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Structured Settlement Investment - The Ins and Outs | Financial Planning Tips

Structured Settlement Investment – The Ins and Outs

A structured settlement investment is a contract or agreement from a lawsuit integrating a payment scheme over a definite period of time. Workers compensation or personal injury claims come with annuity payments that should be completed over an established time frame.

Origin of Structured Settlement

Long before, the damages as a result of an injury lawsuit are being compensated in the form of lump sum settlement. This type of payment, specifically in disastrous injury conditions, frequently situates the victim of the injury in a complicated financial position. Because the victim is still trying to adapt a new way of living, frequently, the large sums of money are quite difficult to manage, leading to immediate financial losses.

Thus, in 1982, the Congress approved and passed a legislation that changed the federal tax code. “The Periodic Payment Settlement Act of 1982” also known as Public Law 97-473 was implemented, which has formally promoted the use of structured settlements particularly in workers compensation and physical injury lawsuits.

Understanding Structured Settlement

While your injury lawyer and the other party’s insurance came up with a structured settlement with a payment scheme that will last for a specific number of years, even if the compensation is substantial, you must understand that only a portion of such amount will be given to you to cover your medical expenditures. The settlement funds will be dispersed via a structured settlement annuity, therefore such payouts will be completed over a period of time.

But what if the periodic payments are not enough to compensate your needs? The good news is that you can sell structured insurance settlements, but you must take some factors into consideration first.

As of the 23rd of January 2002, sales of these settlements do not compel any tax liability. The best step to take is to only sell a part of the settlement that will cover your present needs, and then leave the remaining funds in the annuity so you can still procure some sort of income on a monthly basis.

Always remember that a structured settlement is intended to be awarded over time. Therefore, it’s wise to only sell your structured settlement investment to resolve a financial emergency or other unanticipated yet very important expenditures. You may also check on how to sell and or purchase structured settlements online.

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