Interested parties
An ‘Interested party’ in a structured settlement is an individual who receives the rights to receive payments under a structured settlement agreement. These rights are transferred between the obligor and the payee. In addition to the rights to receive payments, a transfer agreement provides that the obligor can terminate the agreement if the circumstances change.
There are several reasons why a payee would want to sell the right to receive periodic payments. One reason could be that the payee has an urgent need for cash. In these cases, a structured settlement purchaser (also called a factoring company) can purchase the right to receive periodic payments at a discounted rate. This discounted rate takes into account the time value of money and the cost of doing business.
Payment schedule
When negotiating a structured settlement, parties need to be aware of the options available to them. These options include choosing a payment schedule and frequency, as well as the source of the compensation. A structured settlement can be paid out monthly, annually, or at another frequency, depending on the agreement between the parties. If the plaintiff dies before the settlement is fully paid out, family members will still receive payments, and the payments can be adapted to meet the needs of the victim’s dependents.
One option for getting a lump sum out of a structured settlement is to sell all of the payments. Depending on the type of structured settlement, the buyer may offer a larger lump sum than what is offered in the structured settlement. Typically, the buyer will offer anywhere from 10% to 85% of the remaining payments.
Taxes
If you are in the process of negotiating a structured settlement, you need to understand how tax implications will affect your case. Even if the amount of money is small, a large cash settlement will result in a substantial tax bill. Even a moderate settlement can push you into a higher marginal tax bracket. Fortunately, there are ways to mitigate this tax impact.
First of all, you need to understand what taxable income is. The IRS has set forth tax regulations for structured settlements. Generally, a lump sum payment is tax-free, but there may be circumstances where you need to pay taxes on that money. If this is the case, you need to plan accordingly and seek tax advice from a qualified tax professional.
Qualified Assignment (SSA)
A Qualified Assignment (SSA) is a transaction that transfers a long-term periodic payment obligation to a third party. This third party is known as the assignment company or qualified assignee. When the defendant funds the annuity and makes a qualified assignment, they are released from further liability for periodic payments.
A qualified assignment is a legal contract between two people. It involves the transfer of a contractual obligation to pay a third party over a period of time. The assignment agreement specifies the amount of future payments and the parties involved. This transfer of a structured settlement annuity is income tax-free.
A qualified assignment company purchases a qualified funding asset from the defendant or property/casualty insurance company. The qualified funding asset is then used to fund the assigned periodic payment obligation. This asset can be an annuity or a government obligation.