A structured settlement company, structured settlement broker or a personal injury lawyer in your local jurisdiction will be able to give you more information.
Should I Sell my Structured Settlement?
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Beware of Factoring Companies!
Whatever your circumstances, don't allow anyone to persuade you to sell your settlement if you are not certain that it's in your best interests. It doesn't matter whether you are soft-soaped by a large factoring company or charmed by a smooth-talking structured settlement broker; don't sell if you don't feel comfortable with it or them. Just say you'll think about it and walk away. When all's said and done, they're only in it to make a profit from part of your money (actually there are some exceptions - see below). There is always going to be a price to pay if you are determined to have your payments as a lump sum. Proceed with great caution because that price is likely to be much higher than you think.
A few things to ponder before selling structured settlement compensation
So you'd like to collect your structured settlement payments as a lump sum? Well cool your boots right here, dude!
Despite the undoubted advantages of structured settlements, the majority of people would very much prefer to have a lump sum and are pleased when they discover that this type of settlement can in fact be sold. It is not difficult to find a buyer; there are many companies that specialize in such purchases. What people do not generally realize is the scale of the losses that they may incur if they proceed down this path. Even when properly advised, the cost to the individual can be high. It is extremely foolhardy to sell a structured settlement without first taking advice from a lawyer that you trust and then thinking the whole thing through very carefully. You may also need to get advice from a tax accountant and / or a financial advisor. Generally speaking, structured settlements should only be sold as a last resort. The whole purpose of this type of settlement is to act as a protection for the individual to whom it is granted. Anyone in receipt of such a settlement is likely to have suffered injury serious enough to have had life-changing consequences. Often, therefore, the compensation awarded is meant to last for a lifetime. The act of selling it exchanges long-term security for short-term financial benefit and must therefore involve increased financial risk for the annuitant. There will also be some financial loss, as fees and charges may be levied by the buyer and because tax-free income has been surrendered. In the long term, the value of a tax-free award tends to increase very considerably over anything that taxed low-risk investments can produce. We all like to think that, were it thrust upon us, we could handle a lump sum well. However, such research as there is in this area suggests that this is very far from the case. For this reason, the sale of structured settlements is regulated and controlled by law in the US and in other countries. In most jurisdictions, the annuitant is required to demonstrate to a court that the sale would be in their best interests. If they cannot do so tax may be charged on the sale. In the U.S. this is a withering 40%.
So, as the 'lucky' recipient of a structured settlement annuity, why on earth would anyone wish to sell it? The reason is often a liquidity crisis caused by some unforeseen circumstance. It could also be the need to pay off a mortgage, buy a new home, resolve a long-standing financial commitment or fund the higher education of a child. For some, it comes down to the desire to have control of the money and the freedom to do what they wish with it. As already mentioned, those with a good understanding of investment strategy and business opportunity might very well want to have control of their money. However, non-specific reasons such as these may not convince a court to authorize a sale.
OK, but none of this applies to you, right, because you've got this fantastic idea about how to invest your money so that you can make far more than your settlement will ever pay out. All you need is that lump sum as "seed " money. You only take calculated risks, that's why you've been successful in business. You're a pretty smooth operator, after all, and always were good with figures. Now stop right there and ask yourself just how well you do understand risk. You reckon you're pretty clued up on it, right? Good. So you'll know what Monte Carlo analysis is, and will be able to apply it to your particular situation. Bully for you. ........What's that? Not heard of it? Then look it up and see how comfortable you feel about your understanding of risk after that. This is exactly the sort of homework you'll need to do before making a life-changing decision such as selling a structured settlement. You need to assess your current and future needs or get someone else to do it for you, using sophisticated analysis techniques such as Monte Carlo.
You will also need to do some sort of 'due diligence' on potential buyers. Don't rely solely on the representative of a factoring company to advise you. Companies in the factoring sector work to differing standards and ethical codes and some use practices which are dubious to say the least, and sometimes downright unethical. For example, some companies use aggressive advertising material bordering on fantasy showing images of expensive houses, yachts, cars and piles of money. Avoid them like the plague. Make sure you carry out extensive background research on any company that you might be thinking of selling to so that you really know who you are dealing with. Why? well, you're only going to get one go at this. The amount of compensation that factoring companies have to award in exchange for a settlement is generally not regulated and you could be ripped off. Worse, the levels of training and qualifications required of their representatives are also largely unregulated.
If you did not find the potential buyer of your settlement yourself, another question you need to ask is who recommended you to them, and more to the point, why did they do it? The factoring company may well have offered a commission to the referrer. Such commissions are completely negotiable and can be very high. They will be paid straight out of the value of your settlement so you need to protect yourself on this one. Ask the referrer in writing if they are taking a fee or commission and get their answer in writing. Ask the same questions of the factoring company. Again, get their answer in writing. If this is not forthcoming or they prevaricate or drag their feet, don't sell to them, walk away, because there are companies, brokers and planners around who won't take a fee or commission. The first place to start looking for a referral free of any commission or fee would be amongst companies who actually create structured settlements, since they in the business of protecting their clients by the creation of these structures and do not depend on income made from their break-up.
Always bear in mind that a compromise solution may be possible. If releasing part of the funds from your annuity will meet the need you have, then you could sell a few years worth and not all of it, keeping some of the periodic payments. Many buyers will offer a range of 'cash for structured settlement' options, so find a company that is prepared to do this if a partial sale might suit you. Ask if such solutions are available. Companies that do not offer this facility or, worse, try to get you to sell all of your settlement when you only want to liquidate part of it should be avoided at all costs. Finally, ask a financial advisor whether a loan might not be more suitable for your needs.
If you are thinking about selling, be very clear about your reasons. They should be specific, not vague. It is a good idea to write them down. None of them should include the funding of the purchase of a depreciating asset, such as a car, without very good reason. Ask yourself why your circumstances have changed since you were awarded your settlement. Have you lost money through bad financial management or unwise investments? In either case, you will already be benefiting from the protection that the structured settlement gives you. If you do sell, you will be giving up the sort of financial protection that most people could never afford, so don't do it without a lot of thought. Plan what you will do with money once you have it and don't be tempted to be irresponsible, take big risks or fritter it away.