Have you ever wondered if people who win a big lawsuit, lottery, or other windfall get all the money at once? Well, they usually don’t. Most of the time, these payments are split into smaller amounts paid over a set period. For example, instead of getting $500,000 from a lawsuit at once, someone might receive $2,000 a month for the next 30 years. This type of arrangement is called a structured settlement.
Even though we often think about long-term wealth, it’s also important to consider other perspectives. Sometimes, people might decide they want to sell their structured settlement. Here are a few reasons why:
1. Pay off debt: If you have a lot of high-interest debt, paying it off all at once might make more sense than slowly chipping away at it with small payments.
2. Cover upcoming bills: If your settlement is because of a lawsuit and you have medical bills piling up, having cash on hand might be crucial to avoid new debt.
3. Invest for a better return: Structured settlements often can’t be changed, so if the payment rate is low, you might think about selling it to invest in stocks, mutual funds, or even a business.
4. Make a large purchase: Like buying a house, car, or planning a wedding.
5. Fund college: If you have kids reaching college age and don’t want them burdened with student loans, a lump sum could help pay for their education.
Before selling a structured settlement, it’s important to understand what you’re getting into. You won’t get the full value of your settlement because the company buying it aims to make a profit while offering you the convenience of getting cash now. It’s a good idea to get multiple quotes and understand the math behind your current payments to ensure the offer is fair.
You should also consult a lawyer to avoid unscrupulous offers and check if selling your settlement is allowed in your state. The most significant advantage of getting professional advice is understanding the tax implications. Your settlement was likely structured for tax benefits, but selling it for a lump sum will have tax consequences. A professional can help you navigate this and understand the impact of selling your settlement.
