Structured Settlement Protection Act

The young woman had received structured settlement money from a lawsuit won by her family fifteen years earlier from a fatal car crash deemed the negligent fault of the automobile maker. The father had died in the accident and the three million dollar judgment was for the only child. The annuity purchased for the child was worked out among the father's attorneys and representatives of the child services of the state. The policy money, would increase each year as the young woman matured and financial needs increased until she reached twenty five, when three thousand dollars a month would begin to filter into the woman's bank account, continuing indefinitely. However, she was graduating from high school with good grades and was eligible to attend an Ivy League school where the young woman had eyes on becoming a doctor someday. The woman would have to pay for all educational bills and three thousand dollars a month, even though the money was tax free and a reality for life, would not be enough to fund the med school aspirant's dream.

On the woman's eighteenth birthday, she sat down with an attorney to explore getting a lump sum amount from the annuity received many years before. The young lady was adamant about getting all the money left from the annuity, but the wise attorney took time to explain that as much as thirty percent or more of the total money would go to a company specializing in structured settlement transactions, and that the woman should consider only taking out what was absolutely necessary for the anticipated educational costs that would be incurred, and have that money placed in a secure CD until needed. The soon to be college bound woman sat and contemplated what the attorney had suggested, and agreed to the professional's wisdom on the matter. A plan was conceived by the two of them that the woman would seek a lump sum from no more than a million dollars of the annuity, while the remaining amount would be reallocated in a way that would give the security of a monthly income for years to come.

The woman was fortunate to have been born at the time she was, because the Structured Settlement Protection Act of 2002 gave protection to all the woman's decisions regarding the lump sum money that would be received from the upcoming transaction. Prior to this law, any person requesting structured settlement money be changed to a lump sum allocation was often taken advantage of by the companies offering to buy annuities or other monthly or yearly allocated financial plans. Between 1988 and 2002, factoring and transfer companies were at odds with the issuers of such things such as annuities, typically life insurance companies. Often, many holders of structured settlement policy money had very negative experiences with factoring and transfer companies, including having information withheld, and the fact that lump sum payments could affect, in adverse ways, the tax liabilities of the clients. The Structured Settlement Protection Act placed into law a number of safety nets for Americans facing the same issues as the young woman. "Finally my brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue, and if there be any praise, think on these things." (Philippians 4:8)

The Structured Settlement Protection Act of 2002 mandated a number of safeguards for those holding structured settlement money. This legislation demanded that all transactions going through a factoring or transaction company be approved by a state court, which would investigate to ascertain if the transaction from structured settlement money to a lump sum payment is good for the client and the client's dependents. Additionally, the issuers of annuities, the life insurance companies, were brought into the loop, contrary to factoring companies' standard policy of years past. Often, the life insurance companies were caught off guard when lump sum settlements were arranged, and the new owner of the annuity was discovered. The Structured Settlement Protection Act also called for the client receiving a lump sum payment to obtain professional counsel on every aspect of the transaction's affect upon the future quality of life for the client.

The young woman, making one of the biggest decisions in her entire life, had advantages never dreamt of by clients facing the same options years before. These people, often times not financially able to seek professional advice, lost not only a substantial amount of money in the transfer process from structured settlement money to a lump sum allocation, but became subject to higher tax brackets, often taking much of the lump sum needed desperately for real financial needs to fulfill excise obligations. The television commercials of today that are sponsored by factoring or transfer companies make it seem so attractive to those getting small, monthly checks to cash in and get a lump sum payment. Why wouldn't someone want to go from one hundred and fifty dollars each month to fourteen thousand dollars in pocket for the bill collectors knocking at the door? It is always the dilemma of the human race: the lure of a temporary pleasure or ease of pain that can be possessed for a seemingly small price, or the reality of a long term commitment that will provide security, albeit not necessarily comfort, for a lifetime, and in spiritual matters, for eternity.

Option For Structured Settlement

Selecting the right option for a structured settlement can depend upon many factors including the circumstances and the life stage of the recipient. When a lawsuit is settled for an agreed upon amount of money, the decision as to how this monetary award will be distributed is important. Generally, these settlements will either be paid over the course of time or in a lump sum. The terms for such pay outs may be negotiated by an attorney or a financial planner on behalf of the client. If the decision is made to avoid a lump sum and pay off the agreement through regular payments, this is known as a structured settlement. How these payments will be scheduled is usually up to the client who will receive the payments along with the terms of any negotiations that professional representatives will have accomplished on behalf of the client. There can be many benefits associated with selecting the option for a structured settlement. If the individual has been disabled, either temporarily or permanently, having financial support that will stretch out over time can provide a needed income for clients who are unable to work. In wrongful death lawsuits, the injured party may have left behind a family that is need of a long term income and these timed pay outs can provide that income. Minor children or incompetent individuals can also benefit from monetary support that is dispersed in this manner. In addition, anyone who is facing continuing medical expenses will definitely benefit from funding that is stretched out over time.

Once all terms have been negotiated there is another option for a structured settlement that a recipient could consider. In many cases, a litigant may not have been offered the choice of receiving all of the monetary award at one time. Additionally, some litigants may originally agree to receive the payments over time, but later reconsider this decision. If receiving payments over time does not seem to be working out, some clients may decide to pursue selling settlements off to a third party. These third parties may be a group of investors who seek out such opportunities. Settlements will usually be purchased from successful litigants for less than the total face value. There can be many benefits of this option for a structured settlement for both the buyer and the seller. The seller will receive their money up front and will not have to wait for payments that could stretch out over many years. The buyer will continue to collect the payments over time and will end up receiving more money in the long run. The laws that govern these transactions will frequently vary, depending on the state of origin and other local laws. In some cases, it is not possible to sell off a structured settlement. Before agreeing to any agreement, a seller will want to look out for excessive commissions or fees as this may signal a buyer with compromised ethics and business practices.

Investors who advertise aggressively and make outrageous promises may not represent a fair and equitable option for a structured settlement and should usually be avoided. As with most business dealings, promises that seem to be too good to be true usually are. The ethics and reputation of any investing organization is important. Nobody would want to sacrifice something as valuable as future settlement payments to a company that will not honor its promise to pay. Of course, there are benefits that can make the option for a structured settlement more attractive. Avoiding heavy tax liabilities might be one of those benefits. Most arrangements can also provide a built in structure for providing for the future and this is very crucial in some cases. Of course, if a family desperately needs the funds and they are tied up, selling off the future payments for a large pay out may seem attractive. Inflation can also cut into the worth of any money that will be doled out in the future. If a recipient has made the decision to sell this asset, shopping around for the right offer can make a good deal of sense. Some purchasing agencies may attempt to buy up future payments for an unreasonably low payment to the seller. It is up to the seller to make sure that they are getting a fair price.

When filing a claim on behalf of a minor, the option for a structured settlement can be a very viable one. Without taking advantage of the benefits of a structured settlement, a large lump sum of money could fall into the hands of a very young person. If the money is paid out over time the minor can spread the benefits of any settlements that they might receive over an entire lifetime. There also may be special government regulations that apply to minors in these agreements. The Bible encourages believers to fight for their beliefs. "Fight the good fight of faith, lay hold on eternal life, whereunto thou art also called, and hast professed a good profession before many witnesses." (1 Timothy 6:12)

There can, unfortunately, be many risks that are associated with choosing to sell as an option for a structured settlement. The potential loss of valuable tax benefits may be one of those risks. Many recipients may also be tempted to spend a lump sum of money very quickly, forfeiting all future benefits. If settlements were awarded to help defer the costs of ongoing medical care, keeping the payments coming in over time might make more sense. Careful research is required before making any major decisions regarding these valuable assets.

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