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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.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of
Retro Marketing, a firm devoted to informational Websites, including
StructuredSettlementHelp.com, a site devoted to structured
settlements and HomeEquityHelp.net, a site devoted to home
equity loan information. |