Structured settlements are tax-free arrangements where an individual will receive a regular payment over a period of time. For example, if an injured party has been awarded a claim amount in a lawsuit, instead of being given a lump sum settlement they may be awarded a set payment each month for a period ranging from perhaps a few years up to the remainder of their lives. One of the benefits of such an arrangement is a high level of financial security over time. However, some individuals may wish to have a larger amount of liquid cash up front, for something like the purchase of a home or sending a student to college. In such cases, structured settlements can be used to determine income in order to be approved for a loan, and this is often the best option for individuals who need extra cash in the short term. However, there are also options for those wishing to sell structured settlement payments.
Before considering this option, it is important to determine if this is the best course in the particular case, because overall money will be lost due to discount rates (because the money to be received years down the road is not worth as much in today’s dollars). Also the person’s financial stability will suffer if the structured settlement is the only means of stable income. Additionally, the sale must be approved by a judge, who must be convinced of the financial necessity and wisdom of completing the sale.
If the decision is made to sell structured settlement payments, it is possible to sell only a portion of the payments instead of the full amount, thus retaining the long-term stable income as well as receiving a portion of the cash in advance for current necessities. This compromise can provide the benefits of both options. Also, we advise contacting a settlement firm that provides a number of quotes from different potential purchasers, making it possible to select the best fit for the particular need and thus increasing the likelihood of court approval as well. Always consider the various discount rates offered and any commission to be paid and, if necessary, contact a financial adviser regarding the best course of action.