Cash For Structured Settlement Payments
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Many years ago, injured people who obtained settlements would receive one lump cash payment. Sometimes, the money would be spent and not available for future needs. In the 1980's, another settlement arrangement was created where injured persons could receive periodic payments over a set time period or lifetime. The recurring future payment is known as a structured settlement.
Though both lump cash and structured settlement payments are nontaxable, structured settlements became popular for a couple of reasons. The payments were \"guaranteed\", the person receiving the future payments could not spend the entire settlement proceeds, did not have to worry about managing, investing or overseeing large amounts of cash and paid no taxes on the proceeds.
However, there are drawbacks. Though the funds are seemingly protected, the guarantee is only as strong as the financial backers (e.g., First Executive Life, which sold annuities for structured settlements went bankrupt). A structured settlement is inflexible. The recipient of the structured settlement cannot own the annuity policy that makes the regular payments, assign the payments to another person, change the payment schedule or accelerate the money. If a person who receives structured settlements is in immediate need of cash, they cannot ask that the payments be increased or that the annuity policy be cashed in. Realizing that some injured persons were in dire need of cash, companies advertised they would purchase structured settlements for immediate cash. The companies do not explain that the cash payment is at a substantial discount. Let me explain.
When a person first accepts a structured settlement, she is giving up an immediate cash payment in exchange for regular future payments. The future payments look like a better deal because the total amount of payments (the payout) is larger than a present lump cash payment. But future money is worth less and less (because of inflation). The crucial number is the present value of the structured settlement. This is the amount of current money needed to obtain the future stream of payments considering inflation and other factors. For example, one hundred thousand dollars per year received over twenty years is a two million dollar payout but the present value of the twenty year payment is substantially less than two million dollars because of inflation.
Agreeing to a structured settlement eliminates control and flexibility. If a sudden financial need arises, the person cannot obtain an increased payment or sell the structure. Persons in these situations are at the mercy of companies (factoring companies) who use cash to buy the structured settlements.
For the immediate cash, the injured person allows the factoring company to receive all the future payments. The transaction appears simple but is fraught with hidden costs and problems. The factoring company acquires the structured settlement at a price substantially below the present value, perhaps charging excessive rates and failing to disclose the rates and terms of the transaction.
Once the structure is purchased, the injured person gives a change of address to the company making the periodic a payments and a power of attorney to the factoring company to accept the payments. A person who sells his structured settlement may be risking a lot:
Persons with traumatic brain injury who are receiving structured settlement payments may be easy prey for these factoring companies. A person with brain injury does have the right to settle her case, to accept lump sum or a structured settlement payment. If they accept a structure, a person with a brain injury has a right to later sell the structure for immediate cash. However, BEFORE AGREEING to sell a structured settlement, a person with a brain injury should fully be aware of the consequences of the decision. The person should know the terms of the purchase, the legal and financial impact. It is strongly recommended that BEFORE selling a structured settlement, you obtain legal representation and financial counsel. Otherwise, it could cost you more than you know.
If you have a structured settlement in which you receive your personal injury lawsuit award or settlement over time, you might be able to \"cash-out\" the settlement. To do this, you sell some or all of your future payments in exchange for getting cash now.
When you win or settle a personal injury suit, you might have a choice to take your award as a one-time lump sum payment or as a structured settlement, which is a series of smaller payments over a period of years. Many people choose a structured settlement for its tax advantages, to avoid difficulties of managing large sums, or to ensure a stream of income when it's needed most.
Structured settlements are often designed to take into account your future income needs, ongoing medical bills, your income from other sources, and other upcoming financial obligations, like college tuition for your children. Structured settlements can't, however, account for all financial challenges. Although your settlement might pay you $10,000 each year for 30 years, at some time during the payout period, you might want to tap into those future payments to cover a present need.
To cash out your settlement annuity, you sell your right to receive certain payments that are due under your settlement agreement. The companies that buy the rights to these payments, and give you cash, are called \"factoring companies.\"
Example. Under the terms of your settlement agreement, you're paid $50,000 per year for 20 years. After ten years of payments, you need cash right away and can't wait for your next settlement payments. You contact a factoring company. Under the agreement with the company, you get $20,000 in cash now and, in return, the factoring company will get your next two settlement payments, for years 11 and 12. Those payments total $100,000. Once the factoring company has received its two payments, the annuity payments revert back to you, and you'll receive the payments for year 13 and beyond.
The commercials make the process sound quick and easy, but in almost every state you must get approval from a judge to sell your future payments to a factoring company. The review is designed to ensure that the request and the terms of the cash-out are in your best interest. The process, therefore, can take a month or more.
When you go before the judge, you'll probably have to justify your request. Using the money to pay medical bills or buy a new car might be acceptable. On the other hand, the judge might think that taking a luxury vacation or investing in your brother-in-law's get-rich-quick scheme is not a good enough reason to sell future payments for less than their value. Even if you need the cash-out to pay ordinary living expenses, a court could be reluctant to approve your request.
Finally, consider looking for alternative sources for the cash you need before you commit to selling your settlement. If you have other assets, like a home with equity or a retirement account, it might be more cost-effective for you to borrow against those assets than to cash out a future guaranteed payment. Even personal loans or cash advances on your credit cards are likely to cost less if you're disciplined about paying them timely or using your future settlement installment to retire the debt.
Over the years, we have become a household name - due, in part, to helping everyday people receive a lump sum of money for their structured settlement payments. What's not as well-known is how consequential we've also been in providing debt relief to those who need it.
Structured settlements are a type of annuity that allows a claimant in a lawsuit to receive their settlement in a series of payments over time, instead of as a lump sum payment made up front. Structured settlement annuities are usually the result of a personal injury or wrongful death. These annuity payments are not subject to income taxes, and the claimant decides the payment schedule when the settlement is drafted.
Selling part or all of your structured settlement payment stream is a great way to keep your head above water while avoiding taking on extra debt. If you need cash in a pinch to take care of a major expense, this could be the best solution.
Many litigation filings are a matter of public record, dependent on the rules of specific courts and jurisdictions. That means that any company or individual can access information about who has structured settlements in order to make an offer to purchase their payment stream. If you are approached by a company that you have never reached out to about selling your payments, exercise caution and do your research before making a move.
When you sell your structured settlement payments, the purchasing company will offer you a price based on the future value of your payments, factoring in the cost of inflation over time. The company will calculate an amount called the discount rate, based on a variety of factors, including the difference in value between current and future payments, and factor in that amount when determining the sale price.
** Cash advances are not available in Maryland, Rhode Island, Vermont and West Virginia. Cash advances are not available to residents of Georgia, Louisiana or Nevada that have a transaction pending with JG Wentworth or any related or unrelated structured settlement payment purchasing company.
These types of monetary awards can be disbursed all at once in a lump sum or over time in a series of regular, tax-free payments known as a structured settlement. When a structured settlement is established, the payments are often made through an annuity purchased on behalf of the recipient and managed by an insurance company.
Structured settlements are the source of about $10 billion in annual payments to more than 30,000 recipients each year. These payments are tax-free and the income does not impact eligibility for such programs as Medicaid or Social Security disability benefits. 59ce067264