One of the ways that you can receive compensation for an injury committed against you is to agree to a structured settlement. Generally, when you are injured, you can sue a company or an individual (often their insurance company actually does the paying out) in order to receive compensation for a wrong committed against you. In many cases, rather than risk a huge judgment, or to avoid months in court, an insurance company will offer to settle with you.
However, instead of paying the amount due to you at once, a structured settlement will be offered in which you receive periodic payments for a set amount of time until the amount is discharged. In most cases, you also receive interest, creating the possibility that you end up with even more over time. For some, though, the monthly or quarterly payments may not offer the opportunities wanted. In such cases, it is possible to sell structured settlements.
Why Some People Sell Structured Settlements
Selling a structured settlement can be tempting because it allows the seller to receive a lump sum. The seller signs the right to receive regular payments over to the buyer, and the buyer provides a lump sum that the seller can use immediately. Some of the purposes that people state when selling structured settlements include:
- Paying off or consolidating debt.
- Buying a home.
- Paying for an education.
- Investing the lump sum.
- Buying some other expensive item.
A lump sum can permit someone to do things immediately that a limited monthly payment may not provide opportunities for. For those who are impatient for their money, it is possible to sell structured settlements. However, you should realize that if you sell your structured settlement, the lump sum you get will probably be much less than the total value of your settlement.
Disadvantages to Selling Structured Settlements
The main advantage when you sell structured settlements is that a large sum of money becomes available immediately. However, you are giving up a large portion of your settlement when you sign over the right to receive regular payments, and you might be giving up a regular and reliable source of income. You are also giving up the possibility of interest earnings on the money that is yet to be paid to you. In the long run, you can end up with much more money if you keep your structured settlement rather than selling it.
It is also worth noting that there are other issues that come when you sell structured settlements. Fees are charged with the sale of structured settlements. Additionally, there are legal considerations. Many states require court approval before you sell structured settlements. You will have to go through a legal process – and that means more fees. There may also be tax considerations associated with selling your structured settlement, so you will need to consult a professional about those issues. After navigating all of these processes, you might find that the lump sum you end up is much less than you had expected.