Structured Settlement Annuity

A Structured Settlement is essentially an agreement under which an insurance company agrees to pay an individual a predetermined amount of cash for a fixed length of time. Payments for a structured settlement annuity can be made for the duration of the life of the claimant or for only a term of years. The amount paid could be equal installments, installments of varying amounts, or lump sums. The payments from a Structured Settlement Annuity are free from income-tax and are guaranteed by contract.

Once a structured settlement plan is reached, the payments cannot be altered unless the individual decides to sell his or her structured settlement annuity payments to a funding company. In which case, State and federal laws govern the closing of a structured settlement annuity transfer. The closing process usually gets completed in approximately 3-6 months. Federal laws require that a qualified court order be obtained by either the customer or the funding company that is purchasing the payment stream so that there are no tax liabilities. The manner in which the court order is obtained is regulated by various “Structured Settlement Protection Acts”, which are in force in 36 states in the United States.

In all structured settlement annuity transfers, a disclosure statement is provided to a customer 3 to 10 days before he or she receives the transfer agreement. The disclosure statement outlines the amounts to be paid to the customer and their due dates; the IRS Discounted Present Value of the amount at that given point in time; the Gross Advance Amount and the Annual Discount Rate; and a list of the fees and commissions incurred.

It is advisable to avail attorney advice before agreeing to transfer your structured settlement annuity. In fact, in some states, it is a precondition to acquiring a structured settlement annuity. However, depending upon the laws being used for the transaction, customers do have the option of waiving legal representation in the Transfer Agreement.

After the insurance company has acknowledged the assignment and the funding company has received a court order, you should receive payment for your the structured settlement annuity payments you have sold.