When a person is seriously injured due to the actions of another party, he or she may be awarded financial compensation in a lawsuit. The purpose of the lawsuit is for the injured person to have funds available to pay for medical expenses and to compensate for time missed from work. In many cases, the injured party receives an award that is over and above the actual monetary costs of the accident. This is intended to punish the party who cause the injuries either through negligence or through deliberate actions and is known as punitive damages. In the past, structured payments were only used for very large dollar amounts, but it is common these days for the process to be used on settlements as low as $50,000.
Once the lawsuit has been settled, it is typically paid to the injured person through a process known as structured settlements. The funds are paid from the insurance company representing the other party in a lawsuit. Typically, payments are made in monthly installments for a period of several years. If the person who is receiving the settlement wishes to gain access to the cash faster, he or she must sell the payments and then collect the funds. There are companies that exist for the sole purpose of purchasing settlements from accident victims, but the transaction must be approved by a judge in most states.
After the settlement holder has obtained permission to sell his or her structured payments, the next step is to find a buyer. An Internet search should turn up several potential companies to buy the settlement payments. There are many factors that a settlement holder must consider before relinquishing his or her future payments. Since lump sum payments may be taxable, it is advisable to meet with an accountant before proceeding with the transaction. It is also important to understand any fees that are involved and how they are to be paid.
For example, does the fee to purchase the structured settlement come out of the amount paid to the accident victim or is he or she expected to pay it separately? Are there any penalties for choosing to invest a large lump sum of money rather than making small monthly investments? The person who wants to sell his or her settlement payments should ask these questions of all potential buyers and then make note of the responses. This will help the seller to make the best financial decision for his or her future.
Matt Haran, an avid writer of business and finance, is a part of an elite team of writers who have contributed to many different blogs and news sites. Follow him @thatdoodmatt