Structured Settlement Litigation Funding

Plaintiffs who have settled their lawsuits may have agreed to structured settlement litigation funding. Structured settlement funding allows the plaintiff to receive a portion of his settlement periodically, rather than a lump sum at once. Such legal funding allows the plaintiff access to cash flow over the long term. In some cases, however, the plaintiff may need access to cash, and may consider selling his structured settlement.


In some cases, where the plaintiff settles his lawsuit for a large sum of money, the option is given for the plaintiff to receive the money in small payments, given periodically. This is called a structured settlement. A plaintiff may prefer a structured settlement when he is concerned about having adequate cash flow over a long period of time. Receiving a periodic influx of money can help ensure bills are paid and medical expenses are covered in the future, and may be preferable to receiving a lump sum up front.

Sometimes after a plaintiff opts for a structured settlement, he may change his mind and decide that he needs money up front. This could happen if he decides he wants to start a business, for example, and needs money to invest in the business. Or, if he finds he wants to go to school but needs money for tuition. If the plaintiff is able to go back to work and no longer needs the security of a structured settlement, he may decide he wants the money from his settlement up front. In such cases, the plaintiff could sell a structured settlement payment stream to access his money right away.

This is not a decision that should be taken lightly, however, because accessing the money immediately means that overall, the plaintiff will receive less than if he waited for the life of the structured settlement. Plaintiffs should only consider selling their structured settlement if they are in serious need or if they have an income-generating opportunity.

Plaintiffs who sell their structured settlement will receive less than the full value of the settlement, and less than he would receive if he allowed the structured settlement to complete its term. Such plaintiffs must be made fully aware of the terms of the sale of a structured settlement and should speak to a financial counselor for advice.

Structured settlements do not have to be sold in their entirety. For example, a person who is receiving $2,000 a month for 20 years could sell half the settlement, keeping the other half for future income. Plaintiffs should seek quotes on buying different amounts of their settlement, especially if cash flow in the future is a concern.

Selling a structured settlement may require the approval of a judge, depending on the state in which the transaction occurs. Furthermore, selling the settlement may result in ending the tax-free status of the structured settlement payments. It is also important to ensure that the annuity contract (which is used to provide structured settlement payment streams) allows transfer to a third party.

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Last updated on May-30-12