Getting the lump sum of any big payout is always tempting. Somehow, it feels more tangible. It also feels like you have more control over your money. But do you really? How do you come out in the best position possible if you choose to cash out? If you are thinking your self to sell my structured settlement, read through the points below:
Structured settlements have been part of the US legal landscape for more than two decades. It’s an annuity or tax-free periodic payout of aggregates of a fixed amount awarded to you for winning a lottery or a legal settlement for cases like personal injury or worker compensation claims.
List Your Pros & Cons
There is no hard and fast list of pros and cons that applies to everyone when selling structured settlements. Put together a list of the benefits you’ll get and the losses you’ll take if you decide to sell. Consider these points as you mull over which path to choose:
◉ Count Your Possible Losses
➙ Loss due to taxes.When you take the lump sum from a finance company, you’re liable to pay state and federal taxes that may significantly reduce the actual amount you get. Research the taxes that may be levied in your location.
➙ Loss due to being underpaid.Of course the buying company you’ll sell to would want to make the most profit from any transaction. Expect to be underpaid a lot less than the real value of your structured settlement.
◉ Research Buyers &Financial Companies
Don’t settle for the first company willing to buy your structured settlement. Be wary of low offers. Shop around for the best terms. Inquire at different companies at the same time. Take your time and do thorough research. There are many resources that can help you, like the Better Business Bureau and your Attorney General’s Office.
➙ Read reviews about the companies or buyers you shortlisted.
➙ Contact other structured settlement owners who cashed in with a buying company and get first-hand information.
➙ Have multiple meetings with your buyer to gauge if this is really someone you can trust.
◉ Sell Only What You Need
If you are leaning strongly towards the selling option, consider not giving up the whole lot of your settlement. Explore options that allow you to sell just a portion for a quick cash payout. Think over how much cash will tide you over then sell only what you’ll need.
◉ Note Possible Contract Restrictions
Read your structured settlement document carefully. Some annuity arrangements are arranged through a contractual agreement. Be very sure that you are not violating any contract terms or condition sunder the settlement.
Issues with Selling Structured Settlements
After you list your pros and cons, it’s also best to know some of the knotty issues surrounding the buy and sell of structured settlements and why utmost care needs to be taken.
Structured settlement is big business in the US.According to the IRS, more than $6 billion is paid each year to new structured settlements and an estimated $100 billion or more has been paid in parts to settlements that are in force today. As a whole, the US government encouraged structured settlements because of their strong benefits to injured parties. Federal tax rules are even designed to encourage the use of structured settlements—structured settlements are excluded from the recipient’s taxable income (Periodic Payment Settlement Tax Act of 1982).
Financiers learned to take advantage of structured settlements.In the early 1990s, a market of individual buyers and financing companies, also referred to as factoring companies, started creating a business around the buying of the rights of settlement recipients to future payments. They used aggressive advertising and enticing terms to get settlement owners to trade their rights for easy cash.Even though settlement rights are non-transferable, factoring companies found a way to circumvent this restriction by asking the settlement owners to redirect their payments to the company addresses.
There are legal rulings to protect structured settlement owners.Because of the shenanigans of these companies, the US government created rulings designed to protect structured settlement recipients. These decrees are enacted in varying degrees in the 47 states.You can find more information on your state’s rulings HERE.
➸ The transfer of structured settlement payment rights is legally ineffective unless it receives advance court approval. This is enforced in 38 states.
➸ Factoring companies must fully disclose the value of the settlement and the discounted amount to be paid in exchange for it.
➸ The IRS imposes a 40% federal excise tax if a transfer of structured settlement payment rights does not receive the required court approval.
Beware of Fraud
Now you know that it’s not always possible to sell a structured settlement under state and federal laws. Also, majority of the states have restrictions for such a sale to take place. Be sure to seek court approval before attempting to do a sale so that you’re sure you’re not violating any laws.
Lastly, beware of fraud. There are a lot of fake companies and persons out there that are just waiting to pounce on unsuspecting victims. Do your research and do business only with reputable finance organizations. If a group or an individual is giving you a too-good-to-be-true offer the nit probably is.
You may want to consider hiring a financial consultant or a lawyer to advise you on the best course of action.
Play It Smart
Selling your structured settlement definitely has its potentials and drawbacks. Be sure you’ve weighed all your options, have done the necessary research, and, if you’re still unsure, have sought credible legal and financial advice. Undoubtedly, it’s a big decision. Your “yay or nay” to selling your structured settlement should only be decided when you’re already well informed and have thoroughly deliberated your choice. Play it smart. Good Luck!!