Exploring Options for Structured Settlement Funding

Shay Morrigan | January 2nd, 2013

Have you been involved in a lawsuit against a company or individual that caused you harm because of negligence or intentional misconduct? Did you negotiate a settlement or win a jury award? If you are currently receiving structured settlements, or are receiving your jury award in incremental payments, you may want to consider legal funding.

If you were awarded a million dollars, for example, getting a lump-sum check for the full amount is one option. But electing to receive your money over time may be smarter for you, especially if you have long-term medical needs, or if the money is for a minor who will need it later for college. However, if you find yourself in a financial emergency down the road and need a larger amount of money than your structured settlement pays month to month, you can use a post settlement loan to obtain immediate cash.

Structured settlements first established for personal injury cases

Structured settlements first came into being to help personal injury victims. Damages paid because of an injury typically came in the form of a single lump sum. This presented challenges to the injury victim and his or her family, however. They often lacked the time and expertise to manage such a large sum of money, and many ended up using it too soon and facing overwhelming medical expenses later in life for which they had no more funds.

In 1982, legislators in Congress passed an amended federal tax code that allowed for a structured settlement to be paid out over time, tax-free. These settlements were encouraged particularly in personal injury cases, to provide for long-term rehabilitation and permanent care facility expenses, relieve the burden of managing the large sum of money, and deliver funds for college, mortgages, and eventually, even a retirement fund.

Dangerous drug lawsuit funding expands settlement options

Successful medical malpractice lawsuits and birth injury lawsuits, which also often involve victims with long-term disabilities, are commonly paid out in structured payments over time, as are any lawsuits against big corporations that end in large jury awards or settlements. Dangerous drug lawsuit funding simply expands the options for these plaintiffs, giving them the opportunity to receive an immediate lump-sum, instead of having the settlement paid out over time.

Structured settlements also provide a tax advantage, since the money is tax-free. If you take a lump sum, however, and then invest it, you pay taxes on your investment earnings.

Settlement funding

A structured settlement can be set up in a way that best suits your needs. You may elect to receive yearly payments, monthly installments, deferred payments, or a combination. For example, you may elect to receive a partial lump sum up front to cover any legal fees and costs of the lawsuit itself, then elect to receive monthly payments until you come of retirement age, when you may again receive a larger deferred payment.

Four types of structured settlements commonly used include:

  • Life annuity: You receive payments every week, every other week, monthly, quarterly, semi-annually, or every other year for a guaranteed number of years.
  • Lump sum: You receive lump-sum payments over a pre-determined time period. This is also called “deferred lump-sum payments.” If you die before you receive all the funds, your beneficiary will collect the remaining amount.
  • Life-contingent lump sum: Beneficiaries are not eligible to receive the remaining funds should you pass away before they are paid out.
  • Joint survivor annuity: You receive payments for life.

Once you set up your structured settlement, any time you find that you need a larger payment, you can apply for lawsuit loans—including personal injury or commercial litigation funding—to receive that cash advance. The application does not affect your credit rating.

Commercial litigation funding can help in a tight spot

If you set up a structured settlement after your successful lawsuit and you experience an unexpected financial emergency, LawStreet Capital can provide you with post settlement funding. We need only your application—no credit check or employment verification is necessary. There is no risk to you to apply, and we have one of the fastest cash turn-arounds in the industry. Call out helpful representatives toll-free 800-345-8500.