The reading level for this article is Novice
If you have been involved in a lawsuit and a settlement agreement was reached for a monetary amount to be paid over a period of time that is known as a structured settlement annuity. The word annuity simply means a series of financial payments that will be made over a period of time.
There are many reasons why settlements are set up as a structured financial program. If you have been seriously injured and cannot work for some time regular payments will provide you with a guaranteed long term income to replace your lost earning capacity. For the defendant making a settlement agreement may avoid a court trial with a jury that may award an even higher amount to the plaintiff. The plaintiff may want to avoid waiting any longer to get their just compensation for damages. They may just want to get the process over and go on with their life.
A structured settlement annuity is a form of legal property that can be bought and sold. Buyers of a structured settlement annuity will offer a discounted lump sum to purchase the future payments. They give what is essentially a cash advance and take out a large fee for their risk and service. There is risk involved because with inflation the future value of the annuity can easily go down. That is also a good reason why the holder of the agreement would want to sell out even though they have to pay a large fee. Money today could be worth much more than in the future.
Whatever the reasons for selling out a structured settlement annuity it is a financial opportunity that some people want to use. With some agreements the court must give its approval to protect the interests of the plaintiff who holds the agreement. Good reasons for selling out the annuity might be to come up with a large sum of cash for a home down payment or to attend college.
When the structured settlement annuity is sold the person who sells it loses all claims to that future income. They may, however, sell only a portion of the future income and still get some reduced future payments. Giving up a guaranteed income is an important decision and financial move that should be carefully thought about before making any commitments. Having a structured settlement annuity can provide peace of mind to the recipient.