When you win a settlement in a lawsuit, hit the lottery jackpot, or otherwise come into a large sum of money, you usually have two choices: take all of the money at once in a lump sum or opt for a structured settlement that makes a set amount of payments over time. For many reasons, structured settlements are a common and popular choice. But what happens if you choose a structured settlement, then end up in a situation where you can't wait for the money? In that case, you may decide to look into a structured settlement payout. Essentially, this is when you sell your structured settlement to another entity for a lump sum payment. Here's what you need to know before you decide to go this route.
How Much Will You Sell?
It's common for people considering a structured settlement payout to believe that they have to sell the entire structured settlement, or none at all. However, this is not the case. Many companies that buy structured settlements offer the opportunity for you to sell only part of your structured settlement agreement to them. That means that you could end up with a large lump sum, and still have money coming to you on a regular basis.
For many people, this is an ideal solution. The cash up front can help you out of a temporary financial jam or free up the funds for you to make a large purchase, but selling only part of your settlement allows you to retain the security of knowing that funds are coming in on a regular basis. However, if you have a smaller settlement, if you're coming to the end of your settlement payments, or if you need a very large amount of cash quickly, you may be better off selling the whole thing. You should carefully evaluate your cash needs and calculate what's left of your settlement to determine whether you should sell all or part of it.
How Much Will You Get?
Obviously, you won't get the full value of your structured settlement when you sell it for cash. The companies that buy these payments hope to make a profit, and you'll pay a bit for the convenience of having immediate access to your money instead of having to wait. The question is how much money you're willing to pay for that convenience, and how much money you'll get from selling all or part of that settlement.
The answer depends on the discount rate offered by the buyout company. If the sum total of your structured settlement payments is $120,000, and the discount rate is 5%, then you'll receive $94,600 if you sell. On the other hand, if the discount rate is 20%, you'll receive only $52,500. Discount rates typically fall between 8% and 22%. It's a wise idea to shop around for the lowest discount rate that you can find in order to get the most money back for your structured settlement.
What Are The Restrictions On Structured Settlement Payouts?
Selling a structured settlement comes with some restrictions in most states. Most commonly, you'll have to appear in court and have a judge approve the sale of your structured settlement. Not all structured settlement payout agreements are approved. In New York, for example, there have been several cases where judges have determined that the payout was not in the best interest of the structured settlement recipient, usually because the recipient failed to understand the consequences of the advance payout or failed to demonstrate a need for the advance payout. There have also been cases where the judge determined that the terms of the cash advance payout were not fair and reasonable.
You don't want to go through the time and effort of a court hearing only to have the payout denied by a judge, so it's important that you can demonstrate a legitimate need for the advance, and that you know and understand the consequences of the advance. For example, structured settlements are typically set up to be tax free, but you'll face some tax consequences when you sell your structured settlement payouts. Finding out what these consequences will be and coming up with a plan to deal with them can go a long way toward getting your payout approved.
For many people, a structured settlement payout is a financial lifesaver. Planning ahead by determining how much you want to sell, finding the best discount rate, and understanding the restrictions and requirements for having a structured settlement approved will ensure that you get your payout and get the most use out of it. For more information, visit a website like http://mylumpsum.com.
Share18 March 2015
When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.