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Five Reasons NOT To Take Cash For Your Structured Settlement
Structured settlements are legally approved methods of making payments for issues such as injury and accident compensation. Rather than giving out a lump sum here these deals are designed to make a series of payments over time to a schedule that you work out with the company in question.
Oftentimes people accept a structured settlement but then start to think that the money might be better in a lump sum payment. They may even see adverts for structured settlement brokers who will help them sell their deals on to other people. How bad could this be? After all, you could sell your deal to somebody else and get a cash lump sum for it. But, there are reasons not to sell this kind of deal, including:
#1. In some places you actually cannot sell part or all of your structured settlement. This may depend on where you live and what kind of settlement deal you have. Some of these deals, for example, were set up for specific reasons (i.e. to financially support people in need after injury or accident) and they were given tax breaks as an incentive. Sometimes the law just won't let you give these benefits to somebody else.
#2. If you can and do sell on your structured settlement then that is it. Once you accept a cash payment you sign the settlement over to the buyer. They then get the remaining payments and you won't. Later on down the line it can be hard to cope without the payment that you were expecting even if you did sell for a lump sum.
#3. You won't get the real value of your settlement when someone else buys it. So, if your settlement is worth $50,000 in terms of the payments that will be made on it then you cannot expect to be paid $50,000 for it. The buyer needs to make a profit too. So, you'll get a convenient lump sum but you'll lose out in the long term.
#4. Any tax breaks that are given as part of a structured settlement will add it its overall value over time from your own perspective. If you sell on your settlement then you won't have these tax breaks that could potentially make you more money as somebody else will own it.
#5. You may be essentially selling your future financial security here and you cannot get the settlement back once you've sold it on. So, don't just think about your needs now, think about future needs as well. You may need to put the kids through college, you may lose your job or you may simply want to retire early. A settlement deal could help out with all these issues.
After considering these questions you may still want to sell on your deal -- this is fine as long as you know that this is the best thing for you to do. Do, however, try to shop around for quotes before you sell part or all of any structured settlement to make sure that you get the best financial returns.
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