3 Precautions Everyone Must Take When Getting Cash for Structured Settlements
Selling your structured settlement payments can be a great way to get cash now -- but not all companies that buy these payments are as trustworthy as they should be.
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3 Precautions Everyone Must Take When Getting Cash for Structured Settlements

27 Jul 3 Precautions Everyone Must Take When Getting Cash for Structured Settlements

getting cash for structured settlementIf you have recently won a settlement in a lawsuit, you’re not alone. In fact, more than 90% of all lawsuits will ultimately end in a settlement for the plaintiff who brought the suit.

And these settlements can pay off in a big way. Medical malpractice lawsuits alone resulted in an incredible $3.6 billion being paid out to individuals throughout 2013.

However, most settlements are paid out via structured settlement payments, which distribute the money over a set period of time rather than giving you the money all at once. For example, a $1 million settlement might be paid out over a 10-year period, with the individual receiving $100,000 per year.

In this scenario, you’d get a better income tax rate — 28% — by going with structured settlement payments than if you were to opt for a lump sum, which would tax your settlement 39.6%.

Yet there are ways to obtain more of your settlement money immediately, the most popular of which is selling the rights to your payments to a company that buys structured settlements in exchange for a lump sum. The thought of getting your settlement cash now can be tempting — so tempting, in fact, that many people will sell their structured settlement payments to the first company they come across, without doing any research. When it comes to your money, you can’t be too careful.

To avoid losing thousands of dollars by selling your structured settlement to a less-than-reputable buyer, follow these three essential precautions:

Make sure you’re doing it for the right reasons
Before selling your structured settlement, sit down and think about why you’re planning on getting cash for structured settlement payments. Be aware that once you sell them, you can’t revert back to getting these structured payments — you’re stuck with your lump sum. If your settlement money is your only source of income, you might want to wait on getting cash for structured settlement payments.

Have a thorough understanding of the discount rate
As a seller of structured settlement payments, you want to sell to the company that will give you the lowest discount rate possible. The discount rate is the percentage of your money that the buyer will keep for themselves; as a result, get several different offers from several different companies before making your final choice.

Be aware of potential tricks and scams
When it comes to your money, you can never be too careful. Companies that buy structured settlements can make a huge profit off of people who don’t understand the system very well. As a result, it’s wise to sit down with an independent financial professional who will help you choose the right company and educate you on common tricks to avoid.

Have any other questions about safely getting cash for structured settlement payments? Feel free to ask us anything about selling a structured settlement in the comments below.

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