Selling a Structured Settlement

selling structured settlement paymentsStructured settlements are not something that most people are seeking. The thought of receiving an unexpected annuity (a prearranged sum to be paid out annually) in addition to a regular income is certainly compelling. But the fact that you must suffer a serious incident or accident that results in long-term injury or illness in order to qualify for such a settlement makes the prospect far less appealing. And yet, if you have been the victim of such unfortunate circumstances, you definitely want some kind of settlement to ensure that you don’t spend the rest of your life saddled with medical bills that you can’t hope to pay (in addition to your ongoing pain and suffering). Of course, many people hope for a lump sum that they can do with as they wish. But many judges see fit to offer a structured settlement instead as a way to maximize the payout (often by reducing taxation through a deferred payment plan) and protect injured parties from themselves (whether justifiably or not).

However, structured settlements may not work for everyone. For example, suppose an injury has left you unable to work. You may need more money now to cover interim costs like living expenses, in addition to your medical bills. Even if you can return to work in a year, it won’t matter if you’ve lost your house in the meantime. Or perhaps you are elderly and worry that you will expire before you receive your full payout. As the saying goes, you can’t take it with you. There are all kinds of reasons why people who are awarded structured settlements might want to trade them in for a lump sum instead, and luckily, there are companies waiting to give you the money you need now in exchange for your annuity payments.

But how does it work? There are actually a couple of different ways to sell a structured settlement. For starters, you should know that you can sell either your entire settlement or just a part of it, depending on your needs, and you should carefully consider each before you choose one or the other. It can be tempting to hand over your entire settlement for cash now, but keep in mind that the company purchasing your settlement is in business to make a profit. As a result, you will not receive the full amount of your settlement in cash. If, for example, you are getting an annuity of $20,000 for the next five years (for a total settlement of $100,000), selling it may only net you, say, $65,000 cash. And you will have to pay taxes as if it were income (whereas your annuity payments may waive federal income tax as a condition of the settlement in some cases). So you’ll gain in the short term but lose some in the long run.

That said, some people are willing to take a small hit in order to get the money they need for expenses right now, and selling a structured settlement is a good way to do it. You may choose to sell only a portion of your settlement for immediate cash, or if your need is great you might sell the whole thing. However, you should start by getting settlement quotes in order to ensure that you get the most bang for your buck, so to speak, when you sell your settlement annuities. And don’t be afraid to ask for multiple quotes pertaining to selling off varying portions of your settlement, keeping in mind that you may need to save some of your annuities for future expenses.