SHOULD I SELL OUT MY STRUCTURED SETTLEMENT ?
In most of the cases , selling a structured settlement is not a good investment decision. Ideally, selling a structured settlement for cash should be the last alternative and should be resorted to only if the individual is confident of managing his own investment portfolio in a competent manner. This is because in any sale of a structured settlement, it is possible to lose up to half of the long-term value of the structured settlement.
A structured settlement offers guaranteed payment that is tax-free; this may not be the case with investments made by selling a structured settlement. Moreover, the regular payments offered by a structured settlement are a source of great comfort to retired individuals and those with an impaired earning ability. A structured settlement offers the advantage of a regular income without having to worry about managing it.
If one has sufficient business experience and is confident of himself, he can use the money obtained from the sale of a structured settlement as capital, and the money can also be used to make intelligent real estate purchases. In case, an individual has to sell his structured settlement, he should try and sell as few payments as would be required to get his work done. Exchanging the security of structured settlement payments for another investment plan has its risks and one should consider alternatives in collaboration with a financial advisor. An advantage of investing money obtained from selling a structured settlement is that one gains control of his own finances; with a structured settlement, the control is largely in the hands of lawyers and companies that pay the settlements.
Selling structured settlements can be particularly detrimental to individuals who are disabled, minors, workers compensated for loss, and compensation due to severe injury.
WHY COMPANIES LIKE TO BUY STRUCTURED SETTLEMENT ?
Structured settlement companies that buy a structured settlement do for a profit. The amount of lump sum received by an individual selling either a part or the complete settlement is not the same as the value of the structured settlements sold.
The money they earn is invested by these companies as per the best option available in their investment portfolios at that point in time. The profits are used to run the company, pay employees, and advertise. A financially healthy structured settlement company is a safer option for an individual as there is less chance of the company going bankrupt. Also, the market standing of such a company would allow it to offer the best rates to their clients, use their own money to pay the clients without having to take loans from a bank or take the services of a middleman. If they do take the services of a broker or a middleman, they will have to factor in the broker’s charges which are ultimately paid by the structured settlement owner.
Companies are attracted toward structured settlements because it guarantees a safe cash flow and the transaction is not taxable. There are always individuals in need of quick cash who would like to swap their structured settlements for some quick cash. The work involved in purchasing a structured settlement is not much, the main effort lies in marketing and obtaining court approval in compliance with the prevalent state and federal laws.
The fact that structured settlements are guaranteed means that structured settlement companies can obtain debt at low interest rates and finance other ventures with that debt.
UNDERSTANDING THE BASIC OF STRUCTURED SETTLEMENT ?
A Structured Settlement is an agreement under which an insurance company agrees to pay an individual a predetermined amount of cash for a fixed length of time if the individual meets an accident. The documents generated in a structured settlement include an agreement, a qualified assignment, an annuity application, a court order if a claim is made by a minor, and an annuity policy.
Payments for a structured settlement annuity can be made for the duration of the life of the claimant. The amount paid can comprise of equal installments, installments of varying amounts, and lump sums. The payments from a Structured Settlement Annuity are free from income-tax and are guaranteed by contract. Since a structured settlement annuity is meant for long-term financial security, it is important to get an assurance of the credentials of the annuity provider.
The periodicity of payment is entered into the settlement agreement. Factors that individuals can consider in deciding upon the date of commencement of payment, duration, and periodicity include monthly expenses, present age, extent of hazard in occupation, and retirement plans. In order to ensure that the payments remain tax-free, the structure of payments should not be altered once it has been agreed upon by both parties. In the case of a qualified assignment, the insurance company making the payment can transfer its obligation for payments to a third party.
There are issues that one should understand before opting for a structured settlement agreement. If payments are made to an estate, they are free from income tax but subject to estate tax. Purchasing a structured annuity can affect the availability of ready money with an individual.
The funding company commences payment to an individual after acknowledging the assignment and receiving a court order. The payments start 30-45 days after the receipt of the court order.