If you have a big expense coming up — a car, a wedding, or a new baby, for example — you may be looking for ways to get some extra cash. If you’re currently receiving a structured settlement, you may be able to sell some of your future payments for a lump sum of cash.
But how exactly does that process work? Is selling your payments an all-or-nothing scenario? Here, we take a look at five things that you should know about selling your structured settlement payments.
1. To sell your payments, you’ll need to contact an annuity purchasing company.
Structured settlements are paid out as annuities, and there are a number of companies that buy structured settlement payments. When choosing a company to work with, consider one that is a direct funder. This means that they already have the funds to pay you the lump sum. You may also decide to evaluate the company based on the number of years they have been in business and their rating with the BBB. When you contact a company, they will typically offer you a free quote for how much your payments are worth. If you don’t feel comfortable with the quote, you do not need to move forward with the sale.
2. You have options when it comes to selling payments.
When you receive a quote, it will usually have multiple options to get you the cash that you want. If you still want to receive a regular check from your settlement, you can choose to sell a portion of each of your payments. Another option is to sell your payments from a certain period of time. That would mean that in the timeframe that you select, you would not receive any payments. Lastly, you can decide to sell all of your remaining future payments.
3. You’ll need court approval to sell your payments.
Once you decide to move forward with selling your structured settlement payments and all the appropriate paperwork has been gathered, you’ll need to appear in court to finalize the sale. That’s because there are state and federal regulations that require a court to determine, among other things, that the transaction is in your best interest. You should come prepared to explain to the judge how you intend to use the money from the sale.
4. The money you receive from the sale is usually tax-exempt.
If you’re not currently paying taxes on your structured settlement payments, that means that you won’t need to pay any taxes on the lump sum that you get from the sale of your payments, either. You should talk to a tax professional if you have any questions about how your payments are taxed.
5. If you didn’t sell all of your payments, you can choose to sell more later.
Let’s say you go through with selling some of your future payments. Then, further down the road, another big expense pops up, and you find that a larger sum of cash would be helpful. You can decide to sell another set of payments, whether it be to the same company that you worked with before, or a different one.
Life is full of surprises — and most of them require that you have a little extra cash. Selling your structured settlement payments is one way that you may be able to get the cash you need.
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