What Is A Structured Settlement?

 

Most people have only been exposed to the term structured settlement from the ‘need cash now’ commercials played during the middle of the day, or late at night. If you won a court case and were awarded a settlement, a structured settlement could be more personal. If you have a structured settlement, you could be thinking about opting to ‘get your cash now’. Before you sell your structured settlement, you should know how they work, and how selling it will affect your taxes.

 

Periodic VS Cash Payment

 

If you receive a settlement in one lump payment from an insurer or the person who caused the accident, this payment is tax-free. If the money is invested, the money earned on the investment is taxable. If you choose to have a structured settlement, the total money could be broken up into payments over a year, or to cover your whole lifetime. Each of the payments is tax-free and is added to your after-tax earnings when filing your taxes.

 

How A Structured Settlements works?

 

A structured settlement is a type of annuity fund, which releases a specific amount of money each month. Most structured settlements are 5 to 10 years long, but there is also the option to have payments spread out over a person’s lifetime.

 

The way that the settlement works is instead of paying the money directly to the person, the money is placed into an annuity fund. The person who has the structured settlement will speak with the structured settlement broker to set up payment arrangements, which include the amount of the payments, and how long they want to wait before receiving the payments. A structured settlement is usually very flexible and can be readjusted as it needs to be. The one thing that you cannot do with a structured settlement is take the money out of the fund, and this is where the structured settlement buyers come in.

 

But I Need Cash Now

 

Selling structured settlements is not as easy as the commercials make it out to be. In most areas, you need to speak with the courts and have a valid reason for why you are selling the settlement. This reason will need to help you in the long run. Most of the companies on TV will not pay the full amount of the settlement. For many people, selling the settlement does not help in the long run.

 

There are other ways that you can sell your settlement. You can find one of the many smaller companies, or you could sell it to a private buyer. The process is the same. If you do not want to sell your settlement, you should speak with the broker that is in charge of your fund. You could be able to up your payment amount, for a shorter time period of the settlement.