At some point or another, you may find yourself in a situation where you are in urgent need of sizeable, lump sum amount of money. Perhaps you need money for a medical emergency, make a down payment on a house, or start a business. If you are unable to raise the required sum through other means it may be tempting to sell off your structured settlement payments to one of the plethora of structured settlement companies out there. Before you do so, however, there are a number of things you'll want to bear in mind.
Firstly, many states actually have restrictions regarding the sale of structured settlements. Therefore, you may not be able to sell them even if you want to or need court approval first. Moreover, the terms of your settlement may not allow such a sale either. Even if it is possible to your sell your structured settlement, you need to realize that it is quite likely that you'll lose money in the long run. Structured settlement companies are out there to make a profit and so the offers they make to you may be quite low. Yet another drawback is taxes. While you are receiving payments from a structured settlement plan, they may be tax free. However, as soon as you sell them, the amount that you sell them for may well be taxed.
If you are currently eligible for a structured settlement but have not yet entered into a formal agreement, we strongly recommend that you look into prearranging its terms in a way that anticipates your future needs. It may be possible to set it up in a way by which you receive an initial lump sum followed by periodic monthly or yearly payments or receive lump sum amounts at some future point in time. A competent lawyer can help with this. Sadly, if you are already in a binding agreement and did not do this, you won't be able to change its terms and now request a lump sum from the paying party. If you find yourself in such a situation and you must sell your payments, be sure to contact an attorney and have him review the terms of any agreement that's on the table and ensure your rights and interests are protected. Your attorney will also be able to tell whether the amount you will receive is fair. We also recommend that you shop around until you find a company willing to pay you a competitive price. Make sure they are well reputed and well-funded so that you in fact receive the payment you are due. Contacting a tax professional is also a good idea to figure out if there are ways you can reduce the amount you will need to pay.
There are many drawbacks to selling structured settlements but if you find yourself in a situation where you must do so, we hope you find the advice in this article to be useful. Thanks for reading and take care!
To learn more about structured settlements including how they work, their pros and cons, and more useful tips on things you need to be aware of when buying and selling them, log on to our structured settlement guide. See you there!
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