If you are currently experiencing a shaky financial situation or economic hardship, perhaps you have wondered about selling your structured settlement. A structured settlement is a financial vehicle in the form of an annuity, in which you receive periodic payments resulting from a personal injury settlement.
Structured settlements are popular for the obvious benefits they offer for both parties; the insurance company saves money, while the recipient benefits by receiving a steady tax-free income which could last for many years. While there are many issues to consider should you decide to sell, your first question is probably whether or not it is actually legal.
Do Some Structured Settlements Prohibit Selling?
While it is true that some settlement agreements include anti-assignment, or anti-acceleration language, numerous court cases have challenged this language, with the results being that the recipient of a structured settlement does indeed have the right to assign the payments. A federal law was put into place in 2002, which invalidated the “non-assignable” language and during the past few years, many states have also passed statutes regulating the transfer of such payments. Some states will require that the selling of structured payments include a court order authorizing the sale; if the sale takes place outside the applicable state statute, the purchaser must pay an excise tax on the total discount. Because of the steep price of this tax, most companies will not purchase a settlement which doesn’t meet state statute requirements.
Should I Contact an Attorney?
While certain states do require you consult an attorney or financial advisor during the process of selling your future structured settlement payments, most do not. Even if your particular state does not have a law approximating the 2002 federal law, the insurance company who is currently making your settlement payments may be based in a state which does have these laws in place.
In such a situation, the laws of the state where the insurance company is based will be used to specify the process governing the sale of your structured settlement. The short answer is that you probably do not need an attorney during the sale of your structured settlement, however if you feel unsure about your decision, it could be wise to consult the advice of a lawyer who has experience in this area.
First, you must be given full disclosure regarding the financial terms of your sale, and you must be offered a “cooling off” period in case you change your mind after you have already signed the documents. Ask any companies you are considering selling your structured settlement to what your state's cooling off period is. There must be a statement in writing advising you to seek independent professional advice regarding this sale, although some states allow the waiver of this advice. A hearing will be held in which a judge will look carefully at your case, and either approve it or not.
The judge is allowed to examine your financial situation as well as your intentions regarding the money, leading to a conclusion regarding whether or not the sale is truly in your best interests. Once the judge approves the sale, a court order approving the sale will be issued, and the sale of your structured settlement will be complete.