Selling structured settlement payments
There are lots of principled reasons individuals think of selling structured settlement payments for a lump sum. From the starters, you can negotiate to receive part of the compensation and the rest through a structured settlement. You might need a part of the benefit in a lump sum to cover any pending bills. It rules out the need to sell your structured settlement payments in a lump sum at a future date. The rest of the compensation received. This is through a negotiated, customized schedule of periodic payments. At all costs, avoid selling your regular payout in a secondary market.
Structures settlements on payments once agreed upon by the plaintiff and the defendant are rigid. The life insurance company that underwrites the plan should hold to it as stipulated by the law. The company must follow the Internal Revenue Code 130 that specifies the same. Besides, the Code, in part, does not allow any acceleration or modification of the structured settlement payments. But options exist for the annuitants to sell or transfer the right to the future periodic payments. The annuitant receives a lump sum amount of cash.
The right to transfer of future periodic payments is quite a process. It starts by finding a buyer known as a structured settlement factoring company. The factoring company buys part or all your structured settlement payments right. The transaction must follow all legal requirements and under IRC set regulations.
Why Sell Your Structured Settlement for Cash?
With such a hefty infusion of money, such as a settlement, you can get out of a financial bind. The money can change your life for the better. But the structured settlement is a slow trickle of cash. With such petty cash coming in, reaching more prominent and better goals can be painful. It is against your interest to receive the compensation in a structured settlement.
Selling structured settlement payments for a lump sum paves the way to real-life upgrade. You can buy a new home or invest in real estate. But again, there are a few “cons” that often creep up when you sell your structured settlements. The federal government in advocating for a structured settlement had in mind the need for periodic income to the affected party. It may not make sense to sell the right at all.
Whether to sell or keep the periodic payouts boils down to individual financial circumstances. To help beneficiaries of a structured settlement, financial experts work toward the right course of action.
A factoring transaction is the exchange of structured settlement payments right for an instant payout. For example, your structured settlement periodic payout stream for 20 years for a one discounted rate now.
A sale of structured settlement payments right, or a transfer requires the approval of a judge. Under the local state laws, structured settlement falls under the protection Act—IRC 5891.
For example, a Tennessee Chancery Court issued an order barring a Payee from transferring a workers’ compensation plan. According to Judge William E. Lantrip, the periodic payments under a structured settlement agreement could not be sold. The decision was within the Tennessee Structured Settlement Protection Act, Tenn. Code.
How to Sell Structured Settlements for Cash?
Below is a detailed step-by-step process of selling structured settlement payments for cash now.
To sell annuities, you need a suitable buyer, lawyer, and professional financial advisor. The process includes finding an appropriate factoring company, researching purchasing companies, comparing offers, and ultimately making a sale. In the end, you will need court approval allowing the transfer to complete.
The selling process for structured settlement annuities is simple. But, before you embark on the idea, takes a good look at your financial situation. Decide if you genuinely need to transfer the right to the structured settlement for money immediately.
If your answer to sell is yes, be informed, prepared, and in control of the transfer transaction. As you prepare, know the process differs from the sale of commercial annuities. Start by understanding the differences between annuities and structured settlements.
A step-by-step process of selling structured settlement payments
Step 1: Do Your Homework and Research Buyers
A simple internet search is a good starting point. Find out everything you can about factoring companies. You need a buyer who can provide the best deal and the best service. Achieve this by looking at companies with good ratings and the number of years in the business. A company with positive online reviews and a higher rating from the Better Business Bureau is a good look.
Besides, ask for tips from financial planners experienced in structured settlement sale. Thus, undertake due diligence in finding a factoring company that is available to respond to all your inquiries. Do not commit to the deal before you are satisfied that you got the right buyer.
Step 2: Consult a Representative and Get a Free Quote
After you have identified a few reputable and trustworthy buyers, start making inquiries. A phone call would be a high starting point in scheduling a meeting to discuss the sale and available options. A phone call or an actual encounter with the company service representative finds the selling option available. Avoid companies that use confusing jargon. Look for one with a selling process described in an easy-to-understand manner. When satisfied with a particular factoring company manner of doing business, ask for a free quote.
Pro tip: To get the most out of a sale, tell the potential buyer that you are getting quotes from multiple companies. The factoring company will know you are looking for the best offer and likely proposal a better quote.
In the end, take at least three structural purchasers and compare their quotes. Verify the quotes with your research. Do not let any company pressure you into committing to sell. Take as much time as possible to explore your options and make the best decision.
Step 3: Consider and Accept an Offer
Consider the offers, compare all to each other, and accept the best among all.
In a structured settlement, you are selling your rights to the payments at a discounted rate. A company will negotiate the highest discount, and you should seek a lower discount rate. You will only benefit through a lower price, which retains a higher cash value.
Discount rates are the focus of structured settlement negotiations. Factoring companies have a predetermined rate. The average discount rate ranges between 9 and 18 percent— which falls under the National Association of Settlement Purchasers.
Besides, the transfer of right to structured settlement payments attracts surrender charges. The fees arise from your current insurance holder. Also, the sale will suffer tax penalties depending on your age and the length of time you had the annuity.
Step 4: Complete Paperwork
The factoring company and your annuity holder (insurance company) process the paperwork. Completion of all documentation to transfer the ownership and payee designation to the buyer the rest takes a month. You will need to provide certain information on the future structured settlement payout. The step includes completing various forms specific to the transaction.
Besides, send a copy of the original structured settlement contract to the buyer company. You cannot sell your future payment without the initial commitment. Still, the annuity holder insurance company can get a new copy of the policy. Otherwise, you can reach out to your lawyers who negotiated the settlement for a copy.
In fact, the lawyer who should handle everything related to structured settlement transfers on your behave.
The documents required in finalizing a structured settlement payments sale include:
- Two forms of identification.
- Completed transfer application.
- Copy of the original contract.
- Complete release agreement.
As soon as you accept the cash offer to your future structured settlement, the buyer company sends you transfer documents. You will need to sign and notarize accordingly and return the documents. Generally, the sooner you return the record, the better for you to receive your lump-sum payment faster.
However, always keep a record of all transactions in a safe, easily accessible location. You will need copies of the transfer transaction in case of any technicality arising from the transfer in the future.
Step 5: Get Approved and Receive Your Money
The original insurance company that issued the annuity plan must agree to the deal to complete the sale. It is the insurer’s jurisdiction to approve or deny the transfer with enough reasons. As long as the transfer is legitimate and backed by facts, and the buyer is reputable, the insurer will approve. As soon as the insurer agrees with the sale, you will get your money as quickly as the state law allows.
Selling structured settlement payments takes between 45 days to 90 days on average. The sale process may take longer, given some states requires the seller to receive financial advice. You will also need a sale assessment for approval. You can find state official or third-party tasked to review the transaction specifics. The federal law allows for a “cooling period” during which the seller can rethink the sale.
Pro tip: A financial transaction, such as a structured settlement involving huge sums, requires lawyers and financial advisors. Also, there are unique laws that apply that may hinder your sale if you are not keen.
Structured settlement payment sale court approval
The most critical step in selling a structured settlement payment is court approvals. A judge must review the sale specifics and speak to the beneficiaries to determine if the sale is in their best interest. With all the signed documents, a local attorney—one you can hire or provide by the buyer company, file the paperwork with the state court. A hearing is scheduled, which might take up to 60 days after the initial filing. But the waiting depends on where you live. Additional how busy the local state court docket is may prolong the period.
As soon as the court date comes along, your appearance is the most critical part of how long it will take. This is the most significant variable on how soon you can receive your lump sum from the sale. If the process takes longer, the factoring company can issue a cash advance deductible from the final sale. A cash advance takes a few days to actualize.
You will receive a judgment per the state laws and regulations. The sale falls under the structured settlement protection Act. The laws protect consumers from unfair factoring companies looking to scam naïve sellers in the highly competitive secondary market. However, the rules and regulations vary from state to state. So, consult with an attorney or seek outside professional counsel before finalizing an agreement.
You will be required to explain the need for the sale at the hearing before a judge. Elaborate, you are not putting yourself or other beneficiaries in a financial fix. The judge will consider your arguments in evaluating the case, so the approval counts on you. Other factors come into play, such as the reputation of the factoring company, discount rate, and current financial status. If you are unemployed, the judge may deny your sale request. Besides, your past payment transaction also plays a more significant role in influencing the judgment.
A judgment in your favor, the issuing company, receives a transfer request order for acknowledgment. The factoring company will send your lump-sum payment in 5 days.
To sum up, let us find out how much it costs to sell a structured settlement.
How much does it cost to sell a structured settlement?
A glance at the quote or offer, you can find out the correct cost of selling a structured settlement. There are plenty of structured settlement calculators online. It is crucial to be exact about the number provided on the offer. The settlement calculator evaluates the time, interest, discount rate. It also calculates the long-term value of the investment.
As a result, the calculator will get you the expected cost of a structured settlement transfer. But, certain features may not be accounted for. The calculators use quote specifics and the basic formula used with fixed variables. So, for more contract specifications, consult with experienced economics. Also, find a structured settlement, financial expert.
Even so, the cost of a structured settlement depends upon how the original agreement was set. Besides the selling companies you choose to manage the sale factors in the price, so find the best.
Selling structured settlement payment is complex, but with the right people on your side, you are in for a smooth process. However, because the structured settlement is a highly unregulated sector, due diligence is crucial. It will protect you against paying a high discount rate or scammed along the way. Decide on the best rates between the discount rate and the effective discount rate. Find an expert to help you calculate the discount rate as you negotiate.
Still, you will need to consider your current structured settlement value. You can also find an independent professional advisor and as you shop around.