When a court orders a large settlement to be paid, at the time when the lawsuit is resolved, there is an agreement amongst the parties for an amount to be paid in monthly instalments. The rationale behind this is to make the payments manageable should the payee be awarded millions.
If the payee is expecting to be paid all at once, they will be upset to find out that the settlement which the court has awarded them must be paid in monthly instalments. For this reason, third party companies may offer the payee a lump sum payment in exchange for their monthly instalments.
The payee is now in a better situation because he/she gets a large sum of money instead of being paid in instalments while the payer continues to pay out the original monthly payments. The instalment check will not be sent to the original payee but the third party company.
Now that the large sum of money is paid out in full, the payee is free to spend the money and is not burdened by waiting for monthly instalments. It also works for the payer (who is usually an insurance company) because their cash payout is not affected since they can continue to send their payment in monthly instalments.
There are a variety of options that the payee can consider when thinking about how to spend the money. He/she may consider a financial investment like buying property, going on a month’s vacation or fulfilling any other dream he/she may have. The opportunity to make big changes in one’s lifestyle is only possible as long as he/she is not tied to monthly instalment checks from the structured settlement.
You may wonder how the third party company benefits from this arrangement. By purchasing the payees’ rights to the structured monthly instalments for a lump sum of cash, these companies ensure a steady flow of cash to fund their portfolio. They invest this money as per a well-planned and diversified investment plan. This ensures that they do not have fund shortages and a bright financial future is assured. This is an advantage many financial institutions are pleased to oblige.
Those individuals who receive the monthly payments from a structured settlement usually will see advertisements from third party companies. Before you commit to any agreement, you need to research and analyze what is the best option for you based on your current situation and the kind of settlement you have been awarded.
In case you feel you would rather have a lump sum amount instead of regular monthly checks, you may avail of the services of these companies. It is always advisable to consult a financial professional or an attorney.
Tags: Structured-Settlements