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Structured settlements provide financial security through regular payments over time, but life’s unpredictable nature sometimes demands immediate access to larger sums of money. Selling all or part of your structured settlement can be a solution when immediate financial needs arise. To better understand why you might want to sell your payments, we’ll explore the reasons people choose to do so, the process involved, and important considerations to help you make an informed decision.
Understanding structured settlements
Before discussing why you might sell, it’s important to understand what structured settlements are and how they work.
A structured settlement is a financial arrangement typically established following a personal injury lawsuit, medical malpractice case, or wrongful death claim. Instead of receiving a lump sum payment, the injured party receives a series of tax-free payments over time. These settlements are designed to provide long-term financial security by covering ongoing medical expenses, lost wages, and daily living costs.
Common reasons to sell structured settlement payments
You might have other reasons, but these are the most common:
1. Emergency financial Needs
Life’s unexpected challenges often require immediate access to funds:
Medical emergencies not covered by insurance.
Home repairs following damage from natural disasters.
Family emergencies requiring immediate financial assistance.
2. Debt elimination
High-interest debt can create a significant financial burden:
Credit card debt with double-digit interest rates.
Medical bills that have gone to collections.
Tax liens that could result in asset seizure.
3. Major life investments
Structured settlements may not align with your timeline for important life investments:
- Homeownership requiring a down payment.
- Education costs for yourself or family members.
- Business opportunities requiring startup capital.
4. Improved financial management
Sometimes, having control over a larger sum can provide better financial outcomes:
- Higher-yield investments that outperform the structured settlement’s implicit return.
- Portfolio diversification to better manage overall financial risk.
- Estate planning considerations for beneficiaries.
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The process of selling your structured settlement
These are the basic steps involved should you decide to sell your payments:
1. Legal requirements
The sale of structured settlement payments is regulated by state and federal laws, including:
- Structured Settlement Protection Acts (SSPAs) implemented in most states.
- Court approval requirement to complete the transaction.
- “Best interest” standard that must be met for judicial approval.
2. Finding a reputable buyer
The company you choose to work with significantly impacts your experience:
- Research multiple companies and compare their offers.
- Check for complaints with the Better Business Bureau.
- Review online ratings and testimonials from previous clients.
3. The transaction timeline
Understanding the process timeline helps set expectations (the below are estimates):
- Initial consultation (1-2 days).
- Quote and offer acceptance (1 week).
- Document preparation (1-2 weeks).
- Court approval process (4-8 weeks).
- Fund disbursement (3-10 days after court approval).
Important considerations before selling
Keep these in mind before you commit to selling your payments:
1. Financial impact
Selling has long-term financial implications:
- Discount rates typically range from 9% to 18%, meaning you receive less than the total future value.
- Tax implications may differ from those of the original structured settlement.
- Loss of guaranteed future income that was initially structured for your needs.
2. Partial sale options
You don’t have to sell your entire settlement:
- Sell a portion of future payments.
- Sell payments for a specific time period while retaining later payments.
- Sell specific payment amounts from each scheduled payment.
3. Alternatives to consider
Before proceeding with a sale, explore other options:
- Personal loans from traditional lenders.
- Home equity lines of credit if you own property.
- Financial assistance programs for specific needs like medical bills or education.
Making an informed decision
Cover your bases and you’ll make the right choice one way or another:
1. Seek professional advice
Consult with professionals who can provide guidance:
- Financial advisors to assess the impact on your overall financial plan.
- Attorneys familiar with structured settlement transactions.
- Tax professionals to understand potential tax implications.
2. Calculate the true cost
Understanding what you’re giving up is crucial:
- Compare the present value of future payments to the offered lump sum.
- Consider inflation and the time value of money.
- Factor in transaction costs and fees associated with the sale.
3. Evaluate your long-term needs
Beyond immediate needs, consider your future financial situation:
- Retirement planning without the guaranteed settlement payments.
- Healthcare costs that may increase as you age.
- Living expenses and how they’ll be covered without the settlement income.
The takeaway
Selling structured settlement payments is a significant financial decision that should not be taken lightly. While it can provide immediate access to funds for pressing needs or opportunities, it comes with costs and potential long-term impacts on financial security.
By thoroughly researching your options, consulting with financial and legal professionals, and carefully considering both immediate needs and long-term goals, you can make an informed decision that best serves your financial well-being.
Let Peachtree help
At Peachtree Financial Solutions, we’ve helped thousands of people get their money sooner by purchasing their future annuity payments for a lump sum of cash. Selling your payments is a regulated process and we have a lot of experience with these transactions. And while every annuity is unique, which means every payment sale will be different, they all have the same basic five steps:
- Call one of our representatives.
- Receive a free, no-obligation quote for the sale of your payments.
- Review and sign the purchase agreement.
- We process the agreement with your insurance company.
- You get your cash!
Why should you choose Peachtree?
It’s all part of something we call the Peachtree Promise: our experienced, dedicated representatives listen to your goals and clearly explain your available options. We meet you where you are without judgement and work hard to help you meet your financial goals. Getting your quote is completely free, and you’re under no obligation to sell to us if you aren’t completely satisfied with what you hear.
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
