What happens to the money paid out when someone is injured or harmed?
Often, the person receives a structured settlement annuity. Sometimes, however, that person may not want to hold onto the annuity, but sell it for faster access to their cash.
These leaves these long-term annuities up for purchase by interested investors like you. It’s a great investment that is often overlooked.
Ready to find out more? Keep reading for tips to consider when purchasing structured settlement!
What is a Structured Settlement?
A structured settlement takes place when a plaintiff sues someone for compensation for an injury or some other damage caused by the defendant. The structured settlement often comes into play when the defendant decides to settle outside of court to avoid a trial.
Then, the plaintiff will work with a qualified assignee to agree to the terms of the settlement, after which the qualified assignee will purchase the annuity from a life insurance company.
5 Tips for Purchasing Structured Settlement
Here are 5 tips for you to consider if you’re thinking about purchasing a structured settlement.
1. Understand What You’re Purchasing
A structured settlement is paid out over time, instead of all at once. This often happens because the amount being paid out is very large, and it is more practical for the original recipient to take the settlement in smaller amounts over a longer period.
When a structured settlement annuity is sold to a buyer, they are purchasing the right to the payments over time or a lump sum of the payments. More about those options later.
2. Get Your Sale Approved by a Judge
The seller is required to present their reasons for selling to a judge, who will decide if it is actually in their best interest to sell.
You will need to make sure all the proper paperwork is provided for the court process to go smoothly.
3. Consider Whether to Purchase a Partial, Entire, or Lump Sum Structured Settlement Annuity
A partial buy-out will give the purchaser the right to the payments coming in for a certain period of time. After that, payments to the original plaintiff will resume.
You can also purchase the entire structured settlement, giving you the right to all payments over time.
Purchasing a lump sum is the third option, which would mean you receive a portion of the money all at once instead of in payments over time.
4. Negotiate the Discount Rate
The discount rate is the difference between what the structured settlement annuity is worth and what the seller will receive from the purchaser. This is negotiated between both parties, but the rate can range between 7% and 29%.
5. Get Advice From a Financial Adviser or Lawyer
It may be wise to have legal counsel during this process to make sure you are following all regulations and also doing everything in your own best interest.
The Structured Settlement Protection Acts are in place to set up rules and regulations surrounding the buying and selling of structured settlement annuities. You will need to make sure you are doing everything in this process by the book.
Purchasing structured settlement may be the best option for an investment that will allow you to control your finances and have a payment coming in over time. Comment below with any questions or thoughts you have about the process!