Structured Settlement Funding

Written by Jacey Harmon
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Structured settlements are used by lottery commissions to pay out jackpots, and insurance companies to settle claims. In both cases, the settlement is funded by an annuity that is purchased by a lottery commission or insurance company. Once the terms of the settlement are agreed upon, the annuity funds the payment stream that the beneficiary expects to receive. Advanced funding of the settlement is an option that a beneficiary can consider to access funds once the terms of settlement have been accepted.

It is important to understand how structured settlements work in order to make a decision about accepting one. As noted above, the settlement is funded by an annuity that is purchased by the settling entity. This annuity is chosen and wholly owned by the lottery commission or insurance company. The use of an annuity to fund a settlement may allow for a smaller initial investment to fund payments, due to compounding interest accumulation.

The purchased annuity is what provides the payment stream with structured settlements, not the insurance company or lottery commission. Since the annuity is not owned by the beneficiary, they have zero access to the cash that is funding their payment stream. Nor do they have a voice in determining what type of annuity is purchased to fund the settlement. This means that once a payment is agreed upon, a person is bound by the terms of the settlement.

Advanced Funding of Structured Settlements

In some cases, there is a need to access the cash that is located in the funding annuity. The only way to access that cash is by advanced funding of the settlement. This is basically selling your future payments to a business or other third party. You receive a sum of money in exchange for assigning future payments to the entity that provides the cash. The beneficiary of the claim has full legal rights to do whatever he chooses with the payments. This option allows for greater flexibility with accessing the cash funding the settlement than otherwise available.

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