This post will offer some tips and advice for selling a structured settlement, as it is not an easy thing to do.
Structured settlements by their nature are set up with the intention to provide long-term regular annuity income for the recipient. Most recipients of a settlement are considered beneficiaries for many years.
Because of the circumstances that typically led up to a settlement in the first place, much of the legal arrangements and favorable tax treatment assumes that a settlement will not be sold at any time. The regular annuity payments are provided by a small number of large pre-approved insurance companies who have been approved for the purposes of providing stable returns and safe investments no matter what the economy does. This security has been proven in the past, as despite downturns in the national and international economies, that despite the fiscal banking crisis, no structured settlement payments to an individual have ever been missed due to financial mismanagement on behalf of the insurance companies.
The tax treatment of structured settlements is similarly set up to encourage favorable long-term tax treatment of the periodic payments. With the Periodic Payment Settlement Tax Act (1982), periodic payments from a structured settlement are considered tax-free from federal taxation.
With all this background, most of the established organizations (courts, IRS, state assemblies and large insurers) work together to create binding settlements to compensate victims for many years.
These constraints and limitations are fine for many people, however personal circumstances do not remain constant. For some people, their personal circumstances may have changed significantly since the settlement was set up. Although regular payments are a great benefit in many cases, sometimes a change is needed.
There are many factors that come into place for people with different needs compared to their original situation. Just consider what can change to just about anybody over a couple of decades – as a few examples, there may have been births and deaths, illness or health, personal finance profits or debts, success in business or business failure.
Because of the way these settlements are set up, and the way the establishment does not want to see change, there are many restrictions on the sale of structured settlements. In fact forty seven states have passed guidelines restricting and controlling their sale. Because of these restrictions, there are a limited number of valid reasons that a court will allow a structured settlement sale to go ahead. Here is some useful information on what are considered valid reasons: personal debt reduction (where consumer debt has got out of hand), downpayment for a home, payment to stop home foreclosure, sound business investment, college or university fees for an education for the recipient or close family member.
To have the best chance of approval of a sale, its reason must fit the criteria of one of the reasons above. Don’t forget that any sale must be approved by a judge or court, and they will only agree if they consider the sale to be in the individual’s best interest. Collect all relevant paperwork together in advance, the more documentation that is provided, the better the case for a sale.
It is also a good tip to consider selling only a part of a settlement, so there will still be a significant monthly payment as well as a lump sum, as courts will consider that favorable to the recipient. And the last tip for selling a structured settlement is to shop around before choosing a company that will provide the funds. There are many different companies offering to buy settlements, and the amount that they will charge will vary widely, so make sure the best deal is available before starting the selling process.