10 Aug What Laws Say About Selling Structured Settlements
Far too many people find themselves stuck in a structured settlement after an accident, injury, or lawsuit — and when it’s all happening at the time, it’s hard to figure out which payout option will be most beneficial, simply because there are so many other things to deal with.
The real problem typically pops up a few years down the road, when the settlement recipient needs to have his or her money, but doesn’t have access to the full amount. For this reason, many people choose to sell their structured settlements.
The rules and regulations for selling a structured settlement will be slightly different from state to state, but with that being said, let’s take a quick look at the legal implications and regulations that typically accompany the process:
- It’s usually in the seller’s best interest to seek professional financial advice before deciding to sell his or her structured settlement — and in eight states, it’s actually required that the seller has a professional consultation before the payments are sold. Even if a seller doesn’t live in any of these eight states (Alaska, Delaware, Louisiana, Maine, Maryland, Minnesota, North Carolina, and Ohio), it never hurts to have a consultation anyway!
- Even without mandatory professional advisement, the majority of states still protect sellers under something called a Structured Settlement Protection Act (SSPA). Forty-eight states currently have their own SSPAs; only New Hampshire, Wisconsin, and the District of Columbia do not have SSPAs.
- The concept behind selling structured settlement payments isn’t exactly new, but the legal protections in place have been adjusted fairly recently in order to accommodate the influx of people selling their structured settlements. The Internal Revenue Service (IRS) Code Section 5891 was most recently amended by the U.S. Congress in 2002 to state that all structured settlement transfers must be approved in a court of law and must comply with the state’s SSPA (when applicable).
- After applying for a structured settlement transfer, it typically takes a few weeks to schedule a court hearing; at this hearing, the seller will be required to show proof of age and fill out an application. The seller must be the age of majority, which differs from state to state but is typically between 18 and 21 years of age.
- After the entire process is complete and the contract of transfer has been signed, it usually takes about 45 days for the seller to receive his or her money.
Remember, if you ever find yourself with a structured settlement, you don’t have to feel “stuck” with your payment plan if you need your cash now.