Structured Settlement Payments

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If you receive payments from a structured settlement, or are about to receive a structured settlement, this page will be a valuable resource. Most structured settlements are paid out over time via an annuity offering future payments. You should know that if you are receiving payments from a structured settlement, you have the right to turn those future annuity payments into cash now.

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What is a Structured Settlement?

  • A Structured Settlement is an Agreement for one party, typically an Insurance Company, to pay another party, some future disclosed amount of cash
  • Results from some form of accident

What documents are “created” in a Structured Settlement

  • Structured Settlement Agreement
  • Qualified Assignment
  • Annuity Application
  • Annuity Policy
  • Court Order Approving Minor’s Claim
  • You can cash in your structured settlement payments.

These payments may be scheduled for any length of time -- even as long as the claimant's lifetime -- and are structured to meet the financial needs of the claimant. Payments can be in equal amounts or can vary. They may include future lump sums.

A structured settlement arrangement may be agreed to privately, as in a pre-trial settlement, or it may be required by a court order, as in a settlement or judgment involving a minor.

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What is an Annuity Application

An annuity application is the request for an insurance company to provide a policy that guarantees the payment of the settlements declared amount to the Payee (plaintiff)

What is an Annuity Policy

An annuity policy is the guaranteed “promise to pay” a declared amount to the Payee (plaintiff)

What will an Annuity Policy Show?

  • Payee/Measuring Life
  • Beneficiary
  • Policy Number
  • Issuer
  • Owner
  • Date of Issue
  • Payment Stream to be paid

A structured settlement annuity is a single premium immediate annuity, but defers from a traditional single premium immediate annuity. To understand this, one must first understand both products.

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How many structured settlements are created yearly

  • Over $7 Billion in Settlements will be created in 2003
  • Amount will increase an estimated 15% yearly through 2019
  • 200+ Deals a month completed by funding sources

Customers typically decide to sell their structured settlement payments due to some financial hardship. Usually the customer will go with the person they feel most comfortable with, regardless of “price” .

New Federal and State Laws Regulating a Sale

Due to new State and Federal Laws, the closing process now takes anywhere from 3 to 6 months to complete. Do not be “fooled” by companies that say it can be done quicker. Only in rare cases can this timeframe be shortened to 2 months. On the Federal Level, in order to avoid any tax liabilities, either to the customer or the funding company purchasing the payment stream, a court order is now required. On the State Level, 36 states currently have passed new “Structured Settlement Protection Acts” which regulate exactly how the court Order process is completed.

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The Closing Process

On paper, the closing process seems very simple. However, in order to comply with each state law, certain time frames must be met. The closing process flows as follows:

  • Initial submission of settlement documentation
  • Disclosure Statement
  • Closing documentation
  • Attorney Estoppel letter
  • Petition for Court Order filed
  • Court order is obtained
  • Insurance Company acknowledges assignment

Submission Documentation

When submitting a file to a funding source, some initial documentation is needed to begin the closing process. You should obtain the following:

  • Application for sale
  • Annuity Policy
  • Check Stub
  • Settlement Agreement
  • Qualified Assignment
  • Payment stream to be purchased
  • Purchase Price you are paying to the customer

Disclosure Statements

Based upon each state’s laws, the disclosure statement must be provided to the customer anywhere between 3 to 14 days prior to the customers receipt of the transfer agreement. The Disclosure Statement must show:

  • Amounts and due dates of payments being assigned
  • The current IRS Discounted Present Value of the payments
  • The Gross Advance Amount and the Annual Discount Rate
  • An Itemized listing of all commissions, fees and expenses
  • The Net Amount to be received by the seller
  • Several other minor disclosures required per state

Transfer Agreements

Once the customer has received the Disclosure Statement, and the allotted time has expired, the transfer agreement can be sent to the customer for signature. The documents Sent to the customer are:

  • Transfer Agreement
  • Testamentary Agreement
  • Updated Application
  • Fee Agreement (In some cases with the Disclosure Statement)
  • Attorney Estoppel Letter
  • IRS form W-9

Attorney Advice

Attorney advice in any type of financial transaction is smart for a customer. However, not all states require the customer to obtain said advice. Based upon the laws to be used on your customers transaction, he can either:

  • Waive legal representation in the Transfer Agreement
  • Obtain legal advice and have their Attorney prepare and sign an Estoppel Letter

Court Order Process

The court order process is generally the longest part of the overall closing process. Steps taken during this process are:

  • Attorney obtains complete file and reviews documentation
  • Drafts of Petition and Order are reviewed by funding source
  • Petition is filed (must allow 20 to 30 days notice to all interested parties prior to actual court date)
  • Court Date is set
  • Judge hears arguments and approves the order
  • Judge signs the order (can be immediately or at a later date)
  • Court Order is provided to the funding source

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Insurance Company Acknowledgement

Depending on which funding company you use, the Funding of proceeds to the customer can take place either after the court order is received or after the Annuity Owner and Issuer approve of the changes to the Annuity Policy. If the funds are dispersed after the court order is obtained, the dispersal is usually 5 to 7 business days after receipt of the court order. If the funds are dispersed after the Insurance Company
Acknowledges the assignment, the funding can be anywhere from 30 to 45 days after receipt of the court order. Individuals awarded future payments through litigation derived from personal injury misfortune have sold the right to receive these payments for years. The industry that grew up around this consumer need operated without regulation until January 2002 when the U.S. Congress stepped in and legitimized the process, demanding that the practice be approved by a judge following scrutiny of the transaction.

What is a Structured Settlement?

A Structured Settlement is a term that generally refers to a deferred payment obligation resulting from the settlement of a personal injury lawsuit. Typically these payments are paid over several years or even decades.

Structured Settlement Processing

This information is for you to use as a reference so that you have a step-by-step outline explaining to you how your transaction will occur. Your cooperation in all steps will insure that your transaction is completed in a timely manner so that you can receive your money as quickly as possible.

The first step is to return your application completed, include a clear copy of your photo ID, your most recent annuity check stub (if applicable), a copy of your Annuity Contract, signed copy of your Settlement Agreement, Qualified Assignment, (if applicable) and if you were a minor when your Settlement occurs, a copy of the Order for the Minors Claim, (if applicable). If you are missing any of the documentation, send us everything you have and we will help you to obtain the missing documentation.

After we have received and reviewed your documentation, we begin our internal process. The amount of information you have provided to us will determine how long you can anticipate receiving closing documents. Normally it will be within 2 to 5 business days after we receive the initial documentation back from you.

Once the file review has been completed, we will create and issue to you the closing documents. The closing documents consist of a Disclosure Statement, which outlines the financial terms of the transaction and the Transfer Agreement, which outlines the legal terms of the transaction. Based on the State statue where we will be petitioning for the Court’s Approval, the Disclosure Statement and Transfer Agreement may be sent together or separate. If the Disclosure Statement is sent separate, the Transfer Agreement will be sent to you upon our receipt of the signed Disclosure Statement, but no sooner than ten (10) days after the Disclosure Statement was initially sent to you.

Once you receive the closing documents, review them completely. If you have any questions, give me a call and I will be glad to review those items on which you have questions. After this review, you will need to take the contract to a notary and sign the contract in front of the notary. The notary will need to notarize each of your signatures, where noted. Once completed, you will need to send the closing documents back to us.

After we receive the closing documents, we will review them. We then continue with our internal process. At which point, we will pull your credit and search records for UCC filings, judgments, liens and child support obligations against you. We may either pay or escrow funds to satisfy any lien filed against you or the periodic payment if necessary, and deduct the amount from the purchase price. If we are not satisfied with the results of our investigation, in our Sole and Absolute discretion we shall have the right to cancel your request.

To continue the sale process we will copy the closing documents to the attorney representing the Transfer, with information on proceeding with the Court Order. Once the transfer has been approved and Ordered by the Court, an acknowledgement letter is sent to the insurance company. Upon our receipt of the acknowledgement letter, our final funding review is started. Provided that everything is complete, funding is set up and will take place within ten (10) business days after final approval has been received.

You can cash in your structured settlement payments.

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