News and Tips on structured settlement transfers.


Structured Settlements: To Sell or Not to Sell, That is the Question

When talking about selling structured settlements it can be a confusing and complex topic. Especially when so many companies are not accurately communicating information. The concept itself is simple, but the choices and legal process surrounding the sale can seem so complicated that your left with your head spinning. So when you have a structured settlement do you sell or not sell? That is the question (for today).

Some times the tax properties of a structured settlement are enough reason to not sell all on their own. All such payments are completely exempt from state and federal income taxation, while if you sell for a lump sum you’ll be paying Uncle Sam. Knowing you’ll receive an income at regular intervals for often a large length of time completely tax free sounds like a rather good reason to hold off on selling.

Then again, one of the most misunderstood concepts of those with settlements to sell is the idea of “present value of future money”. I have previously gone into detail on this concept, so I’ll just offer a brief summary here. A dollar today is, most likely, not going to be worth as much as a dollar will be five years from now. And when you are talking about set settlement payments lasting a decade or longer that value becomes even less. So then it does make sense to get the higher value from your settlement now even if it will cost you a portion right?

But then again, we’ve all heard stories about people who “hit the jackpot” with a single big payment, only to end up losing it due to mismanagement. The finance world calls it dissipating those funds. This is often cited as the single most important benefit to staying with a structured settlement payment arrangement. The idea being that since these funds are free of market volatility, which as we’ve recently seen can be quite brutal, those people who often have a reduced ability to generate income but are collecting on structured settlements have built in spend-thrift protection. So now we’re back to not selling?

Wait a minute. That sounds good in a perfect world, but in this world things happen. When someone is facing foreclosure on a home or are in need of some medical treatment that isn’t covered by insurance they should let the house go or live with sickness just to protect future income? That sounds senseless if you have the ability to ease your life by selling your settlement. Okay. So now we’ve gone back to selling our structured settlement. Is your head spinning yet? Because mine sure is!

If we are going to sell, at least all we have to do is pick the company from whatever “get cash now” commercial we see next on TV. How different can these companies be anyway? The answer is: Very different. If you are going to sell, the single most important thing to do is shop around. The ability to get a lump some of money does come at a cost. There is no question that based on industry averages people will typically lose somewhere between 8 percent and 18 percent of the present value of their remaining payments. But what does the difference of 8% to 18% really mean? Say you shopped around and found that 8% agreement and received $125,000. If you had taken another offer at 18% you only would be receiving $85,000. That’s a $40,000 difference just because you put in some phone time to shop around. And when you consider that some of the companies that spend the most on advertising offer the most disadvantageous deals to their clients.. You could possibly end up with a company that you’ve never heard of if you want the most out of your money.

So are we selling or not? Well, the answer to that question won’t be found in any article online, in a magazine, or some “I know everything about settlements” do it yourself book. I’ve just shown how that choice can waffle back and forth based on many factors and really- the decision is whatever works best for you.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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