In order to receive quick cash, you might sell your structured settlement to a factoring business. In spite of the fact that you must first seek court approval to sell your payments, you have the legal right to sell your payments to a structured settlement buyer, whether in part or in full. Survivor benefits may also be available for sale under certain circumstances, depending on the terms of your structured settlement agreement.
In accordance with federal and state regulations, structured settlements are strictly controlled, but the existence of such stringent regulations should not be construed as proof that selling your structured settlement would have a negative influence on your finances. On the other, the opportunity to receive a lump amount of cash in exchange for transferring your payment rights can assist you in achieving financial goals that might otherwise be out of reach without this option.
How to Sell a Structured Settlement: Key Considerations
If you are considering selling your structured settlement payments, we urge that you get the advice of a reputable attorney or financial advisor who has experience in the structured settlement secondary market before taking any action. They will assist you in locating a reputable factoring business that has a proven track record of preserving the long-term interests of its customers.
It will be determined whether or not you can sell your money based on the conditions of your settlement and the regulations of your state. Settlement beneficiaries are supposed to be protected against unscrupulous structured settlement purchasers under state laws that fall under the umbrella of the Structured Settlement Protection Acts. Your own safety is also the reason why you must have your sale approved by a court before proceeding.
All structured settlement sales are subject to the permission of a court. The terms of the sale — whether you’re selling some of your payments, a portion of each payment, or your entire structured settlement — as well as how the sale will affect your long-term financial situation, including the likelihood that you will suffer financial hardship if you don’t receive regular payments from your structured settlement — will be taken into consideration by the judge. If you’re selling some of your payments, a portion of each payment, or your entire structured settlement, the judge will consider how the sale will affect your long.
The judge may take into account:
- Your living expenses
- Your future financial obligations, such as college tuition
- Your life expectancy
Despite the fact that state and federal rules are in place to keep you from getting into a contract that might cause you excessive financial hardship, you must take responsibility for your financial future on your own. You are more knowledgeable about your objectives than the judge or the buyer’s agent. At the end of the day, you must make the decision that is best for you and your family.
Consider the ramifications of selling your payments in detail before proceeding. Retirement plans, eligibility for Social Security or other government assistance programs, and tax liabilities might all be impacted by the sale of the property.
How Much Is My Structured Settlement Worth?
Technically, your structured settlement is worth the present value of your contract, but it is not the amount you would earn if you sell your payments as part of a cash settlement.
This is done by factoring companies using a formula that takes the future value of your payments — because the money will not be received until a later date — and subtracts the growth potential that the company will lose by not being able to invest immediately because it does not have the money in hand to do so.
When the firm uses this method, it may figure out what it calls the “discount rate.” Factoring firms charge a discount rate to account for the inherent risk connected with money they expect to receive in the future. It is customary for the discount rate to a range between 9 and 18 percent.
Your discount rate is calculated by taking into account several factors, including the number of payments you’re selling, the dates of your payments, current market rates and economic conditions, and any service fees associated with the transaction, in addition to the present value of the settlement.
Even while a structured settlement calculator can provide an estimate of your settlement amount, you should keep in mind that no calculator can account for the specific conditions of your contract. Make use of the estimate as a starting point, and be prepared for bids to differ amongst purchasing businesses.
What Are the Benefits of Selling My Structured Settlement?
In a nutshell, the advantage of selling your structured settlement is increased liquidity.
While structured settlements provide financial stability over a long period of time, people occasionally find themselves in situations that necessitate the immediate receipt of a substantial quantity of cash. It is in these situations that the option to sell your structured settlement payments can be a lifeline – and not always in a literal sense.
For example, you could require emergency medical attention yet only have little or no insurance coverage. Alternatively, it is possible that the bank is preparing to foreclose on your house. The list of financial challenges is lengthy, and occasionally people are forced to choose between their long-term financial stability and their present financial need.
If you find yourself in a situation where you require more money at once than your periodic payments can provide, selling a portion of your settlement can provide you with a lump sum of cash that will not only allow you to meet your financial obligations but will also provide you with peace of mind.
It is possible that the stress of approaching debt will result in a variety of mental and physical health concerns. Stress and worry, according to experts, including those from Harvard Medical School, have been related to heart disease and other cardiovascular problems. In the event that selling your structured settlement is able to relieve your worry, the benefits extend beyond the financial to include improvements in your health and overall well-being.
People who sell their structured settlements do so for a variety of reasons, not only financial difficulties. A structured settlement payment for a personal injury that did not result in your incapacity to generate an income may not be as reliant on your contributions as it would be in the case of someone who could not return to work. You have the right to make your own financial decisions if you are an adult who is intelligent and gainfully employed.
Selling a Minor’s Structured Settlement
The structured settlements that provide for children are the ones that are the most closely guarded. It is possible for a parent or legal guardian to sell the right to future payments in a personal injury lawsuit if a kid under the age of 18 obtained a structured settlement and his or her circumstances have changed significantly after the settlement was imposed. However, the burden of evidence is high.
Parents or guardians must establish clearly to the court that they have an urgent need for cash and that selling the settlement would be in the child’s best interests rather than continuing to receive monthly payments in the future.