Sell Your Structured Settlement | Structured Settlement Loans
There are two types of people who receive structured settlements
- Those being compensated from personal injury lawsuits
- Lottery winners
Structured settlements are designed to replace the income lost due to an injury to the plaintiff (and help the insurance company paying their settlement stay solvent) and so a lottery winner doesn’t squander their wealth. While they have good intentions, there may come a time where the recipient needs a lump sum instead of periodic payments. Recipients can sell their payments to a third party for a lump sum. The amount they receive varies from company to company so it’s important to shop around. You can sell a portion of your structured settlement rather than the entire thing. For example you could keep 40% of the payments and give 60% of the payments to a third party in exchange for x amount of dollars. Beware of offers that sound too good to be true or that can be completed in just 24 hours. Structured settlements are complicated and take time.
The most common option is the full buyout or when the entire annuity is sold. Full buyouts are common because people prefer a lump sum, but the insurance companies do not always offer to pay the entire settlement at once. People usually believe they can make more money by investing (in a business or higher education) the full amount into something more profitable, which is a reason often accepted by a judge. Another reason for a full buyout is because of a financial emergency, which includes paying off large debts, buying a house, healthcare, education, buying a car etc. Any reason that improves the quality of life for the policy holder can be used to secure court approval for selling.
A partial buyout allows the policy holder to keep receiving some of the income from the future payments. This is smart if you need money now, but don’t need all of it. Judges are more lenient with partial buyouts and will allow you to sell part of your settlement if you lost your job or need to repair your car.
You need to go through your documents with an attorney or broker and find out if you can sell your structured settlement, but in most cases you can. Before 2002 it wasn’t so easy because many policies had a clause saying they were “non-assignable”, but since 2002 any language mentioning this can be ignored. The Structured Settlement Protection Act of 2002 requires any kind of transaction involving a structured settlement to be approved by a judge. The act also states that the insurance company paying the settlement must also be involved in any sale. The judge determines if the sale is in the best interest of the client by looking at their financial information.
Selling a structured settlement is complicated and many policy holders will seek out the help of a lawyer. The buyer may or may not offer to pay for your legal fees to sell the structured settlement, which may have an effect on the quote you receive. Some companies will even cover your attorney cost even if the judge refuses your application to sell.
After submitting the details of your structured settlement annuity to a buyer they will get back to you in 24 hours or less with a quote. Some companies charge for a quote so beware. Look for a company that will not charge for a quote.
Factors that go into the price you are quoted are the remaining value of the annuity, structure of the payment schedule and the remaining years left. The best practice is to get as many quotes as you can before making a decision.
Payment exchanges – a new option that just became available a few years ago. Offered by finance companies that are willing to exchange your future payouts for hard cash in an instant (same day). Money received is tax free? Also may have to pay for legal fees and obtain a court order. Lose a significant portion of your structured settlement this way.
It is possible to advertise selling your structured settlement online. There are dozens of internet sites that have listing where you could advertise a structured settlement policy for sale. Some sites are specifically geared toward this.
Many structured settlement companies have forms where you can put your information in and receive a quote or have a number you can call for a quote. Many companies offer online calculators to work out what a settlement is worth. We recommend you do your due diligence on a company by looking at reviews/testimonials/BBB.
A really professional structured settlement company may even take the time to scrutinize the reasons you have for selling and advise you whether selling is an intelligent decision.
A company that uses a broker will charge greater fees than companies that deal with a client directly.
Discount rates vary between 10 and 30% plus additional expenses such as court fees, processing fees etc.
The contract should spell out what amount of money the buyer is paying in return for the client transferring the annuity to them, expenses and deductions from the sale amount.
The judge may deny the transfer if he or she doesn’t believe your reasons or thinks the rate is too high.
The Role of Brokers in Selling a Structured Settlement
Selling a structured settlement is a highly complex transaction and comes with a number of legal implications. You need to present a valid argument to a judge in order to secure a court order authorizing a sale. Your broker will be able to help you research various companies and go through the quotes you receive with you. Your broker can also help you negotiate with companies and/or private investors to get more money for your annuity. Their assistance can be invaluable in this kind of transaction.
Remember when looking for a broker to assist you with structured settlements, make sure they have a good reputation and are Department of Justice certified. Your structured settlement annuity is extremely valuable, and you will want to place it in the hands of someone you can trust.
Structured Settlement Loan
You can take out a loan against future payments. Some structured settlements prohibit you from taking out a loan. You may need to get permission from the court, which granted the structured settlement, the insurance company that manages the structured settlement, and possibly from the defendant if the settlement was an out of court agreement. It takes 90-120 days to gain acceptance, unlike lawsuit funding where you can get the money right away. You have to pay fees and taxes, which vary by state.
Structured Settlement Sale
You can sell the annuity outright, which would take half the time (45 days) as the loan application process. When you sell a structured settlement you have to pay more tax and higher fees. If you sell the whole annuity you have to forgo any future payments. When you take out a loan, you continue to receive your structured settlement payments, but the loan must be repaid directly from these payments before you use the money for anything else.
Negatives of a Structured Settlement Loan
Many people chose the loan option because they don’t want to give up their future payments.
- You have to pay taxes on a lump sum, whereas the regular payments are tax free. Income tax, state tax, and self-employment tax (Medicare & SS)
- Lose money on the deal – lenders take 20-30% of the settlement’s value
Pros of a Structured Settlement Loan
- If you’re taking out the loan to protect your assets (car, home) from being repossessed then the benefits outweigh the costs you have to pay.
- Doesn’t matter what your credit history looks like.