Structured Settlement Payments Now Vs The Future - 3 Important Things To Consider
Structured Settlement Payments Now Vs The Future - 3 Important Things To Consider
Structured settlement payments come about from a number of situations. Many are from lawsuits over a personal injury or from financial harm.
Often the settlement will be created through the purchase of an annuity, which will guarantee the future payments. Most structured settlement payments are made monthly, although any payment period is possible.
If you are receiving or about to receive structured settlement payments over a period of time, you may be wondering if selling your payments for an immediate lump sum of cash is a good idea.
Unfortunately, there is no one answer to this question as every person's situation is different. However, there are a few things to consider when deciding on whether to sell your settlement payments or not. Here are 3 important ones.
If you are receiving payments as a result of an injury that made you unable to work but that are insufficient to cover your basic living expenses, a lump sum may be your only real choice. However, you must realize that the lump sum only covers you for a period of time, after which you will be without income.
If you decide to get a lump sum, you need to a) Create a strict budget each month and follow it to be sure your lump sum payment for the payments lasts as long as possible and b) Allocate some of the lump sum payment for training in a profession that you can physically do or to start a home based business so when your lump sum runs out, you have sufficient income to at least cover your monthly financial needs.
If you don't have to have all your structured settlement in a lump sum but are still considering selling the payments, you need to determine for yourself whether you feel the future value of your payments is worth as much as a lump sum now. You will need to get a quote for selling the payments in order to compare the two options.
Your decision on this comes down to what you firmly believe inflation will be over the life of your income stream. Be careful on solely using government reported inflation numbers as the core inflation reported excludes "volatile" items like food and energy, which are very real for every one who eats, fills up the car or heats their home.
If you are thinking of using the lump sum to make a lucrative investment, you will need to analyze the expected (conservative) return on your investment versus the known income from your structured settlement. You may want to consult a financial adviser to help you make these calculations and comparisons.
Selling structured settlement payments can be an emotional event. Try not to let it be. Use logic and sound analysis to help you make this important financial decision. You'll be glad you did.
If This Describes You, Don't Cash out Your Annuity
There are companies that purchase future payments. Personal injury settlements are often structured to pay out over time. As are a portion of lottery wins, paid via an annuity over a period of 20 or more years. There are companies, under the authority of state and federal regulations, that will accelerate future payments and pay out a lump sum of cash now.
But, it is not the best choice for everyone. If any of the below are true about you, avoid selling.
· No pressing financial need or opportunity
· Under the age of 18
· Annuity is sole source of income
· Live in North Carolina
· Monthly payments less than $100
· Lump sum payment more than 7 years away
· Significant amounts owed in child support or back taxes
While this list isn't comprehensive, it does cover many of the usual reasons cases are not accepted or approved. This court ordered process has strict state and federal guidelines. Numerous attorneys, yours, the insurance company's, and the cash out company are involved and the entire transaction must be approved by a judge.
And as always, seek legal and financial counsel before making any significant decisions. There are several established companies with reputable service history and there are many more companies with less than clear intentions. Rule of thumb, avoid any company that tells you what you want to hear. This transaction will be expensive and closing times vary wildly by state and transaction.
