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Buying Structured Settlements

Buying Structured Settlements

Buying of structured settlements in the secondary market has been a booming business that has until of late been relatively a top-secret need to know topic.

What are you buying? Well, you are buying a future payment stream. usually as an award of the court for some sort of personal injury settlement. Where the settlement was invested in an annuity to provide for a larger payment over time.

Now you aren’t buying the payments at face value, in fact; the IRS has a calculation that is used to figure out what that future payment is valued at today. That is what you are buying. I like to think of Popeye’s, Wimpy who always says I will gladly pay you a dollar on Tuesday for a cheeseburger today. a $.25 Cheeseburger had a present-day value of $1 to wimpy

So for a $0.25 cheeseburger you bought a future payment stream of $1, same basic concept. hahaha

See these structured settlements they are selling have been purchased, funded and set up through an insurance company and sometimes the only way for the annuitant to get their money faster is to sell all or a portion of their annuity. So they really want or need $10,000 today, but they only get $500 a month or $25000 a year, or whatever it is. You figure out based on the IRS numbers what the present day discounted value of it and start negotiating.

Once it has been negotiated, and the contracts are drawn up, underwriting done, it goes to the court for approval. When it all said and done the court issues a court order, and that piece of paper is what you have guaranteeing your future payment stream from the insurance company.

Now that you have a basic idea of how it works, you are probably wondering if you can and an individual can do this contract yourselves, the answer is of course. The legal system is set up for that, but not having an attorney advise your through the process may not be the best idea.So having an attorney helping you when buying a structured settlement might mean more expenses but can add the piece of mind and assurances you would not have should you decide to DIY.

 

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