Selling your structured settlement will allow access to the lump sum of cash within months, rather than the years it may normally take to pay out. This will give you the ability to pay off any debts and help to reduce interest payments. Investing your lump sum may yield higher returns than interest on the periodic payments. Investing a lump-sum, or in making a gradual investment over a longer period is a decision you’ll have to face down the road. Along with the promises of quicker payments, and lower interests, there are always the underlying cons to selling. 

In selling, you will be selling off your future payments at a discount, and in return getting a fraction of the money that you would have received. There is always a risk of making poor investment options or having to use the allotted lump sum of cash you have received on costly purchases. These possibilities could hinder you from receiving potential settlement payments in the future. We aren’t looking to scare you, of course, just looking to be as open as we can!

Finding out how much your settlement may be worth is made easy with a structured settlement calculator! The calculator will allow you to get an idea of how much you will be losing monetarily by discounting your payments as well. We recommend searching on Google for the best settlement calculator. Don’t jump into the first factoring company that you find; we recommend shopping around for a factoring company that will work best for you. 

Before making any decisions, we recommend speaking to an advisor, or financial professional about any possible tax implications of selling and if this is the best option for you! There are 5 quick steps to consider before moving forward with the sale:

1. Decide how much cash you require – you can sell all, or portions of your structured settlement
2. Ask for a quote from the Factoring Companies you are interested in
3. Review the sales contract with your lawyer
4. Get court approval of the sale – this is generally required when selling your structured settlement – this may take up to 45-60 days to complete the court processing based on your location
5. Receive your money

When you’re shopping around for a buyer make sure that they are a trusted buyer who will advise you to work with your lawyer through the process, give a clear timeline for your payment, can make a competitive offer for the sale, and is open and transparent about any possible discounts and fees. The National Association of Settle Purchasers recommends an average rate of 9% up to 18% from the factoring companies.

I know what you’re thinking “Are there any tax implications for my structured settlement sale?” In most cases there are no tax implications for the sale. The money you receive from selling your settlement is untaxed as well, when you’re not paying taxes on your structured settlement. This applies for cases such as personal injury and illness, medical malpractice, worker’s compensation, or wrongful death. The Federal Internal Revenue Code states that structured settlement sales are also free from Federal and State Income taxes, as well as Alternative Minimum Tax (AMT), and tax on interest, dividends, or capital gains. Please keep in mind settlements involving defamation, mental anguish, or discrimination may be taxable.

Rather than selling your settlement there are always other options! For debt relief you can investigate credit counseling, loan consolidation, or debt management. Rather than selling your settlement you can looking into government benefits or selling assets to cover personal financial expenses. Most importantly, speaking with an advisor about additional services is always a great step in deciding if selling is the right option for you!