Many people who have obtained structured settlements through their personal injury or workers' compensation claims wonder if they should try to sell their settlement in return for a lump sum payment. This may be a relatively modest curiosity, piqued by an advertisement announcing "It's your money!" and promising cash payment. Or it may be based upon an immediate need for funds. However, selling a structured settlement is not always possible, and it is not necessarily an economically wise decision.
Your Structured Settlement Should Work For You
The best time to decide that a structured settlement is not right for you is before you consent to such a settlement. You may wish to press for a lump sum settlement, for periodic lump sum payments in addition to smaller annual payments, or for a lump sum to be issued at a future date when you anticipate a particular need. If you work out a settlement package that is in your best interest at the outset, you will be able to maximize the value of your settlement and get the greatest tax benefit from the structured portion of any settlement.
Remember that the companies which purchase structured settlements intend to profit from the purchase of your settlement. Their profit comes out of the payments you would otherwise receive.
Recall also that if your future earning capacity is impaired as a result of your injury, you should consider your future needs when you are making any decision regarding the sale of your settlement.
Restrictions on Selling Settlements
There are laws in approximately two thirds of the states which restict the sale of structured settlements, and additional federal regulations apply to the sale of tax-free structured settlements. It may be necessary to obtain court approval for the buy-out. The insurance company that issued the annuities for the structured settlement may refuse to cooperate with the sale of a settlement, citing policy language and asserting that payments cannot be assigned.
Tax Consequences
As a typical structured settlement is designed to provide significant tax advantages to the injured plaintiff, there can be significant tax consequences associated with selling part or all of a settlement. It may be that, while payments made under the settlement were not taxed, the lump sum received through the sale of the settlement will be taxed.
Shop Around For Offers
If you are approached about selling your settlement, or are looking for a buyer, don't take the first offer you receive. You will almost always benefit from consulting with different brokers or buyers in relation to your settlement. You should also take care that you are working with an established, reputable buyer.
Consult A Lawyer
It is wise to consult a lawyer in relation to the sale of your settlement before signing a contract. A lawyer can help ensure that your rights are protected, and that you will not be subject to consequences for events outside of your control, for example if the company which purchases your settlement is later unable to collect payments from the insurance company which issued the annuities in your settlement package. A lawyer will be able to tell you if the terms of the purchase agreement are reasonable, and may also be able to advise you as to whether the offer made for your settlement is adequate.
Structured settlements involve a sequence of specific payments made over a period of time. When there is a monetary emergency, a claimant can sell structured settlements. The whole settlement can be sold for a lump sum amount or it can also be sold in part. Before deciding to sell structured settlements, it is necessary to understand the terms and conditions of the settlement. Some structured settlements cannot be sold earlier for lump sum amount.
A structured settlement broker helps to sell structured settlements without any worries. For a nominal fee, a structured settlement broker will ease your transactions and can also get you a better deal. The advice from an experienced broker will be highly helpful as the sale of structured settlements involve several tricky situations.
Before deciding to sell structured payments get as much information as you can from different sources. It is always better to consult a professional in the field. Since most structured settlements ensure a periodic payment, it is wise to sell a part of structured settlement. When you sell structured settlement for lump sum, you are losing a steady income.How to Sell Structured Settlements
Structured settlement is defined as a legal contract wherein an individual makes payments in exchange for a release of liability. It could be the outcome of a personal damage or some other form of injunction. The payment is done over a period of time in fixed installments rather than a lump sum amount.
There are various situations that entail selling of structured payments. Individuals may resort to this option when they are faced with a personal injury or crisis in terms of an accident, divorce proceedings, the loss of a job or a medical emergency. The most viable option for finance in such situations is the liquidation of a part of the structured payment.The first step in the process of selling a structured settlement is to create an information file with details such as the residing state, the insurance company party to the settlement and the payment schedule document. An individual possessing a structured settlement contract could approach a company that is interested in the purchase of the settlement for a lump sum payment.
In approximately two-thirds of the states in the U.S., the sale of structured payments is restricted. Additionally, tax-free settlements are liable to federal restrictions when the sale is to a third party. Insurance companies may not assign or transfer annuities to third parties. These factors discourage many from the sale of structured payments. The other factors that make selling of structured payments difficult are the individual's state of residence and the current status of the annuities.The prime advantage in the sale of a structured payment settlement is the reduction in tax payment and in some cases, the total nullification of tax liabilities. The drawback of a structured payment is that they cannot be borrowed for use. The companies interested in buying a structured settlement typically look to profit from the purchase and hence the offers may be lesser than the expectations. In such a scenario, it is advisable to shop around and opt for the company that offers the highest price.
Structured settlements are a good source of finance when an individual finds himself in an unanticipated financial crisis. However, it is essential to ensure that the company is a well-established set-up with sufficient funding. Individuals should also consider consulting their attorneys prior to entering an agreement.