If you have agreed to a structured settlement, you probably felt a sense of relief that your financial uncertainties were being resolved and that you would have the funds you needed to pay your bills, support your family, and get on with your life. When you agreed to the terms of the agreement, hopefully with the help of a financial advisor, you agreed to a series of financial payments that made sense to you at the time.
Perhaps you suffered personal injuries in a car or other accident, received damages in a product liability case, or were the victim of medical malpractice or even the plaintiff in a wrongful death lawsuit. He accepted a periodic (usually monthly) payment, perhaps in the form of a lifetime income stream, which seemed like the answer to paying for his living expenses and perhaps his medical costs. You made the best decisions you could at the time, with the information you had, based on what life was like at the time and what you expected for the future.
But life rarely goes the way we expect. Perhaps you are recovering from the accident or other event for which you were settled and want to move and buy a home, get married, go to school, or buy a business. Perhaps medical bills or high-interest debt are an undue burden on you that you need to address now. Or, if your family has grown and your children no longer need you to provide for their education or other expenses, you may want to spend more of the money you receive now, rather than later.
What can you do to match your finances, specifically your structured settlement, with the life you now have or want to have? You should always consult an attorney or financial advisor, but here is a basic overview of your rights and options when assigning your structured settlement:
Settlements are financed by single premium annuities issued by insurance companies. Instead of paying you a lump sum, the party responsible for your injuries or damages has paid a single lump sum to an insurance company, which, in turn, has invested it. The insurance company projected the interest rate or stock dividends they will receive on the lump sum and, based on the time period and the number of payments you chose or were offered for the structured settlement, calculated the amount of the periodic payment you now is reception.
So who owns what? The insurance company owns the annuity and you, as the beneficiary, are entitled to an income stream or series of periodic payments. Because you do not own the underlying asset, the annuity, you cannot sell the annuity contract to another party to receive your money. However, under federal and state law, you may, with court approval, sell all or a portion of the payments you are entitled to receive in the future. By doing so, you can receive a lump sum cash payment now.
What are your options? As an annuitant or structured settlement annuity beneficiary, in most cases, you can assign to a third party the payments you are entitled to receive in the future. Some structured settlement agreements state that payments cannot be assigned, and your legal counsel will advise you of the options and alternatives if yours is written with such a clause. Fortunately, state laws and recent case law have made contracts written with such provisions unenforceable, although other regulations may apply.
How can you determine today’s lump sum value of your structured settlement payments? This depends, in part, on the amount of each payment and the due date. The payment amount and schedule will be described in your Structured Settlement Agreement. It is also affected by the financial strength of the issuer of your annuity, because the better the financial position of the issuer, the more likely it is that the purchaser will be paid out of your cash flow. The current financial climate, plus interest rates, will also affect the amount of your withdrawal. Your finance company will explain these calculations and assumptions to you.
What steps do you need to take?
– First of all, you really need to take a hard look at whether receiving your funds now will truly be in the best interest of you and your family. This is a big financial step, one that should not be taken lightly. That said, your circumstances may have changed enough that a lump sum or partial lump sum payment makes sense and is better for your family’s current and future lifestyle and financial stability.
– Then contact a reputable finance company that buys income streams from structured settlements. They can guide you through the process and help you consider alternatives, such as selling a portion of your structured settlement income stream, if this better meets your needs.
– The finance company will help you by hiring an attorney with experience in structured settlement assignments. The lawyer will explain to the court your desire to change his agreement and any changes in his life that have led you to make this decision. Because the attorney will be seeking court approval, he will need to understand your current finances, obligations, and wishes.
– Having all your documentation and agreements, and providing them immediately to your advisors and possible sources of financing is key to receiving a cash payment in the shortest possible time. Because court approval is required, the time from application initiation to final approval is typically 45-90 days. So, as with other major financial decisions, like getting a mortgage or refinancing, it’s in your best interest to start the process with a bit of time on your hands, before you feel a time crunch. You deserve a fair deal, as quickly as possible, not just the deal you can make in the shortest possible time.
– What can you expect now? Once you have chosen a finance company and lawyer, the courts will put you on the docket and hear your request to receive your funds in a lump sum. They will want details of future payments due, the proposed amount of the lump sum distribution, and the costs you will incur as a result of your settlement restructuring. Their basis for granting you an approval is to ensure that the allocation of your payments elsewhere and the current cash receipt will be in your best interest and the best interest of any dependents you may have.
– Once you have agreed to a lump sum with your finance company and obtained court approval, you will receive a wire transfer or cashier’s check for the lump sum. Now you’ll have the cash you need, right when you need it most.