How to sell your Structured Settlement Payout

As the recipient of a structured settlement, you might be comforted to know that your remaining settlement payouts can be sold as any other asset—should there come a time when your life circumstances change and you need a large amount of cash.  

Today, there are many companies that offer to buy structured settlements in exchange for a lump sum payout. This gives you, as a prospective seller of a structured settlement, more options and thus a chance to get a better deal for your settlement payouts. Also, the sale of structured settlement payouts is protected by law, since U.S. Congress passed a law in 2002 that requires a court order to authorize the sale of such settlements. Thirty-eight states now abide by this law. This makes selling your structured settlement payment more secure.

How to start

Do the math. First, sit yourself down with a calculator and establish what fees and charges you are willing to pay to jumpstart the process of selling your structured settlement payout. Also compute what expenses in this transaction need to be covered immediately. Bear in mind that you must pay a considerable amount to gain access to your money now instead of waiting for all the payouts.

Consult an expert. To ensure that you take all financial costs into consideration, do the step above hand in hand with a trusted advisor – an accountant or financial planner, or the attorney who first negotiated your structured settlement. Since they are more well-versed with estimating future losses and financial needs, experts provide invaluable help in deciding your next move. They may also suggest other options for you to get the cash that you need without selling the entire structured settlement payout.

Explore alternatives. You may be blinded by the many promises of “fast cash” or “big bucks now” made by prospective buyers of life settlements. But the truth is that selling off a structured settlement is a rather drastic option. It isn’t for everyone. You may be able to get a large sum of cash without selling off your entire settlement. Some of the prospective pitfalls of selling your settlement are:

a.    Loss of the tax-free nature of the settlement benefit. If for example you decide to reinvest the lump sum you get from selling your settlement, you will have to pay tax on the interest.

b.    Nobody will pay a lump sum that is equivalent to the actual market value of the annuity; therefore there will be an inevitable financial loss by ‘cashing it in’ early.

c.    A large amount of cash (as opposed to smaller payments received over a long period of time) lends itself more easily to being spent unwisely.

d.    You expose yourself to the risk that the company buying your settlement payouts is not on solid financial footing, or that they are unethical. The latter type of buyer may try to get back at you if they encounter any problems collecting your regular structured settlement payouts.

This is not necessarily a pitfall, but do factor inflation into your decision. The money you have now will be worth much less in the future, if taken over a period of time. Ask your financial advisor or attorney how inflation will impact your structured settlement payout, and if inflation is a point for or against selling the settlement for cash.

Instead of outright selling, one viable option is to change the name of the recipient of your monthly payments. Strictly speaking, this isn’t a sale (do check if your settlement agreement allows this, though). This is one of the best options to take if you intend to cash the structured settlement in to benefit your dependents.

Another option is to sell off a portion of your settlement payout in exchange for a smaller lump sum. This can easily raise enough cash for smaller expenses, such as house repairs, medical care or even a good vacation.
Using a structured settlement as security on a loan may also be viable, but you’ll still need court approval for this. Or, you may raise funds through a mortgage or personal loan and simply meet the payments through your monthly settlement payout.
Shop around for a buyer. Once you’ve decided to sell your settlement, procure the services of a structured settlement broker. Then, shop around for a buyer. Don’t take the first offer, and compare at least several offers to get the best deal for your settlement.
 
Secure a court order. Even if selling structured settlements is allowed in your state, the sale must still be approved in court. This can take up to 90 days, as the judge must scrutinize your need as well as your prospective buyer. .

NEXT ARTICLE >>