Selling a Structured Settlement
Below is a MRR and PLR article in category Finance -> subcategory Other.
Selling a Structured Settlement
With numerous websites, ads, legal terms, and complexities surrounding structured settlements, finding clear and straightforward information can be challenging. Whether you've already received a structured settlement or want to understand them better, this guide will help clarify the details.
Understanding Structured Settlements
A structured settlement involves receiving a series of guaranteed payments (annuities) over time, often resulting from an injury settlement or a similar situation where a substantial sum is involved. This is an alternative to accepting a lump sum upfront. These settlements are tailored to cover both current and future expenses, providing financial security through fixed income over a set period.
How It Works
For example, Melissa was injured in a car accident and can’t work for a year. With medical bills mounting, a structured settlement allows her to pay a $25,000 medical bill immediately and provides another lump sum for future surgery costs. Additionally, monthly payments match her salary during her recovery, and further payments cover childcare expenses. Once Melissa returns to work, these payments may cease or decrease.
Types of Structured Settlements
1. Designated Period/Period Certain Annuities: Payments are made monthly, quarterly, or annually for a set period. If you pass away, remaining payments go to your beneficiary.
2. Life Annuity: Regular payments are made for a guaranteed period based on life expectancy or until death, with remaining payments going to your beneficiary if you pass early.
3. Temporary Life Annuity: Payments are made for a designated period if you’re alive, ending upon death without beneficiary provisions.
4. Life Contingent Lump Sum: A lump sum is received if you’re alive on the due date; otherwise, no payment is made to beneficiaries.
5. Lump Sum: Set to receive a lump sum on a future date; if deceased, the beneficiary receives it.
Important Details
Structured settlements offer flexibility during setup, but once agreed upon, terms cannot be altered. Consult with an attorney and a trusted broker to determine the best payment schedule. Consider multiple scenarios to fully understand your options.
Inadequate Payments
Life can disrupt well-planned settlements, potentially leading to unexpected expenses. If you find yourself needing more cash, selling part or all of your structured settlement to a third party is an option.
Deciding to Sell
Evaluate why you need the money. Immediate medical needs or educational expenses may justify selling. Be aware you’ll receive less than the total future amount due to present-day valuation and further discounts for transaction costs. Shop around for the best deal.
Court Oversight
To protect sellers, a 2002 federal law mandates court approval for structured settlement sales, ensuring fair treatment and clarifying that annuity owners won't face tax consequences due to the sale.
Selling Options
- Full Amount: Sell all future payments for a lump sum.
- Part of the Payments: Sell specific payments at their present-day value.
- Percentages: Sell a percentage of each payment, retaining the rest.
Pitfalls of Selling
- Shady Brokers: Be cautious of brokers who make high promises but change terms later. Ensure your broker has experience and is part of the Better Business Bureau.
- Financial Loss: Selling results in receiving less than the total over time, reducing future security.
- Time Consumption: Court proceedings can delay access to funds, typically taking 4-12 weeks.
Benefits of Selling
Selling offers immediate access to funds, providing flexibility for urgent expenses and peace of mind when faced with costs that can’t be deferred.
This guide aims to provide a clearer understanding of structured settlements and the selling process, helping you make informed financial decisions.
You can find the original non-AI version of this article here: Selling a Structured Settlement.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.