Structured settlement companies buy your payments. If you have a structured settlement, you can sell it to a factoring company for cash. However, you must get court approval first. You must also sell your structured settlement payments in their entirety or in part. You can also sell survivor benefits, but you must sell them in their entirety.
Selling your structured settlement is regulated, but that doesn’t mean you’re in trouble. In fact, the strict regulations are in place because structured settlements are a great way to provide financial stability for consumers. By selling your payment rights, you can receive a lump sum which can help you reach your own financial goals that would otherwise be impossible to achieve.
How to Sell a Structured Settlement: Key Considerations
When you’re considering selling your structured settlement payments, it’s important to know that the secondary market is full of companies that will take advantage of you. You need to find a factoring company that will protect your interests. It’s best to enlist the help of an attorney or financial advisor with experience in the secondary market. They will help you find a credible company with a history of protecting its clients’ interests.
PRO TIP: Confirm that you’ve found a reputable factoring company. This is important because the state attorney general and the consumer protection division can confirm whether there are any complaints on file.
The laws and the terms of your settlement will affect whether you can sell payments. State laws that fall under the Structured Settlement Protection Acts are made to protect you from unscrupulous settlement buyers. Your protection is also the reason a judge needs to approve your sale.
Anytime you want to sell a structured settlement, the judge needs to sign off.
The judge will consider the financial terms of the sale — how you’re selling the payments, what portion of them, and how it will affect your long-term financial situation. Particularly important is whether or not you’ll suffer hardship without the regular payments from your structured settlement.
The judge may take into account:
- Your cost of living Obligation
- Future finances, such as tuition fees
- Life expectancy
The court-approval process takes roughly 45 to 60 days to complete.
Some laws protect you when you enter into a contract, but you have to take control of your financial future. You know what you want more than the judge or the buyer’s representative. Ultimately, you have to make a decision that’s right for you and your family.
Before you sign a contract to sell your payments, consider the long-term implications it may have on your finances. For example, if you sell your payments and then need financial assistance from the government, you might not be eligible because your income would be considered earned income.
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How Much Is My Structured Settlement Worth?
The present value of your contract is technically worth the sum total of all your payments. However, you will not receive that much if you sell your payments.
The factoring company calculates the present value of your invoices using a formula that takes into account the future value of your payments. Your invoices will be received in the future, so the company is essentially calculating how much money it will be able to invest today. The company subtracts how much money it could have invested in the future with the money you are paying it now.
Companies can estimate what to charge for a loan based on the risk. They use the discount rate. The discount rate is the amount of money companies subtract from a loan to account for future uncertainty. In general, the discount rate is 10 to 18 percent.
When you sell an annuity, they consider all sorts of things. The value of your annuity payments is affected by the number of payments you’re selling, the length of the payments, the current market rates and economic conditions, and any fees associated with the transaction.
A structured settlement calculator will give you an estimate for your future payments. But keep in mind that these calculators aren’t perfect. They can’t account for the specific details of your contract. Use the calculator as a starting point, and then expect to receive quotes that vary among different purchasing companies.
What Are the Benefits of Selling My Structured Settlement?
If you’re considering selling your structured settlement, you want to know about the benefits of liquidating.
Sometimes people need a lot of money right away. In these situations, your structured settlement payments can make a huge difference. For example, if someone is in a near-fatal accident and requires a lot of medical care, you can sell your structured payments to pay for it.
For example, you might have to rush to the emergency room with an injury that isn’t fully covered by your insurance. Or you may have to choose between paying for food or medicine. Perhaps you have to leave your house due to foreclosure. There are many financial hardships, and sometimes people need help right now, rather than tomorrow.
If you have an urgent need for money, you should think about selling a portion of your claim. Cash in hand can help to pay bills and provide for immediate needs. Selling a portion of your claim is beneficial because it offers a lump sum of money, which provides both immediate relief and peace of mind.
Selling your structured settlement can help relieve your stress and anxiety. Many experts, including those from Harvard Medical School, say that stress can cause many health problems, including heart disease and cardiac events. If you sell your structured settlement, it will not only help you financially but will also greatly improve your physical and mental health.
A lot of people sell their structured settlements because of financial problems. But it’s not just about money.
In the majority of cases, a structured settlement is not paid to an injured person who can no longer work. In fact, most people who receive a structured settlement are still able to earn a living. However, if you are a competent adult with a solid income, you may be able to manage your own finances without a guardian’s assistance.
Selling a Minor’s Structured Settlement
If you are a parent or legal guardian of a minor child who received structured settlement payments for a personal injury, you can sell the right to future payments. A structured settlement for a minor is the most protected kind of settlement. There are a few requirements to make this sale legal.
Parents or guardians must prove to the court that the child needs money urgently and that the child would be better off receiving cash now than receiving money in installments.
PRO TIP: Some businesses that factor structured settlement payments won’t buy payments intended for minors.
More Questions About Selling Your Structured Settlement
Once you understand the basics of selling your structured settlement, you may still have questions.
If you’re looking for a way to get cash now for future payouts, you can speak with a company that deals in structured settlements. They can provide more information on the best way to approach a sale, as well as information on how to receive payment for your structured settlement annuity quickly.
Does a judge have to approve the sale of my structured settlement?
You can sell your structured settlement payments without a judge’s approval. Unlike annuities available in the marketplace, payments from structured settlements are always subject to court approval.
Selling your structured settlement is perfectly legal when a judge approves the sale. However, there are times when a judge will not approve the sale of your structured settlement. This usually happens when the judge deems the sale contrary to your best interest or the best interest of your family members and dependents.
What are my selling options?
You might be able to sell your structured settlement payments in one lump sum (called an annuity) or you might be able to sell part of your future payments (or a certain dollar amount).
Selling a portion of your payments will give you a steady stream of income. If you sell a percentage of your payments, you will still receive regular installments, either continuing after the last payment you sold or resuming at a reduced amount without interruption.
Will I be taxed on the sale of my structured settlement?
Most of the time, you won’t have to pay taxes for that settlement. However, the IRS says that in some cases, you will have to pay taxes. For example, if you receive payment for emotional distress or for punitive damages, you may be taxed.
The IRS has put out a warning that it will tax the payments you receive from your structured settlement. Your lawyer isn’t going to like this, but if you sell structured payments, you’ll owe taxes on them. Structured settlements are unusual and they’re not something that the IRS handles often. It is crucial that you contact a lawyer before selling any of your structured payments.
Will I be charged an interest rate if I sell my payments?
A discount rate is a percentage paid to the factoring company by the purchaser of a structured settlement. The discount rate is usually around 10% and it’s to offset risk for the purchaser of the payment stream.
How long does it take to sell my payments?
When selling your payments, a number of factors determine how long it will take. First, look into your state law on whether or not you have to go to court. This is the main determining factor. In addition, check over your paperwork for any mistakes.