If you have questions about structured settlements, you’re not alone. Browse frequently asked questions below.
Whether a structured settlement can be inherited depends on whether the annuity contract specifies “life contingent payments” or “guaranteed payments.”
If you are the named beneficiary of a loved one’s structured settlement, and they have passed away, you will have to submit a claim to the annuity issuer so the rest of the agreed payments can be disbursed to you. The money from a qualified structured settlement will continue to be exempt from income taxes even after it has been inherited.
In addition, a structured settlement can have a “commutation rider” included in its contract. This means when the settlement is inherited, all or some of the future payments are converted into a lump sum of cash for the beneficiary.
A commutation rider can make inheritance much simpler.
Without a commutation rider, a beneficiary has to go through the process of selling future payments in order to get cash sooner than scheduled.
How a structured settlement is handled during a divorce depends on the approach your state takes to asset division. States divide assets according to either “equitable division” or “community property.”
In any state, the division of assets doesn’t mean the settlement check itself gets divided. Typically, the spouse who doesn’t keep the settlement will get a different asset to balance out the overall division of assets. If you have a settlement and are facing divorce, you may want to hire a lawyer or mediator with experience handling complex assets.
No. There are several options when it comes to selling your structured settlement payments, including selling some of your payments or all of them. Each person’s situation is unique, and regardless of how much of your settlement you want to sell, a judge has to approve the sale. You should discuss your options with your accountant or attorney before choosing how much to sell.
Before the industry was regulated, some factoring companies took advantage of people who were not informed of the nuances of selling their structured settlements. To prevent this from happening, the United States government passed several laws — such as the Federal Periodic Payment Settlement Act of 1982 —that mandate court approval for the sale process. Mandating court approval ensures the sale is in the consumer’s best interest and a factoring company is not taking advantage of the person’s ignorance.