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Structured Settlements – Should You Sell
Yours?
by Charles Essmeier
In recent years, it has become more common for victims of accidental injury who
accept a settlement from the at-fault party to accept a structured settlement
instead of a lump-sum payment. With a structured settlement, the injured party
receives payments over an agreed-upon length of time – five years, ten years, or
even a lifetime, rather than receiving payment up front in a lump sum.
There are advantages to this for both parties. The injured party may require
constant medical care, and the regular payments of a structured settlement
guarantee that income will be available to cover the medical expenses. For the
paying party, the settlement can be paid by purchasing an annuity, which allows
an upfront payment to accrue interest, thereby producing a larger long-term
yield from a minimal investment. In many cases, a structured settlement is
viewed as a win-win situation for both parties.
There are restrictions on structured settlements that may not suit everyone.
Once you agree to accept a structured settlement, you cannot trade it back in
for a lump sum payment, nor may you use it for collateral for a loan. What if
you want to buy a home and pay cash? What if some other unexpected expense comes
up and you simply do not have the cash available? Under certain circumstances,
you may be able to sell your structured settlement to a third party.
There are companies that are interested in purchasing structured settlements for
investment purposes. Perhaps one or more of these companies has already
contacted you. They will agree to pay you a lump sum, in cash, in exchange for
you signing over your future annuity payments to them. Be aware that any party
that offers to buy your annuity is interested in doing so for investment
purposes. They wish to make money on the transaction, and for them, that profit
will be spread over the long time that it takes to receive all of the payments
that constitute the settlement. Once you combine the factors of time, interest,
inflation, and the buying party’s profit, you will find that the offer made to
you will seem quite small. The amount you receive will be an amount equal to the
present day value of the settlement, minus whatever sum the investors require
for their profit on the transaction.
You should also know that some states prohibit the sale of structured
settlements, that some insurance companies who handle the annuities prohibit
sales to a third party, and that you will probably need to go to court to
arrange the sale. In addition, there may be tax considerations involved in the
sale, and the taxes due on large sums of money are not insignificant. If you are
interested in selling your structured settlement, you will definitely want to
discuss the sale with an attorney and a tax advisor beforehand.
While structured settlements are designed to benefit those who receive them,
there are times when it may be desirable or necessary to sell them. If you are
considering selling your settlement, make sure that you weigh all of your
options carefully. Once you agree to sell, you cannot get it back.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.StructuredSettlementHelp.com/
and http://www.HomeEquityHelp.net/
This article is reprinted with permission from www.WritingCareer.com |
