There are several different types of payments, negotiable instruments, cash based contracts and agreements, that can be sold or purchased in the money market. Structured settlements are often used as financial instruments in the money market. An agent or broker acts as the connection between the buyers and sellers of the money market who are interested in transacting these settlements.
They are a type or mode of payment, that are often used as an alternative for lump sum payments. The term structured settlement is basically used when a payment is made in different installments. These are sometimes made in fixed installments for a prescribed time period. In some cases accrued and accumulated interest, is also paid along with all installations.
This kind of mode of payment is advantageous for both the payer and receiver. The installations are easier to pay in comparison to a huge lump sum payment. From the receivers point of view, structured settlement means an assured, inward cash flow for the prescribed time period. This term is primarily used when a court case results into payment of compensation.
In such a case if the defendant prefers to pay the total amount in different installments, then the mode of payment is termed as a structured settlement. These type of settlements are also used in many different cases such as, during repayment of trade credit, or repayment of a negotiable instrument.
Sometimes the receiver needs urgent finances. In such a situation, the right to receive these settlements can be sold to some other person. This sale of rights is commonly referred to as 'sale of structured settlements'. The transaction diverts the installments to the purchaser of rights. This sale is also intimated, and reported to the payer of settlement installments.
Structured Settlement Broker
The basic function of such a broker is to check for the availability of the structured settlement rights that are available for sale, and then get in touch with people who want to purchase such settlements. These brokers charge a small percentage of the entire transaction as a commission to the parties, and also acts as a consultant to both the parties.
The following are some of the common functions that are fulfilled by the structured settlement broker.
- Giving updates to clients regarding the availability and demand for the settlement markets.
- Ensuring a legal and ethical transaction that does not violate any of the laws and regulation of money and securities market.
- Deriving the cost of the particular settlement with the help of amount of installments, demand and supply forces, structured settlement calculator and a fair profit margin for the seller.
- Many brokers also oversee the legal paperwork of their clients. This paperwork is of a significant importance as it diverts the installations from one person to another.
- Some brokers also ensure that the payer of the settlement makes the payment of installments on time.
There are many associations and governing bodies like, The United States Department of Justice, that monitors and regulates the functioning of these brokers. It is very easy to locate a broker approaching the Department of Justice, you may also approach associations and organizations such as National Structured Settlement Trade Association or the Society of Settlement Planners for the same.