What does the Government have to do with a Buyer of Structured Settlement?

After spending some time surfing the Internet looking for a buyer of structured settlement that suits you, you have started to wonder about regulations. You may be asking yourself if this industry is regulated, how you can be protected from a bad structured settlement buyer and if there are tax issues to consider. There are a few ways that the government dips its fingers into structured settlements and regulates a buyer of structured settlement. Our website has a few articles that cover these in depth, but here we will outline the basics, setting you up to understand these issues in more depth as you read.

Creating the Settlement

The biggest way that the law impacts your structured settlement is simply that it creates them. Prior to 1982 people who won personal injury cases, worker compensation cases or wrongful death cases just received a lump sum to compensate them for their medical bills, pain or loss. In 1982 a law was created that encouraged, almost required, judges to offer structured settlements instead of lump sums of cash. Read our article, "How has Purchasing Structured Settlement Transactions Changed in Recent Years?" for more information about the creation of specific laws that impact your settlement today.

Finding a Buyer of Structured Settlement

In early 2000 the federal government realized that many people who were awarded structured settlements decided that they wanted a lump sum of money instead. These people were looking for a buyer of structured settlement and selling their settlements. The annuity companies and the courts became concerned about this trend. So, the government updated the law to say that a judge had to approve any structured settlement sale. Read our article, "Is it Illegal to get Cash for Structured Settlements?" for details on the legality of finding a buyer of structured settlement to help you get cash today. In short, it is perfectly legal and you can sell your settlement any time. These laws do protect you by requiring certain actions, disclosures and approvals before you can sell your settlement.

Tax Implications

When you go to court and win a personal injury case those financial winnings are free of both federal and state income taxes. This is great; you get money to help pay your medical expenses, emotional issues or living expenses without paying a penny of taxes. If you care, it is Internal Revenue Service Code section 201(a) that declares this as tax free. No income tax. No fees. No alternative minimum tax.

Now, things get a bit more complicated here. However, if you invest this money on your own then the interest that the money earns may be taxable. You can read our article, Is a Structured Settlement Sale Subject to Income Tax? for full details. But the basics are that the 1982 law that created structured settlements as the main way to pay personal injury settlements also provides you with additional tax protections.

This law said that if your personal injury money is invested into an annuity as part of a structured settlement then you probably do not have to pay taxes even on the interest that is earned. There is perhaps no other way in the United States that you can receive money tax free, invest it tax free, and take out the interest you earn tax free. This is the greatest positive of a structured settlement annuity.

Moving Forward

If you have any additional questions about the laws related to structured settlement contact us today. We are happy to answer all of your questions or provide you a free quote. With Direct Settlement you can access your money today or simply use us to stay informed of your options.

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