Selling Structured Settlement Annuity Payments: What You Need to Know


The use of structured settlements has risen dramatically over the past twenty years. A fixed rate structured settlement annuity is now often purchased to fund the settlement of a personal injury lawsuit. In a typical settlement, the tortfeasor’s insurer and the claimant reach a settlement which provides for the claimant to receive periodic payments over a period of time. The annuity is usually purchased by an assignee of the insurer and names the claimant as the payee. Previously, claimants were presented only with the option of an immediate cash settlement,which created significant tax related burdens, and did not always address the long term needs of the plaintiff.

Although these structured settlements typically satisfy the needs of claimants, the most significant downside for a claimant with a structured settlement is the inherent inflexibility of the payment stream. In ways unforeseen at the settlement table, the claimant’s financial needs often change over time resulting in a demand for liquidity options. As a result of this demand and starting in the early 1990s, a few small specialty finance companies started meeting post-settlement liquidity demands by offering new flexibility for structured settlement payees through a lump sum cash payment to the claimant in return for some or all of the rights to the claimant’s structured settlement annuity payments.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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