Structured Settlement Funding and Why It’s Important

Farmington Hills, MISo you have heard this term called structured settlement funding. Perhaps it’s something your attorney has talked about, or maybe you’ve just seen it doing random online searches as your case percolates through the courts. In all likelihood, the subject has come up in conversations with your attorney as your case nears completion and a settlement seems likely. Whatever the case, there is a difference between structured settlement funding and, let’s say, pre-settlement funding.

That said, there is a bit of a common theme between pre-settlement legal funding and structured settlement funding. Both will keep you going a bit longer - pre-settlement funding, for example, that provides advance funding against the expected settlement that goes a long way in helping the plaintiff pay bills and expenses as he or she waits for the case to settle - and structured settlement funding, which helps keep you going longer after the settlement has come in.

It’s how the structured settlement funding is set up, that reveals exactly what it is, and what it isn’t.

Basically, when the plaintiff wins a case and settlement money comes in (following the obligatory holdbacks to verify the absence of liens, and such); you would be generally looking at a lump-sum payment that goes into a bank account and sits there, allowing the plaintiff to draw from it at will.

However, once that settlement fund is exhausted, that’s it. There’s no more pot of gold at the end of the rainbow.

Many Americans know the feeling of blasting through an inheritance, for example, more quickly than anticipated. It’s easy to do. The wise plaintiff will take that settlement money and invest the principal wisely, with help from a qualified financial professional.

Well, that’s basically what structured settlement funding is - settlement money that is paid to you by way of installments. In this way, looking at it simply, it lasts longer. But it also makes much more sense if the plaintiff has ongoing care needs that require funding years down the road.

Structured settlement funding actually got its start in Canada, as a way to take care of physically challenged plaintiffs born with birth defects stemming from their mother’s use of Thalidomide. The strategy would soon be adopted in the US, especially in product liability and injury cases.

A structured settlement is a financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. Once the plaintiff and defense have settled the tort claim in exchange for periodic payments to be made by the defendant, the full amount constitutes tax-free damages to the victim. The defendant may then assign its periodic payment obligation to a structured settlement company (typically a single purpose affiliate of a life insurer) that funds its assumed obligation with an annuity purchased from its affiliated life insurer.

This also allows for, say, the budgeting of the settlement payout that makes the most sense for the plaintiff’s particular needs going forward.

Most of this kind of funding strategy will likely be discussed and mapped out well before the case settles, as the structured settlement is, in reality, a financial package designed to meet the individual plaintiff’s needs. Those needs can and often do include medical and drug expenses, special equipment, and lost wages - amongst other necessities.

Show me the money

A structured settlement fund can take a bit of time to set up, once the case finishes, a settlement amount is determined and all opportunity for appeal has been exhausted. Once a contract for an annuity has been signed, it can take upwards of 45 days to start seeing any gold at the end of the rainbow - and this is after exhausting all requirements that can further delay getting settlement funds to you.

To that end, there are options to cash out or obtain a cash advance against a structured settlement much in the same way that a plaintiff can access temporary funds through post-settlement funding in order to keep paying the bills. Remember, any presettlement legal funding a plaintiff has access to while a case moves through the courts, ends once a settlement has been reached.

Many plaintiffs have found financial relief by working with a post-settlement funding provider, which may offer to buy part or all of a plaintiff’s structured settlement in return for cash up front.

These are conversations to have with a qualified attorney, who will then give you some options that will prove useful.

Just like a lawsuit advance, the option for structured settlement funding and various possibilities stemming from that can prove most helpful. And it’s always good to have options….