a structured settlement, you cannot exchange it for a lump sum payment, nor may you use your settlement as collateral for a loan. What if you want to buy a home and pay cash, or you have some other unexpected large expense? 

Under certain circumstances, you may be able to sell your structured settlement. There are investors who are interested in purchasing structured settlements, lottery winnings, and other annuities. Perhaps you have been contacted by one of these agencies.

The laws regarding the sale of structured settlements vary from state to state, and there are Federal laws that affect their sale, as well. You will probably have to go to court to arrange the sale, and some insurance companies, who handle the annuities that fund structured settlements, will not assign them to a third party.

Even if you do decide that you would like to sell your structured settlement, be aware that the amount that you are likely to be offered for your payments will seem quite small.  If you take the amount of money you receive annually for your settlement and multiply it times the length of time you will be paid, you will come up with a total value for your settlement. Keep in mind, however, that your payments have been funded through the creation of an annuity that earns interest and grows over time. The value of your settlement in present-day dollars may be half of the total value or even less, depending on how the payments were calculated and structured.

Any party that offers to buy your annuity is interested in doing so for investment purposes. They wish to make money on the transaction, and for them, that profit will be spread over the long time that it takes to receive all of the payments that constitute the settlement. Once you combine the factors of time, interest, inflation, and the buying party’s profit, you will find that the offer made to you will seem quite small.

Still, you might be interested in accepting it, as the lump sum offered may allow you to take care of your present needs more readily than continuing to accept payments over time. Be aware that there may be tax considerations in selling your payments, and due to state laws and the policies of the insurance company that handles your annuity, it may not even be possible for you to sell your structured settlement.

If you decide to sell, discuss it with your attorney. You will need to go to court to facilitate the sale. You should also shop around, as different companies may offer widely different amounts for your settlement. Beware of scams; one of the reasons you’ll want an attorney is to make certain that you actually get paid for the transaction.

You might also wish to contact the National Structured Settlements Trade Association. The NSSTA is a trade association that deals specifically with these sorts of arrangements. They may be able to offer additional information regarding the specifics of selling.

Structured Settlements Payment

Structured settlements offer several advantages that make them a popular choice with individuals. The foremost benefit of a structured settlement is that it provides cash at regular intervals and the money is free of state as well as federal taxes. As against this, the interest accrued from investments made from money obtained through a lump sum is subject to federal and state tax. Also, very often individuals who come into money by acquiring a lump sum are unable to invest it wisely and often spend it wastefully, this is not possible with a structured settlement where small amounts are made available periodically and therefore a person’s spending is regulated.

Loss of money that has been acquired through an installment of a structured settlement is not as severe as loss of money acquired through a lump sum payment. The small amounts are easy to manage and also do not excite the interest of unscrupulous elements as compared to hefty lump sum payments.

With a structured settlement, an individual does not need to worry about planning for long-term investments as the periodic payments can be structured to take adequate care of one’s needs post retirement or in the case of a debilitating injury. Structured settlements are favored by both the defendant and the plaintiff as they can be settled without having to go to court. This saves time and is often cheaper for the defendant who would otherwise have to pay more with an in-court settlement. The risks involved for both parties are reduced with a structured settlement as per which the defendant is contractually bound to pay the plaintiff. Also, attorney costs for a out-of-court negotiated structured settlement are lower than what they would be if a litigation were to be filed in court. Attorney fees can come down by as much as 8% to 10% for a structured settlement achieved out of court. This can mean a saving of thousands of dollars for the defendant as structured settlements can often run into more than a million dollars.

Structured settlements allow insurance companies to provide payment to claimants at a lower cost and the payment schedule can be set according to a claimant’s convenience. A structured settlement can be used to provide for certain costs of an individual right from the stage when he is a minor. The money can be disbursed for college expenses or to meet the costs of higher education. Periodic lump sums made available to an injured person can be used to make medicinal purchases and sustain oneself.

One reason for the popularity of structured settlements is that they can be availed in a variety of formats; these include lump sum payments made periodically when funds are required for medical expenses, education, or marriage; percentage increase annuities that offer annually increasing payments that help to counter inflation; deferred annuities that enable to defer the commencement of payment to a later date; period certain annuities that can be combined with a lump sum payment for receiving payment over a fixed period; and joint and survivor annuities in which payments are continued to the survivor annuitant if the primary annuitant passes away.

Legal Structure

The typical structured settlement arises and is structured as follows: An injured party (the claimant) settles a tort suit with the defendant (or its insurance carrier) pursuant to a settlement agreement that provides that, in exchange for the claimant's securing the dismissal of the lawsuit, the defendant (or, more commonly, its insurer) agrees to make a series of periodic payments over time. The insurer, a property/casualty insurance company, thus finds itself with a long-term payment obligation to the claimant. To fund this obligation, the property/casualty insurer generally takes one of two typical approaches: It either purchases an annuity from a life insurance company (an arrangement called a "buy and hold" case) or it assigns (or, more properly, delegates) its periodic payment obligation to a third party which in turn purchases an annuity (which arrangement is called an "assigned case").

In an unassigned case, the property/casualty insurer retains the periodic payment obligation and funds it by purchasing an annuity from a life insurance company, thereby offsetting its obligation with a matching asset. The payment stream purchased under the annuity matches exactly, in timing and amounts, the periodic payments agreed to in the settlement agreement. The property/casualty company owns the annuity and names the claimant as the payee under the annuity, thereby directing the annuity issuer to send payments directly to the claimant. If any of the periodic payments are life-contingent (i.e., the obligation to make a payment is contingent on someone continuing to be alive), then the claimant (or whoever is determined to be the measuring life) is named as the annuitant or measuring life under the annuity.

In an assigned case, the property/casualty company does not wish to retain the long-term periodic payment obligation on its books. Accordingly, the property/casualty insurer transfers the obligation, through a legal device called a qualified assignment, to a third party. The third party, called an assignment company, will require the property/casualty company to pay it an amount sufficient to enable it to buy an annuity that will fund its newly accepted periodic payment obligation. If the claimant consents to the transfer of the periodic payment obligation (either in the settlement agreement or, failing that, in a special form of qualified assignment known as a qualified assignment and release), the defendant and/or its property/casualty company has no further liability to make the periodic payments. This method of substituting the obligor is desirable for property/casualty companies that do not want to retain the periodic payment obligation on their books. Typically, an assignment company is an affiliate of the life insurance company from which the annuity is purchased.

An assignment is said to be "qualified" if it satisfies the criteria set forth in Internal Revenue Code Section 130 [1]. Qualification of the assignment is important to assignment companies because without it the amount they receive to induce them to accept periodic payment obligations would be considered income for federal income tax purposes. If an assignment qualifies under Section 130, however, the amount received is excluded from the income of the assignment company. This provision of the tax code was enacted to encourage assigned cases; without it, assignment companies would owe federal income taxes but would typically have no source from which to make the payments.

Structured Settlements In United States

The United States has enacted structured settlement laws and regulations at both the federal and state levels. Federal structured settlement laws include sections of the (federal) Internal Revenue Code. State structured settlement laws include structured settlement protection statutes and periodic payment of judgment statutes. Medicaid and Medicare laws and regulations affect structured settlements. To preserve a claimant’s Medicare and Medicaid benefits, structured settlement payments may be incorporated into “Medicare Set Aside Arrangements” “Special Needs Trusts."

Structured settlements have been endorsed by many of the nation's largest disability rights organizations, including the American Association of People with Disabilities and the National Organization on Disability

Structured Settlements

A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada and the United States during the 1970s as an alternative to lump sum settlements. Structured settlements are now part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries has its own definitions, rules and standards for structured settlements. Structured settlements may include income tax and spendthrift requirements as well as benefits. Structured settlement payments are sometimes called “periodic payments.” A structured settlement incorporated into a trial judgment is called a “periodic payment judgment."