Selling a structured settlement is not a small decision and it should not be addressed as such. Most structured settlements are received as the result of lawsuits. For example, somebody who slams into your car, causes you personal injury and who was found to have been negligent in doing so by a jury may be required to pay you a large amount of money due to a settlement reached between your attorney and there’s or due to the findings of the jury in the case. In order to ensure that the person can actually pay the money that they owe you, they may be allowed to do so over time.
This results in the person with the structured settlement receiving a specific amount of money at specific intervals. You may, for example, receive $10,000 a year for 20 years or, if your settlement is much smaller than that, $200 a month for two years. There are really infinite degrees of variability involved here.
In some cases, people who have these types of settlements may want to get the money right away. This is where selling a structured settlement comes into play. Essentially, companies that purchased the settlements place bids on your settlement and, by selecting the best bid, you can sell off a certain number of payments on your settlement and receive a lump sum of cash in exchange. Here are some things to consider.
In the vast majority of cases – but you will have to verify this in your specific case – you won’t have to pay any taxes on the lump sum you receive in lieu of your structured settlements if you don’t pay taxes on those structured settlement checks already.
With anything regarding taxes, you will have to talk to an accountant or an attorney about whether or not you will need to pay more money in taxes for receiving a lump. In the vast majority of cases, however, your tax obligations should remain the same. The IRS gives detailed information on excise taxes and structured settlement factoring, available here.
There may be some requirements that you have to meet to sell off part or all of your structured settlements, but most states will allow you to do this. This will apply whether you are selling off payments from an insurance policy or payments from a lawsuit.
Some people have structured settlement agreements that specifically state that they cannot sell them off. It is, counter intuitively enough, possible to sell these off. Generally, you can have a judge look at your case and, if they believe that you do have a valid reason to go ahead and select your structured settlement payments, they can approve the sale and, therefore, can override any of this language.
Some states may require you to go through a cooling off period before you actually do sell off the payments. Once you have completed this, you can go ahead and sell. The idea behind this cooling off payment is to give you an opportunity to make certain that you are making a good decision. By all means, you should use this.
Be aware that it could take up to 30 days – perhaps even longer – to have the courts approve your sale. Keep this in mind if you’re debating whether to go ahead and do it. If you’re sure that you’re going to have to sell off your structured payments for one reason or another and you want to make certain that it happens as quickly as possible, you will want to start moving right away. If everything goes smoothly, you could receive your payment in as little as six weeks.
Can I Just Get a Quote?
Yes. If you want a company to give you a quote on what they’ll pay you for your structured settlement, you can do so without actually having to sell your structured payment to them. You do not enter into any legally binding agreement unless you choose to do so.
Most of the time, the companies that will be willing to buy your structured settlement will do so with a 48 hour window for you to accept their terms. By having several different companies offer you bids, you can go through, decide which one is offering you the best price for your structured settlement payments and make your decision accordingly.
Why People Do It
Selling structured settlements is generally done for the most obvious reason imaginable: people want a lump sum of money instead of a payment at certain intervals. By selling off some of their payments – or all of them – they get a large lump sum payment, which oftentimes enables them to take care of pressing matters that they could not attend to otherwise.
As just one example, if you were injured in a car accident in high school and received a settlement due to a lawsuit, you may very well decide to sell your structured settlement so that you can get a lump sum of money when you want to go to college. If you were already out in the working world and you needed a new vehicle, you may do this so that you could put cash on a vehicle, thereby likely reducing the price by not having to go through any payment and by being able to pay cash up front.
Selling off structured settlements is a good way to make certain that you are not left in a financially undesirable situation when you don’t have to be. If you have the money coming already but you need it faster, you can always sell off some of your payments. If you want to dispense with waiting around for a certain amount of money to roll in every month, you can go ahead and sell the entire thing by looking for a broker who will be willing to buy it from you.
No matter how you choose to address it, many people find that handling the structured settlements in this way is far more convenient than waiting for monthly payments.