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Structured settlements provide guaranteed periodic payments to individuals who have received legal settlements, typically from personal injury or liability cases. While these arrangements offer financial security, circumstances may arise where you might consider assigning your settlement to someone else. But is it possible? And if so, how exactly can you move forward?
Let’s take a closer look at the possibilities, limitations, and important considerations surrounding structured settlement assignments…
What is a structured settlement assignment?
A structured settlement assignment involves transferring your rights to receive future settlement payments to another party. This transfer can be partial or complete, depending on your needs and applicable laws. However, the process is heavily regulated to protect settlement recipients from making hasty decisions that could jeopardize their financial future.
Federal regulations
The Internal Revenue Code Section 5891 and the Federal Tax Code govern structured settlement transfers. These laws establish:
- Requirements for court approval of transfers.
- Tax implications of assignments.
- Protection measures for settlement recipients.
- Disclosure requirements for settlement purchasing companies.
State laws
Most states have enacted specific legislation known as Structured Settlement Protection Acts (SSPAs) that provide additional oversight. These typically require:
- Mandatory court approval for any transfer.
- Clear disclosure of financial terms.
- Independent professional advice for sellers.
- Waiting periods before transfers can be completed.
- Proof that the transfer serves the seller’s best interests.
Can you assign your settlement?
The short answer is yes, but with significant restrictions and requirements:
Required court approval
You cannot simply transfer your settlement rights privately. A judge must review and approve the transfer, considering:
- Your current and future financial needs.
- The terms of the proposed transfer.
- Whether the transfer serves your best interests.
- The impact on any dependents.
- Your understanding of the transaction.
Factoring company requirements
Most structured settlement assignments occur through factoring companies, which must:
- Provide detailed disclosure statements.
- Explain all costs and fees.
- Offer a cancellation period.
- Verify your understanding of the transaction.
- Ensure compliance with state and federal laws.
Common reasons for assignment
People typically consider assigning their structured settlements for various legitimate reasons:
- Immediate financial needs
- Medical emergencies.
- Education expenses.
- Home purchase or repairs.
- Debt consolidation.
- Business opportunities.
Financial planning
- Investment diversification.
- Estate planning.
- Tax optimization.
- Retirement preparation.
Important considerations before assigning
Assigning your structured settlement is a major financial decision. Before you pull the proverbial trigger, keep the following considerations in mind:
Financial impact
- Loss of guaranteed future income.
- Discount rates applied to lump sum payments.
- Transaction fees and costs.
- Tax implications.
- Long-term financial security.
Alternative options
- Partial assignments instead of full transfers.
- Loans secured by settlement payments.
- Financial counseling and budgeting.
- Negotiation with current creditors.
- Government assistance programs.
Protecting your interests
If you decide that assigning your structured settlement to someone is necessary and doable, here are a few ways you can make sure the process goes smoothly:
Due diligence steps
- Obtain multiple quotes from factoring companies.
- Review all terms and conditions carefully.
- Seek independent financial advice.
- Consult with a tax professional.
- Retain legal representation.
Red flags to watch for
- Pressure to make quick decisions.
- Unclear or incomplete disclosures.
- Excessive fees or discount rates.
- Promises of guaranteed court approval.
- Requests to bypass legal requirements.
The assignment process
Here’s what you can expect moving forward:
Step-by-step guide
- Initial consultation with factoring company.
- Receipt of written disclosure statement.
- Independent professional consultation.
- Court petition filing.
- Required waiting period.
- Court hearing and review.
- Final approval or denial.
- Transfer execution.
Timeline expectations
The entire process typically takes 45-90 days, depending on:
- Court schedules.
- State requirements.
- Complexity of the transfer.
- Completeness of documentation.
- Any objections raised.
Final thoughts
While it is possible to assign your structured settlement, the decision requires careful consideration and must follow strict legal requirements. The process is designed to protect settlement recipients from hasty decisions that could compromise their financial security. Before pursuing an assignment, thoroughly evaluate your options, seek professional advice, and ensure you understand all implications of the transfer.
Remember that structured settlements were originally established to provide long-term financial stability, and any decision to assign these rights should be made with careful consideration of both immediate needs and future financial security.
Pave the way with Stone Street
Do you need upfront money for any of the following?
- Annuity
- Structured Settlement
- Inherited Annuity
- Assignable Annuity
If so, we will work with you one-on-one so you get the options that best fit your needs:
- One-on-one consultation.
- Customized solutions just for you.
- Customer service you can count on.
Call us at 866-416-5118 to talk about your financial needs and what annuity payments you have coming to you. We’ll do the hard work and handle the rest of the process!
