Four Questions You Need to Ask Before Selling a Structured Settlement

Get cash for your settlement

Do you receive annuity payments from a lottery winning, a lawsuit settlement, or a life insurance inheritance? Receiving a small payment of your larger balance each month is a nice way to pad your budget; however sometimes it makes more sense to sell your structured settlements to significantly improve your life. Some people find selling a structured settlement is beneficial as starting a business or getting a degree with the cash will generate more money than the annuity payments provided. Other people choose to sell their settlement to buy a house, get out of debt, or make an investment with higher returns to makes their lives more financially stable than getting a small payment each month provides.

Whatever your reasoning, if your are considering selling a structured settlement, you should ask the following four questions before finalizing the deal:

  1. How much cash will I get for selling a structured settlement?
    Companies interested in purchasing structured settlements are doing so to make a profit, you will not be able to sell it for the entire value of the settlement. Additionally, you might be subject to a surrender fee of 10% for selling before the terms of the structured settlement are complete. To get the highest value for your structured settlement, you should consult several companies to get a few quotes. Some structured settlement companies offer instant quotes online, with makes the process convenient.
  2. What options do I have for selling a structured settlement?
    You have several options for how much of your settlement you sell; you do not have to cash in your entire settlement. You have the option of just selling a portion of your payments, which allows you to make the investment that you want while reserving some payments for the future.
  3. What documents do I need to gather before I can sell my structured settlement?
    First, you will need to prove that the structured settlement you’re selling belongs to you. You can achieve this by providing the annuity contract to the company purchasing your annuity. If you do not have the contract, you can provide the original court agreement you were given when you initially entered into the structured settlement or a letter of updated benefits provided by the company who manages your structured settlement.

    Second, you will need to provide proof of residence for the state you live in. The easiest way to do this is by submitting a copy of your driver’s license or state issued ID.

  4. Do I have any restrictions in the sale of my structured settlement?
    You might face restrictions on selling a structured settlement from the state you reside in. At least 38 states have enacted some kind of regulation that restricts the selling of structured settlements. Some states do not allow it at all. There also may be restrictions on selling your settlement listed in your settlement’s contract. It’s a good idea to consult an attorney to understand the full legality of selling your structured settlement.
  5. Have you ever sold a structured settlement? Do you have any advice to share with people just starting the process? Please share your input in the comment section below.

Pros and Cons Sell Annuity Settlements For Cash

Selling an annuity settlement

Every year millions of Americans will receive structured settlement annuity payments. A few lucky winners will receive big paydays from the Mega Millions lottery jackpot, while others will settle for personal injury, wrongful death, or insurance claims.

By the end of 2013, there were more than 34 million individual deferred annuity contracts in place, adding up to $2.5 trillion. Some people will choose to sell an annuity for fast cash. So what are the structured settlement annuity benefits that stop others from selling?

Tax Incentives…

A structured settlement usually offers annual payments that are exempt from income taxes and even capital gains tax. And since most experts agree that tax rates will eventually rise, an income tax exemption will be the envy of one percenters everywhere.

Furthermore, continued eligibility for federal assistance programs is one of the biggest structured settlement annuity benefits. For Americans who depend on assistance programs, a structured settlement can disqualify them from programs they need to get by. Setting up a trust with annuity payments can avoid this issue.

So why do so many people choose to sell structured settlement payments? The most common answer: fast cash. Many people can’t afford to wait for money that is rightfully theirs.

The hard truth is that more than 40% of U.S. families spend more cash in a year than they make in income.

  • On average, Americans owe $12,000 in student loans, $8,000 on car loans, and about $70,000 on mortgage loans.
  • Most U.S. adults owe $3,761 of revolving credit each year.
  • In total, 64 million Americans (35% of the population) said they were unable to pay bills in 2014, with medical bills being the most common complaint.
  • According to The Rutter Group, 90% of accident victims use all the money from their claim within five years.

For many Americans, selling a structured settlement provides the cash they need to finally get out of a financial hole. For others, a cash payment can provide the upfront capital needed to finally buy their dream home. Most lenders require a cash down payment of up to 20% of the house price. And since the average home price in 2010 was more than $270,000, it’s easy to see why some Americans can’t wait for annual payments.

Ultimately, every American is in a totally unique situation. If you’re the recipient of a structured settlement annuity, research all your options before making any big financial decisions.