Pros And Cons Of Structured Settlement Loans

For individuals who have won lawsuits and other claims or who are receiving annuity payments as part of a structured settlement for any other reason, the financial wheels can start to turn a bit slow.  Unplanned expenses, medical bills or variety of other circumstances can arise where cash is needed right away.  For these reasons, consumers can tap into a resource known as structured settlement loans.

What Is A Structured Settlement?

Plaintiffs settle cases every day in civil court and in these cases large sums of money are paid as damages for some type of tort or civil wrong.  This money is often paid in a structured form beginning with some type of down payment to cover court costs and immediate expenses however; the rest is put into an annuity and paid out over a long period of time based on what the parties in a trial agree to.  This is done for a few different reasons.  One could be that a plaintiff wants to minimize or eliminate tax liability, which can be done through this method.  Another reason is to protect the plaintiff’s funds from numerous outside pressures to use the money.  In essence, a settlement is structured to protect the plaintiff from quickly depleting monies that may be meant for medical bills and the inability to work.

What Is A Structured Settlement Loan?

While plans can accurately be made to distribute large sums of money, circumstances can change over time for an individual and the original payment plan may no longer fit their needs.  At this point, receivers of a structured settlement have a couple different options.  The best way to see if you can get a lump sum of cash for your annuity or settlement is to speak with an attorney.  About two thirds of all states have enacted laws that discourage borrowing against annuity payments or selling annuities, which is the same thing.  Annuities with tax advantages or that are exempt from taxes are restricted from being sold or borrowed against.  Annuity holders may be able to find a company to buy the future payments or lend money against the account assuming the terms of the contract and state law allow it.  Individuals should tread with caution however because a company willing to buy you out of your annuity is trying to turn a profit so it may or may not be a good deal depending on your specific circumstances.

Structured settlements are in place mainly for the good of a plaintiff in a case so that awards are maximized for the benefit of the receiver and are not squandered.  If you currently have a structured settlement and are receiving payments, looking into your options cannot hurt however, there is good chance that taking payments may be your only option.