Can I sell my structured settlement?

September 9, 2015

Our Client Services Department periodically receives calls from structured settlement recipients, asking if they can “sell” their structured settlements.  In many instances, they have seen a U.S. advertisement on TV, with someone offering to “buy” their structure.

These ads originate from American factoring companies. The term factoring originated with transactions in the business world where companies sell their accounts receivables to third party company (called a factor) at a discount. 

In the U.S., this practice spread to encompass structured settlements.  In this context a claimant would sell his or her right to receive future periodic payments in exchange for immediate cash in a substantially discounted amount.

This does not occur in Canada. Structured settlement recipients here have their payments underwritten by life insurers issuing very specialized annuity contracts.  These contracts contain an irrevocable direction to the annuity issuer to make all of the annuity payments to (or for the benefit of) the intended structure recipient. This is required by the Canadian tax authorities and is built in to every Canadian Structured Settlement. Annuity contracts funding U.S. structures do not contain this irrevocable direction of payments.

As a result, once implemented, Canadian structured settlements cannot be changed to redirect the payments to a factoring company. Given that the purpose of structured settlements is to provide secure, reliable payments to injured persons in need of that certainty, we think that the inability to factor Canadian structure payments is an important advantage that Canadian structures enjoy over their U.S. counterparts.