Why Do I Have to Go to Court for a Structured Settlement?

You’ve decided to sell all or part of your structured settlement and have hired a reputable structured settlement buyer such as CBC to handle the transaction. So why do you need to appear in court?

The answer is simple: To ensure that the structured settlement sale is in your best interest.

To protect the structured settlement seller – and the buyer – a state court judge mustapprove the transaction before it can go forward. This is true whether your structured settlement comes from a lawsuit settlement, lottery winnings, or an inheritance.

Federal law dictates that the process is handled this way. Under a 2002 law, state court approval is required to avoid a tax penalty on the transfer of payments from a structured settlement.

Today, 47 states have laws in place regulating the sale of structured settlement payments. Most states that passed these laws modeled them on rules put forth by the National Conference of Insurance Legislators. Common requirements include that the seller be informed of all transaction details before the contract is signed, and that parties associated with the deal be notified of the settlement. There are also legal requirements to disclose the intent to seek professional advice on the matter.

Under the law, the court is also required to consider the seller’s financial situation to determine whether receiving the cash settlement is in their best interest. A seller’s dependents and the extent to which they rely on the seller are factored in, too, so that all parties are seen to benefit from the sale. Most of all, the seller’s ability to handle the support and welfare of the dependents must be enhanced by the settlement. These regulations help ensure that the transaction is absolutely necessary and that the seller gets what he or she requires.

Court-settled deals also offer the structured settlement seller protection from non-reputable companies; some of these have been known to take the settlement money and run. A reputable company needs to be familiar with all of the laws in place and to have licensing or registration in certain states.

All decisions made between the structured settlement company and the seller need to be backed by a legal court order, so there are many checkpoints in place that ensure a fair transaction. These regulations also ensure you get the cash you need when selling annuities, at a time during which the financial boost can really help.