How to Buy a Structured Settlement

A structured settlement is when a legal payment is structured in installments rather than a lump sum. The payee can purchase annuities with guaranteed future payments to cover the installments. While there is a theoretical value to these installments--which can be determined using a present value of an annuity calculator--the actual value of a structured settlement can differ substantially based on several key factors.

Contact a structured settlement broker to help locate sellers and negotiate the deal. The National Structured Settlements Trade Association (NSSTA) has more than 600 licensed insurance brokers, insurance companies and others in the business of administering structured settlements. Each member of the NSSTA must agree to a code of ethics before the application is accepted. Use the NSSTA to help locate an independent attorney who will represent your interests well, both legally and ethically.

Ask your attorney/broker for a breakdown of fees associated with buying structured settlements. The fee for a structured settlement can be low or high depending on the time invested and the settlement amount. Litigation will require higher rates. However, not all fees are required upfront. If the fee is large, ask your broker to be paid in installments.

Decide on a payment schedule. Structured settlements can match almost any payment schedule. Payments can vary from every day to once every two years or more.

Understand (and value) the tax obligation. The writer of the structured settlement (seller) may benefit significantly from structuring a settlement deal rather than paying in one lump sum due to tax policy. See Resources for a link to a guide the IRS has published on structured settlements.

Review structured settlement laws in your state. Most states permit structured settlements, subject to court approval, based on showing the settlement is in the consumer's best interest. See Resources for a link to structured settlement laws in your state.

Ask the seller to to pay the full value of the settlement and then have all rebates paid directly to the seller as well. This ensures full payment.