More often than not, you would hear about structured settlements from insurance or financial agencies when some claim agreement needs to be reached by one or more aggrieved claimants seeking compensation for an accident or injury. For example, a tort claim – here the arrangement is such that instead of receiving a lump sum amount, the claimant prefers to accept periodic payments at specific intervals or structured phases. Typically the purpose of opting for structured settlement is to reduce various costs, especially legal costs that may be incurred by going through a trial. In case of structured settlement, this can be avoided to a very large extent. However sellers of settlements do face certain problems.
You have to get the Court’s approval before selling a structured settlement since Courts don’t approve of selling if the reason is not valid and strong enough.
- When the quantum of settlement is very low as compared to the extent of injury or loss
- When there is insufficient evidence to the claim
- When the Court does not agree with the counsel’s estimation of the settlement or
- When the Court does not approve of the structure of the settlement in itself
Therefore the seller must find ways to get the Court’s approval by ensuring that the reason to sell is a plausible one. These settlements or payouts involve tax benefits in the sense that the transaction that takes place does not impose taxes on either party. However, the claimant may be faced with financial difficulties and may hence wish to sell the structured settlement for a lump sum value or any other suitable arrangement. In which case, the supporting legal documents may be required to strengthen the valid reason according to the seller of the structured settlement. Therefore supporting documents like medical reports, emergency call records, medical test reports, summary of discharge, etc should be presented before the Court – for example in accident cases – for approval. Usually the Court would approve if the Court is satisfied with the arguments or analysis of liabilities put forth by the seller without impinging on the interest of the buyer per se.
Fees of lawyers and brokers
In a number of cases it has been found that legal fees, that is, fees of brokers and lawyers pose to be impediments in the process of selling structured settlements. The very idea to arrive at a settlement is to avoid a long drawn legal affair and the subsequent expenses that are incurred in the process so that the party who has to pay receives tax benefits and the one who gets the payment also does not have to pay any taxes on the amount as in the case of insurance or accident or injury claims. However when a seller is compelled to sell the structured settlement to meet pressing financial needs or meet certain other contingent situations, the lawyer’s fees may be so high that the seller might find this to be more of a problem than any other. Normally there is a standard percentage that lawyers and brokers charge on the settlement sum; but you may find this to vary from individual to individual at times. It is a good idea to check this out in the market before deciding to sell your settlement. Under normal circumstances fees should not exceed 15% of the sum acquired. Lawyers may charge hourly rates for they too run the risk of giving off their time for the client as well as dealing with complex issues, the risks involved in such cases and results of the case in it.
Finding the best buyer
Finding the buyer may be a daunting task for the settlement seller! The buyer must have the required financial strength and trustworthiness to fulfill the commitment of the deal; that is to honor the payment as agreed upon. This can pose a huge risk for the structured settlement seller. This is where the lawyer and/or the broker plays a significant role in ensuring that the deal is legalized and fair in all aspects. The seller has therefore to undertake a bit of background check on the buyer’s true assets and the value thereof.
Clauses of your settlement contract
It is important also to know whether at all you can sell your settlement; that is, whether or not the structure permit selling your settlement deed. If it does, only then can you sell your structured settlement. If not, then you may have to seek legal help or guidance to adapt the present agreement in a manner that you get the benefit of sale by getting the Court’s approval to do so.
Overall, though there may be some problems related to selling your settlements, these are not insurmountable issues and should not deter you from seeking the necessary assistance from qualified quarters.
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