In workers’ compensation claims and other cases, plaintiffs receive a settlement offer, which is usually a lump sum payment.
However, another type of offer, known as a structured settlement, could prove more beneficial because it guarantees the injured party a long-term income in the form of regular payments.
Yet, there are times when you need to get your hands on immediate cash. In times like this, one option would be to resell your structured settlement.
This how-to guide details everything you need to know about the process from start to finish. This way, you can make the most informed decision regarding the sale of your structured settlement payment.
- Is It Possible to Resell Structured Settlements?
- What Is the Value of Structured Settlements?
- Things to Consider When Reselling Structured Settlements
- Where to Resell Structured Settlements
- What You’ll Need to Resell Structured Settlements
- How to Sell Structured Settlements: Step-by-Step Instructions
- Can You Make Money Flipping Structured Settlements?
- Frequently Asked Questions
- Similar Tutorials to Check Out
- Wrapping Up
Is It Possible to Resell Structured Settlements?
Yes, it’s possible to sell structured settlement payments. Selling them can provide you with quick cash if you need to close a deal on a house or pay off tuition loans, but the annuity payments from your settlement case can’t cover these expenses.
However, this type of transaction requires finding a reputable buyer. It also requires court approval to ensure that you have a clear financial reason for selling your settlement.
What Kinds of Structured Settlements Sell Well?
Structured settlements fall into two categories: Life-Contingent and Guaranteed Payment. Both types are awarded for wrongful death, personal injury, or workers’ compensation.
The former is harder to sell because it ends at the time of your passing. This means that your beneficiary won’t be able to sell this type because of the terms of the structured settlement agreement.
Alternatively, Guaranteed Payment settlements do pass on to your beneficiaries because they’re designed to pay out for a fixed timeframe. This makes them easier to transfer.
The cause of the settlement can also determine if they’re easy to sell or not. For example, workers’ compensation settlements don’t sell as well because they’re more complex and limited by strict federal and state laws.
On the other hand, personal injury settlement transfers aren’t as complicated, making them easier and less of a hassle to sell.
What Is the Value of Structured Settlements?
Think of the monetary value of a structured settlement as an investment.
The initial amount increases over time thanks to interest earned based on various changes in the market index. In other words, you’ll get more money in the long run than if you were to sell it.
Another way this type of settlement could be valuable is that it provides long-term income. Not only is it a steady form of periodic payments, but it’s also tax-free, which can bring the injured party and their family some peace of mind.
Do Structured Settlements Lose Value Over Time?
According to a clever financial trick known as interest gains on annuities, your structured settlement is likely to increase, not the other way around.
This means that, over time, you’ll get more than if you had received an initial cash settlement. You’ll also almost certainly make more than if you sell your structured settlement for a lump sum.
Things to Consider When Reselling Structured Settlements
Below are a few things you should consider to help you prepare for the sale of your structured settlement.
Before deciding to sell or not, you need to understand the three selling options:
- Full sale: if you sell your entire settlement, you’ll acquire the cash up-front with no future payments to follow.
- Partial sale: a partial sale means you sell your payments for a specific amount of time. After that, you’ll continue receiving payments as before.
- Percentage of monthly payments: you can sell whatever percentage of monthly payments you decide on. For example, you can choose to sell 50% of each payment for the next five years. Once that time ends, you’ll receive payments as usual once again.
Current Financial Needs
Do a thorough assessment of your current financial situation. Are you planning to make a considerable purchase like buying a house, financing a college education, or paying medical bills?
If yes, then calculate approximately how much money you need. Having a rough estimate can help you decide whether you’d like to sell all or only part of your structured settlement.
Future Financial Security
The lump sum you’ll receive for the sale will typically be considerably less than the total amount of any future payments you would have received.
So, before you give up a fixed stream of future income, it’s important to speak to a trusted family member or consult with a financial advisor. They can help you weigh your immediate financial needs against your future stability.
Understanding the discount rate of your buyout is crucial to getting the best possible price for your settlement.
A discount rate is an annual return that the factoring company requires to make it worth offering you money up-front to buy your settlement.
Buyers generally calculate their discount rates based on what they expect to make on future interest rates on their structured settlement payments. This means that the higher the discount rate, the less money you’ll receive for your settlement.
Most companies use a discount rate of around 9% with some using discount rates of as high as 18%, sometimes even higher.
Depending on the type of your structured settlement and how the deal is set up, you’ll end up having to pay taxes on the lump sum you receive from the sale. To understand how selling the settlement can impact your taxes, talk to a tax professional.
Where to Resell Structured Settlements
Currently, you can only sell structured settlements to factoring companies.
These businesses first emerged in the 1990s and mainly worked in the lottery industry. They worked by buying future structured settlement payments from lottery winners at a discount rate.
Today, these companies offer a similar service to all types of settlement owners looking to gain quick access to their funds.
Once the sale is completed, a factoring company could be contacted by individual investors or businesses wishing to buy these settlements. These are known in the financial world as the secondary market.
What You’ll Need to Resell Structured Settlements
Here are the documents you need to prepare for the sale of your structured settlement:
- Two forms of identification: could a state-issued ID card, social security, card, valid driver’s license, or birth certificate
- Copy of the original structured settlement contract: contains details about the court settlement
- Completed sale application: provides information about the sale and serves as an agreement to resell your structured settlement
- A release agreement or disclosure statement: protects both parties from potential liability
How to Sell Structured Settlements: Step-by-Step Instructions
Once you’ve made up your mind about selling, here’s how you can get started:
Step 1: Decide Why You Want to Sell
A judge could rule that the sale isn’t in your best interest if the reason for selling isn’t serious. For example, going on a Mediterranean cruise isn’t a necessity as opposed to paying off college debt or medical bills.
Meet the attorney from your settlement case and ask them what they think about selling. If they approve, talk with them about your reasons and whether you’d prefer to sell all or a portion of the settlement.
Step 2: Choose a Reputable Purchasing Company
An honest and reputable company should offer a fair deal and present you with several offers. It should also be transparent about its valuation process and provide you with access to how it determines the value of the resale price.
So, do your due diligence when choosing a buyer. Take the time to shop around and compare quotes.
The following questions can also help you decide on a suitable buyer:
- How long has the company been in business?
- Does the company have any industry certifications or accreditations?
- Are there any complaints filed against the company?
- Does the company offer a no-obligation quote?
- What type of customer service does the company provide?
- What are previous customers saying about the company?
Step 3: Review the Contract with Your Attorney
After obtaining multiple quotes from several companies, talk with your attorney. They’ll check if the sale is legal and help you determine whether you’re getting the best value for your settlement.
They’ll also highlight all the pertinent information like how much you’ll receive from the sale and how soon you can get your hands on your funds.
Step 4: Wait for Your Court Date
Once you find the best offer and sign the contract, the buyer will arrange a court date. Getting a judge to approve the sale takes between 1–2 months.
Based on the factoring company’s policies and state laws, you could be required to attend the court hearing. Other companies rely on in-house attorneys to represent the seller.
If you need the cash sooner than that, talk with the purchasing company. Many of them provide sellers with a small cash advance.
Step 5: Notarize the Transfer Agreement
After getting a judge’s approval, the factoring company will send the structured settlement transfer documents, which you need to sign and notarize.
Look for a local notary service near you or hire a remote service to have your documents notarized online. Make sure the buyer approves of using a remote notary service as opposed to meeting with a notary provider face-to-face.
Can You Make Money Flipping Structured Settlements?
Yes, you can cash it out. You can do this by selling part or all of any future payments in exchange for a lump sum of cash right now.
Remember that the amount of cash you receive will be less than the total value of your scheduled payments.
What Is a Structured Settlements Resale Business?
Purchasing companies, also known as factoring companies, serve individuals who wish to sell their structured settlement payments.
These companies offer settlement owners multiple offers. Then, the owners decide whether they wish to receive lump sums of cash in exchange for the rights to future settlement payments. Another option is to receive portions of prospective payments.
Is Reselling Structured Settlements a Good Way to Make Money?
If you need immediate funds, then selling a structured settlement can be a great way to make money now.
Make sure you’re not selling it at a huge loss. Calculate how much you’ll make for it today and how much you could be making from the settlement in 5 or 10 years.
If the difference is acceptable and you have a compelling reason to sell, then, by all means, make the sale. Bear in mind that it could mean giving up a guaranteed and stable source of income in the future.
It also means the settlement money won’t have time to gain interest, which means you’re going to lose money on the sale unless you invest it. With the help of a smart investment advisor, you could even have it increase beyond what you could have made over the years.
Otherwise, it’s better to keep the settlement as it is. After all, why mess with guaranteed, tax-free payments that increase over time?
Frequently Asked Questions
Who Will Buy My Structured Settlement?
Structured settlement buyers are mainly factoring, or purchasing, companies. Before deciding on the most suitable one, you need to first understand where you stand financially.
You also must research all potential buyers to ensure they’re professional, reliable, and meet certain standards that set them apart from the rest.
How Long Does it Take to Get Money from a Structured Settlement?
It takes about 45 and 90 days. Some states give you this time to make up your mind once and for all about the sale. Other states use it to receive a professional assessment of the sale via a third party, which is usually a structured settlement broker or financial advisor.
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To resell a structured settlement means you’re in desperate need of money. The sale can help pay off a staggering debt, medical bills, or college loans.
Look for an experienced purchasing company that offers a low discount rate. Have your lawyer look over the transfer agreement before signing it. Then, if everything goes according to plan, expect to get a lump sum within a couple of months.
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