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The Structured Settlement Protection Act


Understanding the structured settlement protection act is vital for anyone who is about to receive this form of annuity payout, no matter if you are happy collecting the payments or you want to sell your structured settlement annuity straight away.

Essentially, the Structured Settlement Protection Act 2002, as it’s known officially, was designed to protect people who wish to sell all or part of their annuity.

As a result, any kind of transaction involving a structured settlement must be approved by a judge in a state court before it can go ahead.

Another condition of the protection act is that insurance companies that are responsible for paying the settlements are also involved in the process of any sale.

Before the act came into being, many times the insurance company wouldn’t be told the annuity had changed hands until after the deal was done.

The act requires that all interested parties are now informed of any sale or part-sale involving structured settlements at least 20 days before a court hearing takes place.

Requirements of the act explained

The structured settlement act requires that a judge look into the circumstances of any sale and decide whether or not it is in the best interest of the holder to sell their annuity.

Therefore, the client needs to disclose all of their financial information regarding the terms of the proposed sale and their current financial circumstances, which must be handed over at least 3 days before the signing of any contracts takes place. 

The company looking to purchase the structured settlement payments is responsible for disclosing any information relating to the sale, not the client or the issuer of the settlement.

Following the signing of the documents, the act also requires a three day “grace” period, during which the client is allowed to change his or her mind regarding the sale.

Structured settlement companies must also advise anyone selling an annuity to seek independent advice about the sale, before going ahead with it. This advice needs to be given in writing, before the case can come to court.

What happens in court?

Following the completion of all of the above steps, the case can go in front of a judge, who will decide if it is okay to go ahead with the transaction for structured settlement payments.

The structured settlement protection act is there to make sure that a client doesn’t sell structured settlement payments needlessly, and so the judge will take care to look at the reasons for sale and come to a decision about whether it’s in the best interest of the client to sell or not.

The reason for this is because, before the act came into being, a large number of annuity holders were being taken advantage of by unscrupulous companies – they would offer paltry amounts for a person’s annuity and the holder, either because they didn’t know any better or were simply desperate for financial liquidity, would accept without realizing how much they were losing out.

With the structured settlement protection act now in place, structured settlement holders can now be assured that any time they need to sell all or part of their annuity, they will not be cheated on the deal.


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