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Generally, income as a result of personal injury is not taxable, depending on the specific type of award. However, some areas are taxed as income. For this reason, and the fact that there is a certain amount of gray area when settlements are not categorized into specific taxable groups, many settlements are set up in a structured settlement, often as an annuity, to completely avoid paying tax on the award. This is one of the primary advantages to a structured settlement.
However, it becomes a completely different tax beast once the structured settlement is sold. In the last few years, several companies have surfaced offering to purchase structured settlements from individuals wanting to obtain a lump sum of cash in exchange for periodic payments. While the general rule is that awards (that are taxable) are considered as income during the year they are awarded. However, once the money goes into a structured settlement and is sold, the proceeds may lose the tax-free status. This is even more a concern since new legislation has gone into effect trying to limit the ability to transfer structured settlements.
In 2002, President Bush signed the initial round of legislation to stop settlement funding abuse, in what was then perceived as a shady business. As a result of those laws, as well as proceeding statutes, there are very strict requirements to buying a structured settlement. In fact, many states require court approval before any sale can take place or an additional 40% tax is placed on the proceeds of the sell. The reason for this is supposed to be to protect people from paying high interest rates and selling a structured settlement for considerably less than its real worth. For in-depth tax questions in your state, it is best to contact a local tax advisor.

Payments are an essential part of any settlement, whether it is lump sum or staggered over a time period. Settlement payments may come in various situations like a physical injury, a work man’s company claim or tort, or an awarded compensation in a legal battle following physical injury. In the recent years, structured settlements, a form of monthly payment over the long term, became very popular because of the benefits for both the paying and the receiving parties. Structured settlement is usually used when a sizeable amount of money is involved in the settlement of a claim where the paying party has a difficulty of raising the needed amount upfront. Lottery winnings are in fact paid under this same form of plan as well. When your settlement comes to an agreement that a series of structured payments will be provided over a period of time instead of a lump sum, you are now guaranteed a passive source of income. The claimant now receives monthly compensation for a period of few years up to a whole lifetime instead of a single payment. This guaranteed big amount spread out over a period of time will surely compensate for the loss of the claimant like a disability. For their part, it usually means a fund for medical expenses and the like. With such a guaranteed amount, most people are not still satisfied and would want the bigger instant cash. That is why this form of payments is even endorsed with lottery winnings to protect people from their own selves. Most people cannot handle a sudden huge financial change. Money will only be spent wildly and mostly expended on the non-essentials. This will only worsen their situation over the experience which will supposedly make their lives more comfortable. Most people who experienced such sudden change were left worse off in just a few years than they were before the large amount arrived in their lives. The very purpose of paying the compensation as a structured settlement is to keep the claimant or recipient from worrying over the management of a large sum of money at once. In the specific case of an injury claim, the insurance company of the paying party keeps the money into an annuity. In some special cases, part of the money is paid up front to the claimant. This is especially true with health-related cases like an injury claim where there is an immediate need for medical expenses. The remaining big chunk is distributed over the regular payments over the agreed time period. A structured settlement can assure the recipient guaranteed income over a long period of time. A recipient should always treasure such passive income and must use it to secure his or her future by using it wisely.

Many people receiving payments from structured insurance settlements often wish they could get their money in a lump sum amount instead of receiving payments for what seems like forever. However, most do not realize that is a very real option for someone that wants to break free from the periodic payments of a structured settlement. If someone is really interested in selling a structured settlement for a lump sum of cash, there are a few common mistakes they should avoid.
Mistake #1 – Being to Hasty
Being in a hurry is often a bad idea when it comes to financial dealings. It is when we are rushed to complete something that we do not read the fine print and practice our due diligence in a business transaction. The same is true when selling a structured insurance settlement. Do not let the promise of a big check cause you to make rash decisions that are not necessarily in your best interest. In this process, it is better to take your time, research various companies, and choose wisely before you get caught up with a company that does not have your best interest at heart.
Mistake #2 – Wasting the Money from the Sale
Structured insurance settlements are designed to save people from themselves. They are meant to keep people from frivolously spending all of their money and being left with nothing. Show financial responsibility when making decisions with your newfound wealth.
Mistake #3 – Not Educating Yourself
You do not have to know every detail of the process of selling a structured settlement; however, if you have no knowledge, you are likely to be taken for a ride. You have heard the saying, “knowledge is power” – this is true in many realms of life, including selling an insurance settlement. Take the time to know what you are talking about to be sure to get the best deal possible.

When the term settlement loan is thrown around people think of a traditional loan. In reality a settlement loan is not a loan at all. A traditional financial institution or lending company would not issue a loan based on the merit of a pending lawsuit. This is due to the fact that if you lose the case you most likely could not pay back the amount lent to you. This is due to the structure of traditional financial institutions and how to generate revenue. In fact, a settlement loan is really a settlement loan provider buying interest into your pending case. They are taking the risk that if you win the case they will give little now and gain big later. Settlement loan providers do not require clients to pay back loans if they lose their pending lawsuit. This simple fact alone doesn’t quality settlement loans as an actual loan. This however is the main reason large interest amounts are attached to settlement loans. This allows the settlement loan provider to be able to handle a certain amount of losses per year and still make a profit. Settlement loan providers will also only accept a case that has good merit and a good chance of winning in the long run. You’ll find that more people are denied settlement loans than are accepted. You can shop around with different settlement loan providers if one denies you. They all have their own guidelines when it comes to accepting a case for a settlement loan. Shopping around will also allow you to find the best deal. Make sure to ask about any fees and what interest rate the loan will be provided at. Remember; don’t jump at the first offer provided to you! You’ll be surprised at the difference in fees and interest rates charged per settlement loan provider. Some instances that occur are one will apply for a loan at the beginning of the case and get denied. Then, half way through apply again and get approved. This is because as the case goes on it’s easier to determine if your will be won or not.

When it comes to the different types of lawsuit cases it can be mind boggling. There are over fifty different types of civil court cases; thousands if you branch them off into their own specific field. Many plaintiffs in the middle of a lawsuit seek pre settlement loans as a source of cash during their pending lawsuit. They may use this cash to pay bills or even to fund their lawsuit case. Regardless of the reason a plaintiff should know what cases lawsuit settlement loan providers accept. In theory with so many different lawsuit loan providers in the industry one will at least fund your particular type of case. However, there is a general set of cases that they all will fund. Below is a quick list of the different cases that the majority of the providers will give loans for. Asbestos Auto Accident Aviation Breach of Contract Civil Rights Class Action Commercial Litigation Construction Negligence Copyright (and other intellectual property) Litigation Divorce Funding Employment Discrimination Environmental Litigation FELA (Railroad) Fraud General Negligence Inheritance Funding Jones Act Legal Malpractice Litigation Funding Mass Tort Medical Expenses Funding Medical Malpractice Mesothelioma Motor Vehicle and Passenger Injury Nursing Home Malpractice Patent Law Pedestrian Injury Personal Injury Pharmaceutical Litigation Plane Crash Premises Negligence (slip & fall) Primary Pulmonary Hypertension (PPH) Product Liability Securities Fraud Settlements Sexual Harassment Slip-and-Fall Structured Settlements Surgical Expenses Funding Trucking Vioxx Whistle blower Workers Compensation Wrongful Death Wrongful Termination Zyprexa As you can see, the list of cases lawsuit loan providers will fund the plaintiffs for is staggering, and this isn’t even a complete list. This just provides you with the basic civil court cases a settlement loan provider may or may not provide plaintiffs with loans for. Regardless of what type of lawsuit case you’re currently involved in you should research the providers list of acceptable cases “before” applying for a lawsuit loan. This will save time and effort while trying to get access to the cash you need. If you want to learn more about the different type of lawsuit cases accept or want to apply for a lawsuit settlement loan then continue below.

Copyright (c) 2008 Bill Broich
Want to sell your annuity or structured settlement? Here are some common mistakes to avoid.
1) Only talking to one funding company.
People considering selling their annuity or structured settlement are usually in a quick need of a cash lump sum. Whether they need the money to cover medical bills, make home mortgage payments, buy a new car, send a kid to college, whatever it may be. You generally need money and you need it fast. In a hurry, a person will usually call a number they find in a TV commercial or internet search and agree to the first annuity or structured settlement buy-out offer they receive. This is often a mistake. Funding companies are vicious competitors and by obtaining multiple bids from multiple companies you will earn a far better rate. The first offer will often not be the best offer. So, practice patience when evaluating offers. Get multiple bids. Shop around. Make them compete to win your business, and do not rush into the first offer you receive.
2) Not keeping the transaction all business
One trick any good salesman employs is to build personal rapport with a prospect. This isn’t necessarily a bad thing. It’s good to be friendly with the people you do business with. However, my advice with these transactions is to keep the dealings all business. Don’t let them in to why you need the money, your personal problems, nothing. You don’t want them to discover that you’re in great need of the money, or worse, desperate for cash. Weakness is often taken advantage of. By keeping a professional attitude and making them realize that you’re looking for the best offer and you’re in no rush to sell until you obtain an offer you find acceptable you change the sales dynamic to your favor.
3) Selling part of your annuity or structured settlement without regard to future payment stream
Believe it or not people forget that when selling only a portion of their annuity or structured settlement they reduce their future payment stream. So when the next payment comes they often realize that they can’t live off that monthly or annual amount and are forced into selling more. Do the math before-hand. Make sure the reduced payment stream after selling a portion is enough to sustain your current lifestyle needs.
4) Not seeking professional advice
Talk to your lawyer and accountant before taking any deal. Find out all tax consequences of transaction. Run all contracts by a good attorney before signing. The little it costs to obtain professional tax and legal advice could save you a lot of money and trouble down the road.
To recap: Talk to multiple funding companies, keep it professional, understand reductions of payment streams if you’re selling just a portion and talk to both an account and a lawyer to advise you through the transaction.

Paying day to day bills to meet different legal and medical expenses is often very difficult for the person who survived the injury. For this reason many people opt for the facility of obtaining cash loan advances against future structured settlement. The best feature of such a loan is you need to repay the loan amount if you lost the case and did not receive any settlement compensation. While it is great to get instant cash for future settlements but please be informed that you will be charged a very heavy rate of interest for such a loan. Sometimes this rate can be as high as 100%. Financers charge these higher rates as they run the risk of losing entire amount if you do not win the lawsuit. You can start the formal procedure to get loan as soon as you get copy of your police report. You should clearly identify the all the parties involved for the damages in the police report. This is the most important document for you to obtain any loan advance for your future settlement. To get a fair compensation from the offending party it is very important that you clearly identify all your losses and injuries. Any temporary or permanent damage caused should be included in your reports. Prepare a detailed report after consulting your legal advisor. You can ask your attorney to proceed for obtaining ‘Authorization to Release Records’ as early as possible. This will ensure that you do not get struck with the payments in future. Follow up regularly with your attorney so that your case is reviewed as fast as possible.

It is frustrating to wait for long time to receive your compensation after winning your lawsuit. Many settlements involve monthly installments in which you receive small amounts of money for several months. For the people who are suffering with injury or job loss money lump sum money is required now. In the present economic conditions it is very difficult to get personal loans from banks. Moreover it is very difficult for the sufferer to pay back the loan while meeting his regular expenses. Under such circumstances many people opt for obtaining loan against their structured settlement. By obtaining loan against your settlement you get instant money without putting your home or car at stake. And if the party is sound and you are receiving installments regularly you need to worry about the repayment of the loan also. Every month you can simply pay your loan from the installment that you receive. This kind of loan is approved easily by many financial institutions as they also see less risk. Generally, in most of the cases such loans are approved and you receive cash instantly even before your settlement claims become available. It is for this reason that obtaining loan against such settlements is very famous common now. Probably the best feature of such loan is you need to worry about the judicial expenses if your loan is approved during the trial. But be careful and obtain such loan only if you are sure that you are going to win the case. Or else you will have the burden to repay the loan from your pocket.

The process of selling your structured settlement could be complex, as it involves several legal aspects. It is for this reason that it is in your best interest to hire services of a professional who can handle all the formalities for you depending on your requirements. It is a fact that brokers are better negotiators. They can help you in getting best discount rates for your settlement. Generally professional settlement brokers have a clear plan for approaching buying companies. They clearly explain to them all the legal aspects that are involved in your case and put everything in a presentable format. So that it becomes easy for the purchaser to analyze all the aspects of your settlements clearly and quote his best offer. Many people try to avoid such professional brokers as a result they end up selling their settlements for very high discount rates. If settlements involve complicated legal aspects it becomes very difficult for you to put your case properly in front of the purchasing party. As a result you settlement may not get the rate it deserve. You can search for good broker online. You can also ask your bank or any trusted accountant to recommend some good broker. Before hiring such services clearly negotiate his charges. It does not matter from where you arrange your broker but make sure that he is honest, competent and qualified and can handle your case properly. You need to make sure that your broker understands your situation and has a clear idea of your financial situation. You can clearly explain to him about your expectations and seek his advice.

Normally when a lawsuit is settled and judgment is won by the victim, the defendant has to pay a lump sum amount to the victim. For instance, let’s say a person is suffering with asbestosis and it is confirmed in the court of law that the disease is caused due to some negligence on the part of manufacturer. The person sues the manufacturer and he agrees to pay a certain amount of money to the victim in small installments over a period of time. This agreement between the victim and the defendant is called structured settlement in the legal terminology. The installments of payment can be structured in several ways depending on the circumstances. It is basically designed to provide you some financial security while protecting you from inflation. The payments can range from simple monthly or yearly payments to complex financial arrangements consisting of an initial lump sum payment followed by monthly indexed payments or deferred payments. Sometimes these settlements also incorporate special provisions relating to insurance and medical support. The defendants usually purchase an annuity from some insurance company by paying an upfront amount. The insurance company then takes care of regular scheduled payments as per the specifications provided by you and by your attorney in accordance with the terms of your structured settlement. Apart from getting a guaranteed income periodically, the victim also receives several tax benefits. The amount of tax payable is substantially reduced for the annuity received. Victim can even sell his settlement to some buying company to receive lump sum cash for a discount rate.