When you are faced with a financial emergency, selling a structured settlement may seem like the only option. But before you make this decision, it is important to understand the implications of selling a structured settlement. This article will provide an overview of what a structured settlement is, how much it costs to sell one, and the legal and financial implications of doing so. A structured settlement is an agreement between an injured person and an insurance company or other entity that provides for regular payments over a period of time.
The lump sum you receive from the buyer, or the factoring company, can be as low as 50 percent of your total future payments, but it will typically range between 60 and 80 percent. Most of the cost of selling your settlement will be the discount rate, which will vary greatly from company to company. Quotations can range from 7% to 29%. Many companies are expected to offer a high discount rate on their initial quotes.
Do not accept the initial quote from any company. It is common practice to negotiate with the company representative to obtain a lower rate. We also recommend that you receive quotes from at least three companies and choose a company that offers a fair rate equal to or greater than 7%. If a company doesn't go below 10%, then keep buying.
When a person first accepts a structured settlement, they are forgoing an immediate cash payment in exchange for regular future payments. Future payments appear to be better because the total amount of payments (the payment) is greater than a current lump sum payment in cash. But the money of the future is worth less and less (due to inflation). The crucial number is the present value of the structured settlement.
This is the current amount of money needed to obtain the future flow of payments, taking into account inflation and other factors. Accepting a Structured Agreement eliminates control and flexibility. If a sudden financial need arises, the person cannot get an increased payment or sell the structure. People in these situations are at the mercy of companies (factoring companies) that use cash to buy structured settlements. For immediate cash, the injured person allows the factoring company to receive all future payments.
The transaction seems simple, but it is fraught with hidden costs and problems. The factoring company acquires the structured settlement at a price substantially below the present value, perhaps charging excessive fees and without disclosing the rates and terms of the transaction. People with traumatic brain injury who receive structured settlement payments can be easy prey for these factoring companies. A person with brain injury has the right to resolve their case, to accept a lump sum or a structured settlement payment. If they accept a structure, a person with a brain injury has the right to sell it later for cash right away. However, BEFORE AGREEING to sell a structured agreement, a person with a brain injury must be fully aware of the consequences of the decision. The person must know the terms of the purchase, the legal and financial impact.
It is strongly recommended that BEFORE you sell a structured agreement, you obtain legal representation and financial advice. Otherwise, it could cost you more than you think. The advice they'll hear ranges from “hell no” to “absolutely” when it comes to selling a structured settlement. It really depends on your case. But one thing is universal about selling a deal: you'll lose money every time. If the judge doesn't approve your structured settlement sale, this doesn't mean you can't sell your settlement payments in the future.
This legislation required individuals to seek court approval when selling their structured settlement payments, and it works in conjunction with state laws governing how these types of transactions will be completed. This only applies to the sale of structured settlement annuities; the sale of commercial annuities does not require court approval. Your lawyer or accountant can lend an extra layer to the proceedings, as they know your individual situation and can help ensure that the sale of your structured settlement annuity is in your best interest. However, it is still possible for residents of these states to sell their structured settlements to a financing company and for that transaction to take place under the laws. Selling your structured settlement can be beneficial in certain situations; however, it's important to understand all aspects before making this decision. Make sure you understand all legal and financial implications before agreeing to sell your structured settlement.
