“Structured Settlement Purchase: A Step-by-Step Guide for Sellers”

Structured Settlement Purchase: A Step-by-Step Guide for Sellers

If you’ve received a structured settlement from a legal case, whether for personal injury, workers’ compensation, or wrongful death, you may find yourself in a position where you need immediate cash instead of waiting for future payments. Selling your structured settlement can provide a lump sum payment, but it’s a significant decision that requires careful consideration.

If you’re thinking about selling your structured settlement, understanding the process is key. Here’s a step-by-step guide to help you navigate the structured settlement purchase process and get the best deal possible.

Step 1: Understand Your Structured Settlement

Before you proceed with selling your structured settlement, it’s essential to have a clear understanding of its terms and value. Structured settlements are typically designed to provide long-term financial security, so knowing the details will help you make an informed decision.

Key details to gather:

• Payment Schedule: How much do you receive and how often? (Monthly, annually, lump sum)
• Total Value: What is the total amount of your settlement over its lifetime?
• Duration: How long will the payments last? Is it for a set period, or will they continue for life?
• Interest/Inflation Adjustments: Are the payments adjusted for inflation, or are they fixed?

Knowing this information will give you a clearer idea of what you are giving up if you sell the settlement.

Step 2: Evaluate Your Need for Immediate Cash

Selling your structured settlement means you’ll be receiving a lump sum payment now, in exchange for future periodic payments. This decision should be based on your current financial needs and long-term goals.

Ask yourself:

• Do you have an immediate financial need? For example, are you facing medical bills, debt, or a large expense like buying a home?
• Are you confident that the lump sum will be enough to cover your needs?
• How will selling impact your future financial security? Consider whether the future payments are meant to cover retirement, long-term healthcare, or other essential expenses.

This assessment will help you determine if selling is the right choice.

Step 3: Shop Around for the Best Offer

Not all companies that purchase structured settlements offer the same terms. It’s crucial to get multiple quotes to ensure you’re getting a fair price for your future payments. Here’s how to do that:

Research Potential Buyers

• Reputable Companies: Look for well-established, reputable settlement purchasing companies. Some of the top companies in the industry include J.G. Wentworth, Peachtree Financial Solutions, and Rock Creek Settlement Group.
• Get Multiple Quotes: Contact several companies and ask for detailed offers. Request specific terms, including the lump sum they’re offering, the discount rate, and any fees involved.
• Compare Offers: Compare the lump sums offered, but also take into account any additional fees, charges, or restrictions that may apply.

The goal is to find the offer that best meets your needs while ensuring that you’re not giving up too much in exchange for the lump sum.

Step 4: Understand the Discount Rate and Fees

When you sell your structured settlement, the lump sum you receive will typically be less than the total value of your future payments. The difference is due to the discount rate applied by the buyer. This discount rate reflects the buyer’s profit margin, inflation, and the time value of money.

• Discount Rate: A higher discount rate means you’ll receive less for your settlement. Make sure to negotiate the lowest possible discount rate that’s fair for both parties.
• Additional Fees: Ask the buyer for a breakdown of any additional fees. These might include processing fees, court fees, legal fees, or administrative fees. Be sure you know the full cost of the transaction before agreeing to sell.

It’s essential to balance the need for immediate cash with the amount you’re willing to lose due to these fees and discount rates.

Step 5: Get Legal and Financial Advice

Before making any decision, it’s wise to consult with professionals, including a lawyer and financial advisor, to ensure you understand the implications of selling your settlement.

• Legal Advice: In most cases, the sale of a structured settlement requires court approval. A lawyer will guide you through this process, ensuring the sale is in your best interest. They can help review the terms and make sure you’re not being taken advantage of by the purchasing company.
• Financial Advice: A financial advisor can help you evaluate whether selling your structured settlement aligns with your long-term financial goals. They can also help you develop a plan for managing the lump sum once you receive it.

Working with professionals can give you confidence that you are making the right decision.

Step 6: Submit the Court Petition

Once you’ve chosen a settlement buyer, you’ll typically need to submit a petition to the court for approval of the sale. This process is designed to ensure that the transaction is fair and in your best interest.

What you’ll need to do:

• Provide Documentation: You may be required to submit various documents, such as financial statements, medical records (if relevant), and proof of the settlement terms.
• Court Approval: The court will review the sale terms and determine whether the deal is fair. If everything is in order, the judge will approve the sale.
• Additional Information: In some cases, the court may request more information before approving the sale. Your lawyer can help facilitate this process.

While the court approval process can take time, it’s an important step in ensuring the transaction is legitimate and favorable to you.

Step 7: Close the Transaction

Once the court approves the sale, you can move forward with completing the transaction. Here’s what typically happens at this stage:

• Transfer of Funds: The buyer will transfer the lump sum amount to you, often by wire transfer or a check.
• Settlement of Fees: Any fees or costs associated with the transaction will be deducted from the lump sum.
• Payment of Any Outstanding Balances: If you have outstanding debts or fees that were part of the settlement process, these may be paid off from the lump sum.

Ensure that you receive the agreed-upon amount and that the terms of the transaction are met as promised.

Step 8: Plan for the Future

Once you’ve received the lump sum payment, it’s crucial to have a financial plan in place for managing the money. Because selling a structured settlement gives you immediate cash but sacrifices future income, it’s important to make sure that the lump sum will meet your needs over time.

Here are a few tips:

• Pay off high-interest debt: Use part of the lump sum to eliminate any high-interest credit card debt or loans that may be weighing you down.
• Invest wisely: Consider working with a financial advisor to invest the lump sum in a way that grows your wealth over time.
• Budget carefully: Create a budget that ensures you can meet both your short-term and long-term financial goals.

Step 9: Keep Records

Finally, keep thorough records of the sale, including all documentation, court orders, and financial transactions. This will be important for future reference, particularly for tax purposes. Although structured settlement payments are often tax-free, the lump sum you receive may be subject to taxes, depending on the nature of the sale and local tax laws.

Conclusion

Selling your structured settlement is a significant decision that requires careful thought and consideration. By following this step-by-step guide, you can ensure that you are getting the best possible deal while securing the financial resources you need. Start by understanding your settlement’s value, shopping around for offers, and consulting with legal and financial professionals. With the right approach, you can make an informed choice that will benefit your financial future.