So, what is a structured settlement anyway? A structured settlement is a monetary or insurance arrangement, as defined by Internal Revenue Code as periodic payments. The following prerequisites must be met however:

A structured settlement has to be established by: A suit or agreement for periodic payment of damages excludable from gross income or an agreement for the periodic payment of compensation under any workers' compensation law.

The periodic payments must be of the character described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c)(2) (26 U.S.C. § 130(c)(2) and must be payable by a person who: Is a party to the suit or agreement or to a workers' compensation claim; or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with Internal Revenue Code.

These types of cases became more popular in the United States of America during the 70s as another option to "lump sum" settlements, but were first used in Canada. The increasing popularity was also due to a hike in interest rates, more personal injury awards, and several rulings by the Internal Revenue Service.

The rulings that were changed by the Internal Revenue Service effected policies in a way that if certain requirements were met then claimants could get their federal income tax waived. Elevated interest rates caused lower present values, which is why annuity premiums became more popular, for periodic payments rather than a lump sum. These types of settlements have became a part of the statutory tort law in Canada, Australia, U.S.A. and England.

Structured settlements are considered to be an asset-backed security. Sometimes the structured settlement payment will be created through buying one or more annuities, which promise the future payments owed.

One huge advantage of a structured settlement is tax avoidance. When dealt with appropriately, a structured payment settlement may drastically bring down the plaintiff's tax obligations as a direct aftereffect of the settlement, and sometimes it can be tax-free as well. The potential seller must be vigilant and on their toes, being sure to avoid being exploited. Selling "periodic payments" can often result in very big commissions so you'll want to be sure that an appropriate percentage is taken for the sale.
Sources: ExpertLaw.com; WikiPedia.org

Laws In The United States

The U.S.A. has invoked structured settlement laws at the federal and the state level. The federal laws include sections of the Internal Revenue Code. State laws include structured settlement protection statues as well as periodic payment of judgement statuses. In the United States, 47 states have structured payment settlement protection acts that were created using a model developed by the National Conference of Insurance Legislations or (NCOIL). Periodic payments have been endorsed by several of the country's disability rights organizations as well.

Selling Structured Settlements

Selling part of a structured payment settlement is one thing that structured settlement holders might contemplate doing at some point in their lifetime. The concept of getting a larger lump sum of money for an emergency financial matter, instead of waiting for monthly installment payments, would be appealing. There are plenty of people who would like to get some cash for a structured settlement.

You don't have to sell the whole thing. You may be able to sell a 1/4, 1/2, or even 3/4 of your structured settlement as you aren't required to sell the entire thing in one process.

You should nonetheless know that you're not going to receive the entire value of your settlement if you sell it. You'll receive a discounted price because your funds are coming in the future. There's just one problem, you have to find a buyer of structured settlements to actually sell it.

When beginning the sales process, you should also keep in mind how much of your money is essential to maintain and live on in the future. It is strongly advised that you get quotes from multiple buyers before making any final decisions as the offers could vary. If you can get more than one offer for your structured payments settlement money then it's a win/win situation for anyone looking to sell such an asset. You can even have the top structured settlement companies compete for a chance to purchase your annuity or settlement if you enter the correct marketplace.

Buying Structured Settlements

Who are the people and companies that buy structured settlements and why do they offer this service? Think of it as making investments with guaranteed payoffs. The companies that purchase these types of settlements are doing so to make money. Period. They aren't doing it to be nice or to get in the good graces of Karma.

It's a business and it's their business to make money by buying structured settlements at a discounted price and then collecting the full monetary value with future settlement payments. So, now we know the why, lets take a look at some companies that will buy your structured settlement from you.