Structured Settlements Explained 

Structured settlements are designed to support those who receive settlements in managing their money to benefit their long-term financial health. This type of settlement was created as a result of many settlement recipients spending their settlement funds very rapidly rather than investing them and gradually withdrawing to cover their expenses for an extended period of time.

Structured settlements became popular in the 1980s when new laws and tax regulations in the United States made all personal injury and wrongful death settlements non-taxable.   As a result of this, the income that individuals receive from their structured settlements is tax-free. 

If you are the recipient of a structured settlement, instead of receiving your entire settlement in one lump sum, you will receive regular payments over a period of time.  This benefits the person or company paying the settlement because they can pay over time.  It also benefits the recipient, providing them with  financial security from those payments. 

Structured settlements come from many types of lawsuits, but most commonly are the result from personal injury lawsuits.  They can also be made in cases of back pay settlements, divorce, punitive damages, and liquidation damages.  It is also common to receive structured settlements through malpractice and wrongful death lawsuits. 

Individuals who own structured settlements do have the right to sell them for cash.  This can be done through factoring companies which provide a lump sum, cash payment in return for selling the regular payments of the structured settlement.  It is possible to sell most structured settlements, whether from a personal injury, medical malpractice, or other type of case.

From beginning to end the process typically takes a few weeks, largely depending on how quickly the hearing is scheduled.

Best Structured Settlement Companies

The differences between buyers of structured settlements are important.  Understand the options before you take any action.  Not all buyers are created equal.  The difference between the right and wrong choices can be measured in thousands of dollars and weeks of time before you receive your lump sum payment. 

DRB Capital Structured Settlement CompanyDRB capital

DRB Capital is an industry leader in purchasing structured settlementsIn addition to competitive quotes, DRB Capital also offers their clients an outstanding customer service team that works efficiently to meet your needs. 

The DRB Capital team will assign a representative to work closely with you to meet your individual needs.  Each time you are in contact with DRB Capital you will be able to speak with this same individual who is familiar with your case.  Even better, their representatives do not rush or pressure you to make a decision, but provide as much information and guidance as you require to make a decision. 

With an A rating from the Better Business Bureau (BBB), the DRB Capital team stands out as an industry leader in structured settlement payments and can offer you an easy and fast process to sell your payments at very competitive rates. 

Rating: 5
Fairfield FundingFrom their base in Atlanta, GA, Fairfield Funding provides customers with specialized service in the area of structured settlements.  Receiving most of their clients through previous customer referrals, Fairfield Funding’s financial professionals offer customers expert service in selling their structured settlements
Rating: 4
Oasis FinancialSince 2002, Oasis Financial has provided pre-settlement funding and structured settlements for a wide variety of cases, including workers compensation, accidental injuries, and wrongful death. The company is based in Rosemont, Illinois with offices throughout the United States.  The company is also known as Oasis Legal Finance, LLC. 
Rating: 4
Novation Settlement SolutionsA factoring company based in West Palm Beach, Florida.  Novation Settlement Solutions offers customers the ability to sell structured settlements, promising to make quick decisions.  Novation Settlement Solutions also offers customers the ability to receive offers over the phone or submit their questions by email. 
Rating: 4
SenecaOneSenecaOne provides multiple options for handling your structured settlement, including selling your payments. They’ve helped thousands of customers and don’t charge any processing or legal fees while you work with them. Located in Bethesda, Maryland, SenecaOne has been helping individuals sell their structured settlements for the last 17 years.
Rating: 4

Qualifications of a Good Buyer

If you think you may have found the right structured settlement buyer for you, make sure they meet the following criteria before you proceed: 

  • Strong industry experience
  • Professional and transparent customer service, without being pushy!
  • Solid rating with the Better Business Bureau 
  • Few negative reviews on Yelp and other rating websites
  • Free quote provided in writing
  • No hidden fees

Know Your Selling Options

There are actual a few different ways you can cash out your structured settlement, so compare your options before proceeding with an offer from a buyer. While you certainly can sell your entire structured settlement, you don’t need to. Instead, consider selling just a portion of your settlement upfront, then keep receiving a reduced settlement payment for the remainder of the term.

With a partial sale, you’ll sell a set period of your payments. Once that period ends, you’ll resume as the settlement owner, so you can still benefit from long-term funds. On the downside, striking a middle ground may feel like there’s no major financial impact on your life both in the near term and the long term.

If you sell your full settlement amount, you do get that flexibility of using that large amount right now in the best way you see fit. On the down side, you can’t get that money back. If some other financial emergency or investable event occurs, you’ll need to use other means to address those issues when the time comes. Either way, it’s important to plan ahead and use your funds wisely, no matter when you receive them.

Process of Selling Settlement Payments

While the quality of the process varies based on your structured settlement buyer, the steps are generally the same no matter what you decide on. Here are the three main parts of selling your structured settlement so you know exactly what to expect. 

  1. Choose a Quote: First, get started by receiving cash out quotes from multiple structured settlement companies. It’s important that you clearly understand the details of how much you’ll receive and how quickly you can expect to get your funds. Also, be sure to get all of those promises in writing. Otherwise, you may be in for an unpleasant surprise when you make a commitment but don’t receive the same terms you were initially promised. 
  2. Receive Court Approval: Once you choose a company to buy your structured settlement, a court hearing will be scheduled in order for a judge to approve the transaction and make sure the decision is truly in your best financial interest. You may be required to attend a court hearing, or you may be able to have your buyer represent you on your behalf. It depends on what your company offers and what your state allows.
  3. Access Your Funds: You won’t receive your structured settlement cash immediately following the court hearing. First, your buyer must coordinate with your insurance company to inform them of the sale. From there, the transfer of the lump sum can be coordinated. How long this takes depends on the company you choose. Your payment options also vary depending on what methods are offered by your buyer. 

When It Makes Sense to Cash Out a Structured Settlement

The terms of a structured settlements are naturally limiting, with the recipients entitled to payments on a strict schedule.  There are many situations in which this schedule will no longer fit the needs of the recipient.  Oftentimes, when people choose to cash out their structured settlement, it is due to urgent financial need. 

In other situations, people regret selecting the structured settlement instead of the lump sum payment and want to reverse their decision.  Regardless of the reason, there is a way to get cash for your structured settlement. 

Common reasons for cashing out a structured settlement include: 

  • buying a home
  • buying a car 
  • financing education 
  • paying off debt 
  • investing in a business 

There are actual a few different ways you can cash out your structured settlement, so compare your options before proceeding with an offer from a buyer. While you certainly can sell your entire structured settlement, you don’t need to. Instead, consider selling just a portion of your settlement upfront, then  

In all cases, you should not feel restricted by the schedule of the payments on your structured settlement.  If you need to access your funds now, there are multiple options available. 

Factoring companies, or companies that purchase structured settlement payments, can provide you with a lump sum payment in exchange for cashing out your remaining payments.  These companies will consider the value of your remaining structured settlement payments and will be able to quickly provide a quote for their purchase price. 

When cashing out structured settlement payments, it is not possible to receive the full value of the structured settlement payments from the buyer.  The buyer will always offer a price less than the total value. The amount of difference between the structured settlement payments and the total value of the lump sum offered by the buyer is called the discount rate.  Continue reading to learn more about the discount rate.

Understand the Discount Rate

While the quality of the process varies based on your structured settlement buyer, the steps are generally the same no matter what you decide on. Here are the three main parts of selling your structured settlement so you know exactly what to expect. 

When you are looking at quotes from potential buyers of your structured settlement, it is critical to understand the meaning of discount rate.  Unlike most cases such as when you are shopping at a sale – you want to keep an eye out for a LOW discount rate! 

This may seem strange at first but it is important to understand that the discount rate is the amount reduced from the full value of your structured settlement that you will receive.  In other words, it is the amount less than their total value that you will receive in the lump sum payment from the buyer. 

Factoring companies consider a number of factors when calculating the discount rate which they can offer a potential customer.  These include total value of payments being sold, number of payments, current interest rates, the timeline over which the payments will be made, and any additional fees that the factoring company wants to charge. 

Unfortunately, the discount rate will never be zero.  No factoring company will offer you a lump sum payment for the full value of the remaining payments on your structured settlement.  Discount rates range between different structured settlement buyers but it is the price customers pay for getting access to cash now. 

F.A.Q.

How are structured settlements taxed?

In the United States, most structured settlements are not subject to taxes as they are not considered income by the IRS. Structured settlements that are not the result of personal injury cases, however, should be carefully reviewed as they may be subject to taxes.

What is the structured settlement protection act?

There is not a single structured settlement protection act, but rather there are acts passed by individual states which offer similar protections to sellers of structured settlements. In general, a study of the different acts across states reveals that buyers need to inform the seller of the difference between the value of the payments in the current annuity arranged compared to the price they will receive for selling.

The protection act in each state will also typically require the approval of a judge. The judge will need to certify that the transaction is in the best interests of the seller and also make a determination that the sale is necessary to prevent financial hardship.  Some states require the seller to consult an attorney or independent financial consultant during the process.

There are key differences between states so it is important to gain an awareness of your local laws. DRB Capital can help you do this.

What about structured settlements for minors – can these be sold?

In general, selling structured settlements owned by minors follows the same procedure as that for settlements own by adults. However, there is substantial variation in the requirement for proof that selling is in the best interest of the minor involved. Parents or guardians will be required to show that selling the future payments will benefit the minor more than waiting until their adult years. Approvals for these types of sales are relatively rare.

Why must a judge approve transactions?

A court date is usually considered negative, however in this case the appearance is required to ensure that your transaction is in your best interest. The judge will review the details of the sale as well as proof that the sale will prevent financial hardship.

How do I know I am getting a good discount rate?

Don’t be afraid to shop around and get quotes from multiple buyers. No quote that you receive should be binding.
It’s also important to remember that you are not only looking for the discount rate of the quote you get but also the quality of service from the structured settlement buyer. Good service can be the difference between receiving your lump sum payment in a matter of weeks compared to months.

What are some red flags to look for in the process of selling my settlement?

As in any business, there are companies with poor service. In the business of structure settlements, this means that there are companies who will make bad offers to potential sellers and try to pressure them into selling. Do not deal with any company who will not make an offer in writing or is pressuring you to sign a document before answering all your questions.

Get a free, no obligation quote today from leading industry experts

DRB Capital is a leading buyer of structured settlements. Their team will customize the process to meet your needs and offers customers competitive quotes. Their A rating from the Better Business Bureau speaks for itself. If you choose DRB Capital, you will benefit from unparalleled customer service to walk you through the process of selling your structured settlement. Their team will answer all your questions as you carefully consider your options.
Get a Free Quote Call (800) 520-2844