Cash For Structured Settlements

Written by Michael Federico
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Most people are constantly trying to save money for the future. They invest in properties or in the stock market, hoping that the payoff will allow them to live comfortably in their old age. Retirement funds and basic 401K plans serve a similar purpose for those who want to eschew the risk of major investing. Many people who cannot afford to set up complex retirement plans will try to put away something each month into a savings account.

Those who receive payments from structured settlements are guaranteed money in the future. A structured settlement is broken into periodic payments that are usually spread out over many years. It seems as though a structured settlement would be incredibly beneficial to anyone who received one. However, as is often the case, saving for the future sometimes has to take a back seat to the financial needs of the present, and people who have structured settlements choose to sell payments off for a lump sum.

Who Receives Structured Settlements?

Litigation settlements that are awarded in personal injury, medical malpractice, and wrongful death suits are usually structured. Lottery winnings are often paid out over a number of years, as well. Even many beneficiaries of wills and estates receive their inheritances in the form of a structured settlement.

The amount of each payment, the schedule by which they are made, and the amount of time that a settlement lasts varies from case to case. However, it is likely that a person will receive periodic payments for a large portion of his lifetime. The fact that many settlements are so drawn out can make payments extremely low, and can cause recipients to feel as though they are not really seeing any benefits from the money they have coming to them.

Getting Cash for Structured Settlements

When a person needs a larger portion of his total settlement than he is receiving through his regular payments he can seek out the aid of a settlement broker. A broker will pay a person now for future payments. A person can choose to sell all of his payments or just a few. Most experts suggest that a seller should never part with all of his payments, though.

There is a federal law that requires a court order approving the sale of structured payments. This turns some people away from the process, but in truth, several thousand approvals are granted each year. There is also an IRS ruling, the "Private Letter Ruling," that says the lump sum a person receives from tax-free periodic payments will, itself, be tax-free. Both the federal law and the IRS ruling protect the seller and help to ensure that he will not suffer financially from the sale.

Finding a Good Buyer for Structured Settlements

The rate that each buyer gives for payments from a structured settlement will be different. Some companies do not even use the same criteria for each seller. They simply offer the lowest rates they can get away with. However, there are settlement brokers that have very strict guidelines for coming up with rates. They consider the amount of the payment, the date that the sale will take place, and the Standard & Poor (S&P) rating of the company that guarantees the payments.

Many settlement brokers provide prospective sellers with free quotes. This is the best way for a person to compare rates among companies. However, it is important to look at the practices of a broker, as well. A seller should work with buyers who are interested in helping him achieve his financial goals. He should not work with buyers who attempt to get him to give up all of his future payments in one sitting.

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