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Structured settlements can provide long-term financial security, but life circumstances may necessitate selling these payments for a lump sum. If you’re considering this option, one of your primary concerns is likely the cost involved. Let’s break down the various expenses associated with selling a structured settlement so that you can make an informed decision.
Before diving into the costs, let’s briefly review what a structured settlement is:
A structured settlement is a financial arrangement where a plaintiff in a civil lawsuit agrees to receive compensation through a series of periodic payments rather than a single lump sum. These are often used in personal injury or wrongful death cases.
Selling a structured settlement payment stream typically involves these steps:
These are the most common expenses associated with selling a structured settlement…
Estimated cost: $100 – $500
Selling a structured settlement requires court approval in most states. Court fees can vary depending on your location but typically range from $100 to $500.
Estimated cost: $500 – $3,000
You may decide to have an attorney review your transaction and/or represent you in court. Costs can range from $500 to $3,000, depending on the complexity of your case and your location.
Keep in mind: The structured settlement purchasing company will have a lawyer who represents them file the petition for the sale of your structured settlement payments, and advocate for approval of the sale, but they do not represent you.
Estimated cost: $50 – $200
Various documents in the process may need to be notarized. Notary fees are usually minimal, ranging from $50 to $200 in total.
Estimated cost: $250 – $1,000
Some companies charge administrative fees for processing your application and facilitating the transaction. These can range from $250 to $1,000.
The most significant “cost” of selling your structured settlement is not a direct expense but rather the discount rate applied to your future payments.
Estimated cost: 9% – 18% of your settlement’s value*
When you sell your structured settlement payments, the purchasing company will offer you a lump sum that’s less than the total value of your future payments. The difference is expressed as a discount rate, typically ranging from 9% to 18%.
Factors affecting the discount rate include:
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The following expenses are less immediate but equally important when it comes to selling your structured settlement…
Potential cost: Varies based on individual circumstances
While structured settlement payments are usually tax-free, selling your settlement might have tax implications. Consult with a tax professional to understand potential tax costs.
Potential cost: Intangible but significant
By selling your structured settlement, you’re giving up guaranteed future income. This could be costly if your financial situation changes unexpectedly.
Potential cost: Varies based on financial markets
The lump sum you receive could potentially earn returns if invested wisely. However, these returns would need to outpace the discount rate applied to your settlement to be worthwhile.
Several factors can influence how much it costs to sell your structured settlement:
To keep costs down when selling your structured settlement:
Most states have enacted Structured Settlement Protection Acts (SSPAs) to protect consumers. While these laws can increase certain costs (like requiring court approval), they ultimately serve to ensure fair deals and prevent exploitation.
Key provisions often include:
Selling your structured settlement is a major decision that should not be taken lightly. Consider the following:
Remember, the cheapest option isn’t always the best. Focus on finding a reputable company that offers a fair deal and guides you through the process transparently. By understanding the costs involved and carefully weighing your options, you can make an informed choice that best serves your financial future.
At Peachtree Financial Solutions, we’ve helped thousands of people get their money sooner by purchasing their future 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 structured settlement is unique, which means every payment sale will be different, they all have the same basic six steps:
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.
*All structured settlement payment purchasing transactions are done at Peachtree’s sole discretion. Discount rate and purchase price vary based on individual circumstances.
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.
Peachtree Financial Solutions is here to help people from all walks of life reach their financial goals. From moving into a bigger home, to getting a more reliable car, to paying tuition, we’ve helped tens of thousands of people.
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