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  • Updated: August 3, 2023
  • This page features 7 Cited Research Articles
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Key Takeaways

  • Selling a structured settlement involves legal complexities. Consult with professionals, familiarize yourself with your state’s laws and understand that court approval may be necessary.
  • Engaging trusted advisors to guide you through the process can help you make informed decisions and protect yourself against unethical buyers.
  • Select a reputable buyer by researching companies, obtaining multiple quotes, and checking for accreditations. This process will help ensure you receive a fair deal for your structured settlement.
  • After the sale, it’s important to manage the lump sum wisely to avoid financial pitfalls.

Understanding the Structured Settlement Selling Process

If you’re receiving payments from a structured settlement, you may contemplate the benefits of receiving a large sum of money all at once in exchange for your future payment stream.

Perhaps you have a significant expense to cover, or you wish to make a substantial investment for your future. Regardless of your motivation, selling your structured settlement may be a suitable option. However, it’s essential to comprehend the process and potential outcomes before making a decision.

Before delving into the sales process, it's important to understand that selling your structured settlement is not the same as obtaining a structured settlement loan. The latter is a misnomer as structured settlements cannot be used as collateral for loans under current laws.

Selling a structured settlement isn’t as straightforward as finding a buyer and exchanging your future payments for a lump sum. You’ll need to consider legal aspects, evaluate your financial situation and strategize to secure the best deal.

To help you understand how to sell your settlement, we’ve divided the process into a few key stages:

  1. Evaluating Your Finances
  2. Understanding the Legal Aspects
  3. Selecting the Right Buyer
  4. Negotiating the Sale
  5. Finalizing the Sale
  6. Managing Your Money

By understanding these steps, you’ll be better prepared to make a decision that’s good for your finances, both now and in the future.

Before you consider selling your structured settlement, thoroughly assess your financial situation. This step is key, as it allows you to identify your immediate financial needs and long-term financial objectives. This information can help you decide if selling your structured settlement is the best choice for you.

Pro Tip
In 2021, when asked about dealing with a potential $400 unexpected expense, 68% of adults indicated they would handle it using only cash, savings or a credit card that they'd pay off with the next bill. The remaining respondents revealed they would resort to borrowing money or selling something — or confessed they wouldn't be able to manage the expense at all.

Source: The Federal Reserve

Evaluate Your Needs and Goals

The first critical consideration is your motivation for selling your structured settlement payments. Are you facing a large, unexpected expense, such as a medical bill or a home repair? Or perhaps you’re planning to purchase a home or finance a college education.

Understanding your needs and objectives can guide you in making an informed decision. Dedicate some time to giving thorough consideration to your current situation and future plans.

Decide How Much Money You Need

Once you know why you need the funds, you can begin to calculate the amount required. Are you trying to pay a $10,000 hospital bill or save up a $200,000 down payment for a house? The amount you need will inform your decision on whether to sell part or all of your structured settlement.

Bear in mind, the lump sum you receive will typically be less than the total amount of your future structured settlement payments.

Weigh the Pros and Cons

Selling your structured settlement has its advantages and disadvantages. Immediate access to a substantial amount of money can be helpful, but you’ll also be giving up a steady stream of income in the future.

Moreover, the lump sum you’re offered will usually be less than the total of your future payments.

Consider these factors carefully. Consult with financial advisors or trusted family members before making a decision. Ensure you’ve contemplated both your immediate needs and your future financial stability.

Step 2: Legal Considerations

When you decide to sell your structured settlement, you’re stepping into a world filled with legal terminology, intricate rules and court procedures. Understanding the legalities is vital to ensure a smooth sale and a successful outcome.

Consult a Financial Advisor or Lawyer

First things first, it’s advisable to seek expert advice. Financial advisors or lawyers can help guide you through the selling process.

They can break down the complicated details, help you understand the implications of your decisions and advise you on the best course of action.

Understand State Laws and Regulations

In most states, a court must approve the sale of a structured settlement according to the Structured Settlement Protection Act. The court’s role is to ensure the sale is in your best interest and that you’re not being exploited.

While this may seem daunting, remember it’s a measure designed to protect your financial interests. The process may take some time, so factor this into your plans.

Prepare for Court Approval and Discussion with the Judge

The court approval process involves explaining to a judge why you need to sell your settlement and how it will benefit you financially.

It’s important to prepare in advance and articulate clearly and convincingly why selling your structured settlement is beneficial to you. Be prepared to discuss your financial plan and how the lump sum will help you achieve your goals.

If you don’t need to sell your entire structured settlement, consider selling just a portion of it. This option allows you to receive some cash now while retaining some of your future regular payments.

Having a plan and being able to discuss it clearly can help you present a compelling case.

Step 3: Find a Reliable Buyer

Once you’ve made the choice to sell your structured settlement, it’s time to find the right buyer. But remember, not all buyers are the same.

A reliable and honest buyer for your structured settlement should have a good reputation, offer a fair deal and have the right qualifications.

Find Trustworthy Companies

Your first task is to create a list of possible buyers. But how can you tell if a company is trustworthy? Research. Look at what other people have said about the company online. Check out their past performance.

Despite more stringent regulations since the Structured Settlement Act of 2002, issues can still arise.

Questions to ask while researching purchasing companies include:

  • How long has the company been in business? A company with a long history in the industry is generally a positive sign.
  • What do other customers say about the company? Look for online reviews or testimonials to get a sense of how previous customers feel about their experiences.
  • Are there any complaints filed against the company? Check with the Better Business Bureau (BBB) or your state’s Attorney General office to see if complaints have been filed.
  • Does the company have any industry accreditations or certifications? Look for professional credentials that indicate the company meets industry standards and best practices.
  • What kind of customer service does the company provide? You want a company that’s responsive, helpful and willing to answer all your questions.
  • How does the company determine the value of your structured settlement? The company should be transparent about its valuation process.
  • Does the company provide a no-obligation quote? Reputable companies should provide you with a quote without requiring a commitment from you.

Obtain Quotes from Different Companies

Once you have a list of potential buyers, it’s time to start getting quotes. Why get more than one quote? Much like when you’re shopping for a car or a house, getting multiple quotes ensures you secure the best deal.

Each company will give a different price for your structured settlement, so comparing offers can help you find the best one.

And remember, this is a negotiation, so you can use these quotes to get a better deal.

Check for Recognitions and Certifications

Finally, check whether the company has any special recognitions or certifications. These are indicators of credibility in the industry — they demonstrate that the company meets certain standards and adheres to best practices.

Be wary of companies without any industry recognition. You want to ensure you’re working with a professional and honest buyer.

Interested in selling all or part of your structured settlement payments?

Step: 4 Negotiate the Sale

You’ve checked your financial situation, learned about the legal side and found a potential buyer. Now, it’s time to get ready to work out a deal.

Negotiating is a conversation where you and the buyer work together to agree on something that works for both of you.

Understand How Buyers Determine Price

Before you can negotiate effectively, you need to understand how buyers decide on a price for structured settlements. They consider factors such as the total value of your settlement, the duration of the payments and the discount rate they apply.

This discount rate is how purchasing companies profit and is one of the main aspects that can be negotiated. Understanding these factors can enhance your negotiation skills.

Prepare To Work Out a Deal

Be ready to negotiate when selling your structured settlement. Remember how much money you need right now, but also remember how much your settlement is worth in total.

Use the quotes you got from different companies to your advantage. If another company offered you more money, don’t be afraid to mention it. Negotiation is a two-way process, and your input can significantly influence the final offer.

Look Over the Contract Carefully

Finally, before you agree to the sale, read the contract carefully. This is the agreement with the buyer that explains how much money you’ll receive and the terms of the sale.

Ensure you understand all the terms and take your time to read through the document. If you’re uncertain about anything in the contract, ask your attorney or financial advisor for help. It’s essential to understand and agree with everything in the contract before you sign it.

Step 5: Finalize the Sale

You’ve navigated through learning, checking, searching, and negotiating. Now, it’s time for the last stage: completing the sale.

Finalize the Paperwork

Much like when you buy a house or a car, you’ll need to fill out certain paperwork when you sell your structured settlement. This might include a disclosure statement that gives information about the sale, a sales agreement or other legal papers.

The buyer should help you with this process and make sure you understand all the paperwork.

If there’s something you don’t understand, don’t hesitate to ask your financial advisor or attorney. Remember, this step is important because it makes the sale official. Take your time and be thorough.

Consider Tax Implications

Did you know that selling your structured settlement can affect your taxes? Depending on the nature of your settlement and how the sale is structured, you might have to pay taxes on the money you receive.

Consulting a tax professional can help you understand how selling your settlement might affect your taxes.

Get Your Money

Finally, it’s time for the part you’ve been working towards: receiving your money. Once the court approves the sale and all the paperwork is done, the buyer will give you the sum of money you agreed upon.

This is when the sale is considered complete. Usually it takes between 45 and 90 days from the time you agree to sell until the time you get your money.

Remember, this is just an average and it could take more or less time depending on your situation. Always ask your buyer to give you an idea of how long it will take.

Step 6: Manage Your Money

Once you’ve successfully sold your structured settlement, you enter a new phase: managing the money you’ve received.

This isn’t just about spending the money, but planning how to use it wisely, making smart choices and getting good advice.

Create a Financial Plan

A survey by Charles Schwab found that people with a written financial plan are twice as likely to achieve their financial goals. Therefore, it’s important to have a financial plan in place when managing your lump sum.

Create a plan that shows where your money should go to best meet your needs and desires. You might need money right away for things like buying a car, paying off debts or covering school costs. But don’t forget about your long-term goals as well, like saving for college, buying a house or even preparing for retirement.

Having a plan will help you make smart decisions and keep you from spending all your money impulsively.

Seek Professional Advice

Managing a large sum of money can be a daunting task. This is where a financial advisor can be of great assistance. These experts are well-versed in money management. They can help you understand your options, make informed decisions about investing, and steer you away from poor financial choices.

Be Cautious of Predatory Practices

Unfortunately, not everyone will have your best interests at heart. Some individuals might attempt to deceive you and take your money. This could happen through scams, unfair deals, or investments that promise more than they can deliver. It’s important to stay vigilant and cautious.

The Federal Trade Commission estimates that consumers lost over $8.8 billion to scams in 2022. As such, it’s important to stay alert and cautious to protect your money from bad deals and scams.

Always check everything twice before making significant financial decisions and say no if something doesn’t feel right. Remember, it’s your money, and it’s your right to keep it safe.

Interested in selling all or part of your structured settlement payments?

Frequently Asked Question About Selling a Structured Settlement

Why would someone want to sell their structured settlement?

People might want to sell their structured settlements if they need a large sum of money immediately for things like paying off debt, buying a house, covering medical expenses or starting a business.

Is selling a structured settlement a good idea?

It depends on the individual’s financial situation. Selling a structured settlement can provide a large lump sum immediately, which can be beneficial in certain circumstances. However, it also means giving up regular, guaranteed payments in the future.

How is the value of my structured settlement determined?

The value of a structured settlement is determined by several factors, including the total amount of future payments, the timing of those payments and current interest rates. Buyers will typically present a discounted cash value offer, which is less than the total of the payments.

What should I consider before selling my structured settlement?

You should evaluate your current financial needs and future financial security. Selling a structured settlement can provide immediate funds, but you’ll be giving up future payments. It’s also important to consider legal requirements, potential tax implications and the reliability of the buyer.

How long does it take to sell a structured settlement?

On average, it can take between 45 and 90 days from the time you agree to sell to receive your lump sum. This can vary based on your specific circumstances and the efficiency of the buying company’s processes.

7 Cited Research Articles

  1. Annuity.org. (2023, May 13). How To Sell Your Annuity Payments. Retrieved from https://www.annuity.org/selling-payments/process
  2. AttorneyHelp.org. ‌(2023). How To Know if an Annuity No Longer Fits Your Needs. Retrieved from https://www.attorneyhelp.org/guide/how-to-know-if-an-annuity-no-longer-fits-your-needs-149.shtml
  3. D.C. Law Library. (2023). Chapter 1. Structured Settlements Protection. Retrieved from https://code.dccouncil.gov/us/dc/council/code/titles/28A/chapters/1
  4. National Association of Settlement Purchasers. (2022). How To Protect Yourself in the Secondary Market. Retrieved from https://www.nasp-usa.com/protect_yourself.php
  5. National Association of Settlement Purchasers. (2022). FAQs About Secondary Market Transfers. Retrieved from https://www.nasp-usa.com/secondary_market_faq.php
  6. Consumersadvocate.org. ‌(2018, February 20). Top 10 Structured Settlements of 2023. Retrieved from https://www.consumersadvocate.org/structured-settlements
  7. U‌.S. Internal Revenue Service. (n.d.). Excise Tax On Structured Settlement Factoring Transactions Audit Technique. Retrieved from https://www.irs.gov/pub/irs-mssp/structured_settlement_factoring.pdf