How to Successfully Sell Your Structured Settlement Payments

Structured settlements are financial or insurance arrangements where a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. While these settlements can provide long-term financial stability, circumstances change, and selling your structured settlement payments might become an attractive option. If you’re considering this, understanding the process and knowing how to execute the sale effectively is crucial.

Understanding Structured Settlements: What You Need To Know

Before deciding to sell your structured settlement payments, it’s essential to understand what they are and why they’re in place. Structured settlements are typically used in cases of personal injury, wrongful death, or workers’ compensation claims. They are meant to provide financial security and stability to the recipient over time, helping cover ongoing expenses and losses incurred from the accident or injury.

However, if your financial situation changes — such as an unexpected major expense, the need for a down payment on a home, or a significant life event — the structured payments might no longer serve your best interests. In these cases, selling your payments for a lump sum can be beneficial.

Evaluating Your Need to Sell

Deciding to sell your structured settlement payments is a significant financial decision and should not be taken lightly. Consider why you need the lump sum and how it will impact your financial future. Calculate your financial obligations and how the lump sum will help you manage them compared to the periodic payments. Sometimes, consulting with a financial advisor can provide clarity and guide you through your decision-making process.

Valuing Your Structured Settlement

The value of your structured settlement payments can vary widely. Factors affecting this include the total amount of the payments, their duration, the stability of the insurance company making the payments, and current market conditions. Typically, sellers receive less than the total value of the structured settlement payments when they choose to sell; this is often anywhere between 50-80% of the original value, depending on these factors.

Choosing a Reputable Company

Choosing the right company to sell your structured settlement payments is paramount. The company should not only offer a fair price but also operate with a high level of integrity and transparency. Research potential companies, read reviews, and check their ratings with the Better Business Bureau. Additionally, ensure that the company is compliant with the federal and state laws governing the sale of structured settlements, including the Structured Settlement Protection Act.

Navigating the Legal Process

Selling structured settlement payments requires court approval. The process involves filing a petition with the court and then attending a hearing. During the hearing, you must demonstrate that the sale is in your best interest and that it will not harm your future financial needs. This legal requirement is designed to protect sellers from making impulsive decisions that could negatively impact their long-term financial health.

Having legal representation during this process is highly advisable. A lawyer specialized in structured settlements can provide guidance, help prepare the necessary documentation, and represent you in court.

Understanding the Tax Implications

Generally, structured settlement payments are tax-free, and this tax benefit extends to the initial lump sum received when the settlement was established. However, when you sell your payments, the lump sum you receive from the sale is also typically tax-free. It’s still wise to consult with a tax professional to understand all potential tax implications fully before proceeding with the sale.

Preparing for After the Sale

After selling your structured settlement, managing the lump sum wisely is crucial. It’s tempting to make large purchases or invest in high-risk opportunities, but such decisions could jeopardize your financial future. Consider investing in low-risk options or saving a portion of the money to ensure long-term financial stability. Again, consulting with a financial advisor post-sale can help set a prudent financial path forward.

Conclusion

Selling your structured settlement payments can provide immediate financial relief and deliver a substantial lump sum. However, this decision needs to be well-thought-out and executed with caution. Thoroughly assess your financial situation, understand the value of your payments, choose a reputable company, navigate the legal hurdles appropriately, and manage the proceeds wisely. With the right approach, selling your structured settlement can be a financially prudent decision.

Whether it’s tackling current financial difficulties or funding a future dream, sometimes selling your structured settlement is the best path forward. By using this guide to navigate the process, you’re taking an informed step towards securing your financial future.