When accidents occur, whether it is a car accident, slip and fall, medical malpractice, wrongful death, or any other non-work-related injury, structured agreements are often established with insurance companies to pay for these wrongful acts. People involved in personal injury or insurance-related cases choose to receive a series of payments over a calendar period of time rather than receiving an immediate lump sum payment. These payments generally amount to more than the amount a person would have received for an immediate payment.
The injured party (plaintiff) goes through a process whereby he chooses to accept this extended payment and enters into a “Rescission and Release Agreement” that allows the insurer (defendant) to purchase an annuity policy on behalf of the policyholder who would provide monthly, quarterly or annual payments to the injured party, which now becomes what is called the Annuitant.
With the advent of new federal laws in 2002 and additional state protections, the injured party is now entitled to obtain money for their structured settlement by selling this income stream to an independent third party if they so choose. These periodic payments that result from an insurance company’s annuity contract (called a structured settlement) can
transferred at any time in the future for a lump sum today, but great care must be taken to ensure that the injured party obtains a proper court order. The reason for the court order is to protect the injured party and this protection is twofold; first, to protect the creditor (injured party) from an unscrupulous transaction, and second, and equally important in our opinion, to preserve the tax-free nature of the transaction. Without obtaining a court order, the product received would be fully taxed, a combative omen scenario.
The structured settlement holder should be aware that these annuity sales have specific legal guidelines that differ from state to state. These specific elements must be strictly adhered to to complete the transaction. Typically, the injured party receiving the payment stream must execute (sign) a new transfer and assignment agreement that discloses all contractual terms and the price to pay.
At this point, the injured party may wonder how difficult it is for them to obtain money for their structured transaction, as the procedure seems complex. In fact, selling a structured settlement annuity is a simple and straightforward process that any institutional lender has done thousands of times and will handle all the paperwork correctly. All the injured party needs to do is make sure they provide the lender with the necessary documents in a timely manner. This process is really a simple transaction. Once in court, the potential sale is announced to all interested parties and then sent to the court for approval.