A structured settlement broker, also known as an annuity broker, is a professional specifically trained in negotiating and facilitating a payout schedule for a monetary settlement that has been awarded to an individual or family as the result of a lawsuit. Usually, the lawsuit stems from an injury due to negligence on the part of the defendant and a compensation amount is agreed upon by both parties to settle the case without resorting to a jury trial. There are several benefits to the injured party when exercising this option, most notably the reduction of legal fees associated with being represented by an attorney if the case had gone to trial. In addition, a structured settlement ensures a steady stream of supplemental income over a period of years, often lasting the course of a lifetime.
Structured settlement payments are treated differently from regular income pursuant to U.S. Congressional legislation passed in 1982, which declared these payments free of Federal and State tax liability. This is in direct contrast to a lump sum settlement, where any proceeds gained from investing said funds are subject to taxation. Technically defined as structured annuity payments, the settlement funds are received and distributed by a third party, usually an insurance company.
There are also several benefits to be gained from taking advantage of the expertise of a structured settlement broker. First, this individual is responsible for setting up the payout schedule of the settlement. Usually the payments are made monthly, but they may be more frequent if the broker deems it necessary. In addition, a structured settlement broker can also arrange for periodic increases or advances against the settlement in the event an unexpected expense incurs, such as the need for a new wheel chair.
One of the most important functions of the structured settlement broker is to determine the medical costs that the injured party will be burdened with on an ongoing basis, such as expenses associated with physical therapy, a home nurse, medications, etc. Of course, these additional costs are calculated together with the regular cost of living to the injured party and his or her family. These projections are particularly key to constructing a successful structured settlement since they are needed to establish the amount of annuity payments to be made and must also incorporate the cost of living increases expected to occur over the lifetime of the recipient.
Structured settlement brokers belong to an elite class of professionals. In fact, there are only a few hundred qualified structured settlement brokers in the U.S. that are registered with the Department of Justice. The broker must be licensed or authorized to perform his or her duties on behalf of at least one insurance company, and must be insured by an Errors and Omissions policy or its equivalent. It should also be noted that an individual who has had a felony conviction or a license as an insurance agent or broker revoked is not eligible for consideration.