Something unexpected (and expensive) might have come up in your life, you need a lot of money right away, and you’re thinking about selling your structured settlement. Or, maybe you’re just wondering if you can “cash-out” your future structured settlement payments and collect a lump sum. If that sounds like you, you’ve found a great place to start!
Rules for Selling Under Federal and State Law
First, it’s important to know that not everyone who has a structured settlement can legally sell. Federal law ensures that the transfer of structured settlement payments is necessary and in the best interest of the seller. Each state also has its own laws about structured settlements, which expand on the federal law and provide additional protections for sellers.
Things that might make it difficult to sell include:
- If you have a traumatic brain injury (TBI), significant lead poisoning, or other situations that might suggest to the court that a decision of this magnitude may be a challenge;
- If you have initiated bankruptcy and therefore don’t have full control of your assets;
- If you have dependents and no other source of income to replace the lost payments.
If you have any of these or similar situations, consult a legal professional before proceeding.
Even if you are legally able to sell structured settlement payments, it’s important to evaluate whether doing so is the best option. You have a valuable asset with tax-related benefits (that is, you don’t pay taxes on the payments). Those payments are meant to ensure your long-term financial security - to ensure you can live and pay your bills. If there is another way to get the money you need, it is worth considering that first. Other ways to get the money you need might include:
- Using savings. If you have the money you can access to cover your financial needs, then avoid selling your structure and incurring the transaction costs.
- Taking out a loan. If you have good credit or security, you might be able to get a rate of 6% or 7%. Use a resource like Bankrate, Lending Tree, or Lending Club. These can be good options if you need a small amount, need money within days, or have assets like a home to borrow against.
- Credit cards are an option if you know that the expenses you are challenged by may change quickly. Their annual rates are generally 15% or more. But you can access the money quickly and payoff partially if possible.
Consider that transferring the rights to your future payments can take multiple weeks depending upon the jurisdiction, but can yield a “discount rate” (think of it as an interest rate) in the 4 - 12 % range. The amount your payments are worth is dependent upon the period of time, frequency, insurance carrier, etc. So achievable discount rates can vary greatly.
Determine How Much Cash You Need
Transferring the rights to your structured settlement can mean getting a large lump sum in a matter of weeks to cover an emergency or an immediate need. People have used money from their future payments to avoid foreclosure, make a major home repair, pay for college, cover medical bills, and address other critical expenses. You can use our free calculator tool to estimate how much you might receive by transferring the rights to your future payments for cash.
There is always the option to sell only a portion of your structured settlement payments. That way, you can continue receiving some money while meeting your immediate financial need. Selling only some of your payments is something that you should be sure about. Selling too little could result in the need to sell multiple times, which increases costs and hassle through the process and decreases the overall sum you end up with. But selling more than you need can result in losing the tax advantages of your settlement while paying too many fees on the transfer. It’s a tough and important decision, which is why we often suggest consulting with an IPA (Independent Professional Advisor) to get advice in helping you fully think through your options.
Get a Free, No-Obligation Consultation
We welcome you to contact CrowFly to discuss your situation. We can help you decide whether or not to sell, and there is absolutely no obligation to do anything further. It’s part of our mission to ensure people sell only for the right reasons. We aim to educate each individual who comes to us for assistance. Try us out today.
Crowfly does not offer legal or financial advice. The information in this article is intended to provide a basic overview and does not constitute professional legal advice.