Structured settlements are the manacles of payments that a client can win following an accident, legal judgment or workers compensation claim. The person who has to make the structured payment will also have to purchase the annuity contract from a renowned insurance institution. In most instances, settlement payments are guaranteed by the authorized company as long as the contract is valid. Though they are pretty much predictable, the circumstances are quite dynamic. Maybe you are planning to get married or buy a new home; anything that will drain your pocket to almost zero pennies.
Sell Your Settlement; yes
It has been noticed that selling structured settlement payments is a much better option as compared to applying for and taking a loan since it does not call for any credit checks. Also, selling a structured settlement is not a risky financial undertaking if a reputable company is choosen.
Many states have laws which are used to regulate how settlements can be sold; they, however, need an experienced judge to preside over the deal and review its fairness. It is worth noting that the idea might not be good if the consumer does not have any legitimate need for the lump sum or even when the payments are required for the living expenses.
Sell Your Settlement; No
It is important to ask yourself one or two questions before indulging into this transaction for the sake of future lump sum gains. One should seek to know if they can be financially responsible or if the venture makes any sense regarding their financial strategy and of course the long-term goals. It is vital to model different instances with a financial planner to understand everything regarding the value of the settlement. Make sure to make it the primary part of the plan before going for it.
Time value and Money
Structured settlement companies offer less than the total of the stream of the payments. The consumers, in this case, are encouraged to ask; how less? When trying to find out whether a given lump sum is fair or not, the calculation might appear quite complex, but the basic concept behind it is simple. One would rather have a dollar in the present than to have the same in future. So, you will go for the discount on money at the moment as compared to on a later date.
The Key Process
In most instances, the entire process to sell settlement payments could go for as long as 45 to 65 days even when everything runs without friction; so it is easy to tell that this is not instant cash out transaction. It will even require a court process before you get your hands on the money that you so covet. The broker associated with the transaction will have to issue a comprehensive explanation of the discount factor during the court process. If it happens that the judge realizes that the sale is not in your interest, it is possible to have the transfer terminated. The meaning of best interest, in this case, is not clear, which means that the termination could happen.
Below are some of the factors to take into consideration to avoid some problems which are most likely to happen.
- Shop around. Try looking for some competing quotes from different firms. If you had done a similar transaction in the past and are in the market again, consider looking for new bids from other companies and buyers.
- Get all information including upfront. The disclosure requirements may differ from one state to the other, but you must seek to know the commitment by timing guarantee and fees on the payout dollar amount.
- Know the person you are dealing with. Confirm with the better business bureau. It is important to ensure that the firm you are dealing with has been on the market for a long period and has gained a good reputation from the past clients.
- Talk to an attorney and a financial planner. By talking to the right people, you will get to know about the restrictions associated with having your settlement sold. Try to find out about the available tax consequences.