Every year there are thousands of settlements distributed to people for unfortunate reasons. Sometimes these settlements are the result of injuries at work (such as falling off of a ladder) or something worse such as a car accident that caused death to a loved one and devastating injuries to yourself.
As sad as these situations may be, the individuals who receive the money face a unique conundrum: Should they continue to receive their monthly settlements or take a lump sum payment?
As you’ll notice from the amount of advertising on television, there is no shortage of companies that are interested in buying your settlement asset.
However this is not a decision to be taken lightly. The consequences of selling a structured settlement should be investigated thoroughly. There are many benefits and drawbacks which could influence whether or not this will be a wise financial decision over the long run.
Here are a few points you should consider.
Selling a Structured Settlement:
A structure does not mean weekly payments or annual payments. Each and every scenario is setup differently. Take notice of the list of different payouts and scenarios that can give you a general idea of how wide of a variety you can receive when getting these payment structures.
If you anticipate bigger expenses further down the road then you can opt for smaller periodical payments and larger lump sum payouts (explanation) as the need for a large infusion of cash. The key to not having to sell your settlement payments on the secondary market is to have your financial adviser, guardian ad litem (if you are under the age of 18), or attorneys handling your case go over different lifetime expenses and financial needs you will need down the road.
There are specialty brokers who deal with this daily like Ringler Associates who are the largest in the industry according to a recent survey. If the future earnings is impacted again as a result of an injury and you no longer have these safe reliable insurance paper coming in then that is something to take into consideration.
Restrictions on Transferring Settlement Payments:
Each state has different laws that must be abided by. Even if you need the money and want to transfer your payments there is no guarantee that the judge will allow it.
There are also a lot of fees associated with the transfer that range from an independent financial adviser you can pay up to $5,000 to let you know if it is a good idea to attorney fees. Also the insurance policy must allow for the transfer of the payments. If they do not then you may be stuck holding the bag on payments that are not enough for you. The tax implications depend and will be unique to you. There are times you pay taxes on the money you receive especially if it is above and beyond the needed living expenses that you received the payments for in the first place.
All situations are unique and nobody can tell you if it is a good or bad idea to sell your payment rights but it is important to know that you will be protected by the court system if you shouldn’t be selling your structure settlement in the first place.
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