What You Need to Know to Sell Structured Settlement Payments
Structured settlements help many injured individuals and their dependents by giving consistent, reliable income to them that helps them make ends meet while they are recovering from their injuries. They also protect those individuals who could not work during recovery and rely on the periodic payments for regular income. However, at times, the structured settlement is more of a bank vault than keeping rightful owners out of access to money they must pay for unexpected expenses or settle debt. In these cases, the original terms of the agreement must be changed to allow the individual to sell their payments in exchange for a lump sum of cash.
When you purchase structured settlement payments from an insurance company or other third party, it is important to factor in the present value of the settlement in order to determine what price the buyer will offer. The lump sum payment may not be exactly the value of the settlement due to inflation or fluctuations in the fair market value of money. The present value of the settlement payment will more accurately reflect the current market value of the settlement due to inflation and fluctuation.
The lump sum you are selling will be compared to current market prices to determine if the current price is greater than the buyer’s offer. Future payments may need to be increased to accommodate changes in circumstances like loss of income or medical expenses. Future payments may need to be decreased due to poor health or death of the original recipient. If the present value of future payments is less than the buyer’s offer, you may need to renegotiate your original agreement so that you can sell structured settlement payments. The buyer may be willing to adjust the terms of the contract in order to accommodate your needs.
A transfer company or broker will make the determination of the fair market value for your future structured settlement payments. They will also make a determination about whether the present value of future payments is greater than the total amount you are offering to sell. In most cases, a transfer company will assign an appraiser to estimate the value of your future payments. You will need an appraiser if you are selling to a third party.
Once you have reviewed your present value and determined that selling your annuity is the best option, you can calculate your discount rate. The discount rate is the percentage of your settlement that you want to sell. The calculation of your discount rate involves the present value of your future payments divided by the present value of all future annuity payments. The higher the discount rate, the less money you will receive when you sell structured settlement payments.
One of the considerations you should make before selling your future payments is whether your state laws allow you to deduct your payment from your taxes. Before deciding on this option, it is important to discuss this with your tax preparer or attorney. Selling your annuities can be a good business decision if you meet the criteria established above. Remember to consult your tax preparer or attorney before proceeding.