Based on a recent article on the secondary market for structured settlements, you already know that transferring your future payments due from a structured settlement to a lump sum award is perfectly legal. However, if you’re selling your structured settlement, involving your attorney or a dedicated, structured settlement professional who specializes in these tough life situations is highly recommended prior to you actually shop around for an offer to purchase your remaining structured settlement. The reason why many people who receive payment settlements decide to sell their remaining payouts is because they need a large lump sum to fund their future needs-to pay off bills, remodel or expand a home, or pay for college tuition. As we all know, education is extremely expensive and with the ever-burgeoning cost of college tuition, many students have little to no extra money to pay for this expense. In fact, most students are unable to meet their minimum financial obligations and must rely on grants, scholarships, and loans to pay for school.
The unfortunate truth is that even though these funds may be awarded to the plaintiff, these monies do not have to be paid back. A plaintiff cannot simply take out a loan using his or her remaining structured settlement payouts to pay off any debts. There is also the issue of inheritance taxes when these monies are distributed. When selling structured settlement payments, you must be aware that the recipient will not receive any cash monthly payments from you because these are considered unclaimed monies. Once a settlement recipient dies, it is not uncommon for the government to notify the beneficiary of their death and ask for the return of any monies.
The second reason why it’s wise to stay away from selling your future payments is that most lenders will not allow you to sell your remaining future payments for a lump sum amount. Even if they will give you a discount rate, there is still a hefty upfront fee that you will need to pay. Also, many buyers of structured settlements are interested in getting a discount rate as much as possible, so they will often offer a lower lump sum amount. However, if you want cash monthly payments, then this is not a good option for you.
You may have heard the term “present value” when you heard about selling your structured settlement future payments. What is this concept mean? Essentially, when you sell your future payments, what you actually are purchasing is the present value of your future payments. Basically, all cash sales are cash sales, but when you sell structured settlement payments, the buyer is getting a discounted rate on the initial purchase. It is important to keep in mind that although this discount factor can be enticing, it may not be worth your while.
Another point to keep in mind is the risk involved in selling your settlement. When you use a cash factoring company, the risks are your obligations and investments. In short, if the factoring company fails to pay you, or the buyer does not pay you in a timely manner, you may end up losing a substantial portion of your settlement. This may cause financial strains and stress that you were not under prior to entering into a contract with a seller. This is why it is important to carefully examine the costs and risks associated with selling your settlement.
If you want to sell structured settlement payments and do not have a broker or factoring company, you will need to take care of the details on your own. Fortunately, due to the recent laws enacted that eliminate brokers’ commissions, and the current economic climate where selling cash can be risky, most people are foregoing brokers and taking care of the details on their own. This gives you, the injured person, more flexibility and ability to choose the method that works best for your individual situation.