What is a structured settlement?

A structured settlement is an agreement to take payments over time rather than in a lump sum.  Many personal injury and wrongful death lawsuits are settled using a structured settlement. The claimant or plaintiff receives payments over time, usually from an annuity, tax free.  The structured settlement industry saw explosive growth in the 1980’s due to a 1982 amendment to the tax code that gave favorable tax treatment to property and casualty insurers who use structured settlements to settle claims. While a structured settlement offers many advantages, the inflexible nature of the settlement terms can sometimes leave the claimant with a need for liquidity.

What is a factoring transaction or the secondary market?

By the mid to late 1990’s, an industry had been created where companies purchased these streams of payments from annuitants, giving the annuitants access to lump sums of money that were not previously accessible under their structured settlements.  Abusive practices in the industry led to the enactment of state statutes known as “structured settlement protection acts” designed to provide standards and a process for the purchase and sale of structured settlement payment streams, with the transfers requiring court approval.  In 2002, Congress enacted IRC Section 5891, which imposed a stiff tax penalty for transfers made without court approval.  In 1997, Illinois became the first state to enact a structured settlement protection act.  Wisconsin’s enactment of a structured settlement protection statute in November, 2015 brought the number of states with laws in place regulating the secondary market to 49. New Hampshire is the only state without a structured settlement protection act.

Recent amendments to many of the state structured settlement acts have strengthened their protections.  The Virginia and Florida statutes now require that the transfer petitions be filed in the seller’s county of residence.   Maryland now requires that “factoring” companies register with the Attorney General’s office.  There are many companies in the secondary market purchasing structured settlement payment streams. Some companies are legitimate, and others are not.  Sellers should exercise caution when responding to advertisements offering “cash now!”

The rise of structured settlement factoring fraud.

In recent years, many companies in the secondary market (factoring industry) have employed high pressure predatory sales tactics to raid large structured settlement annuities designed to provide a lifetime of income, security and medical care for personal injury victims.  Instead of these companies providing needed liquidity to annuitants in times of hardship, these companies target people with large structured settlement annuities and shop for courts and judges they know will rubber stamp petitions that don’t meet the best interest standard required under state and federal law.

If you or someone you know has been victimized by structured settlement fraud, Edward Stone Law will evaluate your transaction at no charge, and let you know if help is available. Check here for recent updates from Edward Stone Law on structured settlement fraud.

Edward Stone Law is familiar with all aspects of the structured settlement industry.  Please do not hesitate to contact us if we can be of assistance with respect to your structured settlement issues. You can reach us by email at or call us at (203) 504-8425.