Here at Buy Like Buffett, we aim to cover every type of financial product available. One type of popular financial product is a structured settlement. A structured settlement is a financial arrangement in which one party agrees to make regular payments to another party. These types of agreements entitle the payee to an income stream for a predetermined number of years. Buying and selling structured settlements is growing in popularity. Below is a guest post from JG Wentworth, the largest buyer of structured settlements in the United States.
Selling a portion or all of your structured settlement isn’t a decision one makes overnight. Budgets must be evaluated, future financial decisions considered and whether or not the structured settlement company you are working with can be both personal and flexible with your needs. Consider the following when preparing to sell your settlement payments.
Review your settlement with consideration. Take into account the cost of living adjustments or lump-sum payments on special dates. Also, are there non-guaranteed payments after a certain date? By reviewing your settlement and understanding its unique features, you will be in a better position to explore new needs and options.
Evaluate the role your settlement plays in the monthly budget. Does your settlement cover all or just a quarter of your monthly expenses? What role does the funding play with yearly dues or other unexpected-expected bills? This will help you determine exactly how much of your settlement you can sell for a cash payout.
Understand your precise cash needs. Your structured settlement is an asset that can get you ahead financially, so spend it wisely. By figuring out the exact number you need for a new car or to pay for college tuition, calculate the all the costs ahead of time before you sell a portion of your settlement.
Get help creating a flexible payout plan. Settlement funding professionals will be well-versed in helping customers design a customized settlement payout plan that includes larger monthly payments, continuous lump-sums and the flexibility to obtain additional transactions.
Organize your settlement documentation. To complete your transaction, you will need to produce documentation about your settlement, including the settlement agreement and related insurance company information. Having these documents helps a settlement professional speed up the payout process.
Make sure the settlement company is reputable. Trust a structured settlement company that has successfully handled a large volume of settlement payouts. You’ll get a competitive quote and a faster turn-around period for the settlement money you need now.
Final Thoughts
Hopefully the guest post above has shed some light on structured settlements. Most people that receive structured settlements either do so from an accident settlement, annuity, disability claim or winning the lottery. While I have never received a structured settlement myself, they sound like an interesting product. The owners have the option of receiving a one time lump sum payment or receiving periodic payments over a number of years.
I can see the benefit of both options. The steady stream of payments would be nice because it provides you with a regular income stream that you can count in. The lump sum payment option is a plus as well because you can use the money to pay off debts, invest for retirement, or send your child to college. It can make sense to take a large payment amount if you need cash and would have to wait 20 or 30 years to get the full amount of the payment due to you. You would just need to compare the future value of the income stream to its net present value today. Companies like JG Wentworth are worth taking a look at if you are in the market to sell your structured settlement.
What do you think about structured settlements? Do you think it would be better to receive a lump sum payment for a structured settlement or to hold onto the contract and receive regular payments over the long term?
