Selling Structured Settlements

Selling structured settlements is an ideal – and often, the only – course of action to take if you, as a beneficiary of a structured settlement, would prefer to have a lump sum cash payment instead of a series of payments over an extended period of time.  

Although it looks complicated, reading more about how structured settlements are sold will help you become more confident about your decision. Before we tell you about the process itself, though, here are some preliminary factors to consider before you decide on selling your structured settlement. 

Clearly define your purpose

Common reasons for selling off a structured settlement are the purchase of a home (most common), to pay for a large medical bill or bills and to cover mortgage payments. These are all valid reasons for selling a structured settlement. What they all have in common is that a large sum is needed at one fixed point in time (a “one time, big time” payout), and is deemed more useful to the beneficiary than a series of periodic payments.

Examine your own reasons for wanting to sell your structured settlement. In attaining this goal, say buying a piece of real estate, have you exhausted all possible options? Is there absolutely no way to make the purchase without giving up your monthly settlement payout?  Is there a genuine need for the money or are there other factors involved – like just having the feeling of having your hands on all that money?

Whether you’re benefiting from a structured settlement because of a lotto win or a injury claim, think twice, many times even, before you make a decision.

Work with a financial advisor

 To say that structured settlements often involve a great deal of money (typically $100,000 and above) is an understatement. Structured settlements consider losses and compensation over a person’s entire life span, often upping the settlement’s total present value to several millions of dollars.

Just to become the recipient of such a settlement, you’ve probably gone through a lot of paperwork and jargon that you’d never heard before and never thought you’d hear in your life. You most definitely had the services of an expert – a lawyer, since structured settlements can only be given out upon a court order – and maybe even more than one.

Things should be no different when you decide to sell your structured settlement. The importance of using professional services in the sale of a structured settlement cannot be emphasized enough. Even from the moment of your first considering it, selling your structured settlement should be immediately discussed with a financial adviser. This can be an attorney, an accountant, estate planner, financial planner, etc. Later on, you will need to involve more specialized services such as those of an annuity consultant and a lawyer specializing in this area. These services may cost you a large amount, but the mistakes that you could make going it own your own could be even costlier.

Be prepared to wait for your money

Chances are, prospective buyers of your structured settlement have told you that it takes a matter of days to get your lump sum payment. Well, this is simply not true. As with any legal transaction involving a large sum of money, there is a lot of paperwork to be done first.

First of all, the release of your money depends on how quickly your insurance company responds to these matters. Some can be very difficult to deal with. Second, and more importantly, sale of structured settlement in any and all states require a court order – otherwise, a tax of about 40 percent must be paid on the total amount of payments sold. While the additional red tape may be a bugger, this is essentially an advantage to you as a beneficiary and seller of a structured settlement. This makes the transaction more secure.

Other mitigating circumstances that could affect the timely release of your funds are the type of payouts you get on your structured settlement (monthly, quarterly, annual, etc.), necessary documentation (copy of the annuity, settlement agreement and release, photo identification, and others).

NEXT ARTICLE >>