Looking for money to make successful progress under your own stream? You’re not the only one. In fact recent events have shown that most people who need money will turn to some unusual places to get it, such is the struggle. The sale of structured settlements, annuities, lottery payoffs or other ongoing payments for cash became most popular during the country’s recession period.
Should I sell structured settlements for cash? This question can be quite tricky but we would do our best to make you understand it’s benefits and implications, you then decide if its worth the risk.
I have a structured settlement and I need cash now
Unless your financial predicaments are critical, most experienced financial advisors recommend against selling your structured settlements or annuities for cash. Cashing in an annuity can trigger surrender charges which could go as high as 10 percent, and those who sell before age 59 1/2 can also face penalties and federal taxes. The reason most structured settlements are attractive is because they usually provide one with tax free income throughout your lifetime.
Nevertheless, sometimes selling structured settlement is the only option that you have. That $1,000 monthly payment from an old accident may have helped lesson or totally eradicte medical bills at the beginning, but if the one who benefits lost his job and falls behind on payment of some bills or had to make important costly repairs to his home, a huge money payout of $100,000 may look like his biggest hope at that moment.
Disadvantages Of Cashing In Your Settlement
If your financial condition seem not to get better and all roads to getting cash is blocked, sale of your settlement might just be your best option. That being said, let’s examine the downsides of doing so:
Sale of an annuity can spike up surrender charges of up to 10 percent
Selling it before age 59 1/2 can trigger federal tax and penalties.
This is crazy:I have a structured settlement and I need cash now
Americans have a great deal of money invested in annuities and structured settlements , with about $6 billion worth of new structured settlement written each year, according to the NSSTA(National Structured Settlemnets Trade Association) . Back in 2013, at the end of the year there existed 34.8 million individual deffered annuity contracts in plane exceeding $2.58 trillion, according to LIMRA secure retirement institute , a nonprofit research trade association for the financial services industry.
I have a structured settlement and I need cash now!
J.G Wentworth, a company which is one of the largest buyers of structured payment and annuities. In 2009, it handled more than $2 billion in payment transfers between 1994 and 2009.
Ken Murray the then-chief marketing office said in rhe year 2009 that the company had witnessed an increase in customer inquiries following the economic downturn, there were always people looking to sell and buy annuities, lottery winnings and structured settlements, Murray said. Because of the nature of the business, buyers of payments usually see customers when they are in some sort of unfortunate financial condition.
“Historically, the common denominator is people who need cash, but there are some new reasons we are hearing more frequently than others as a result of the recession. It might be the fact that they lost their job or mortgage payments have increased, said” Murray.
But the company refused to provide an upodate on whether inquiries were on an upward trend.
It’s quite funny how some television advertisements and commercials may seem to insinuate that getting a fast cash payout on an annuity or structured settlement is just a phone call away. On the contrary, it’s a long process, a court-controlled process at that. A phone call to to an advertised 800 number is only the beginning of a lengthy process, and a regulatory framework mandates that every single transaction go before a judge, who must then decide whether the transaction can move forward.
The buyer and the structured settlement seller must prove that they have legitimate need for the money and calculate the payout amount they are requesting for. While the regulations for lottery winnings and annuities might differ, the payer can’t turn a structured settlement into cash because he wants a nice vacation, a new car or other secondary wants.
You might say: but I have a structured settlement and I need cash now, why can’t I get it straightaway?
In order to keep immoral companies at bay, most state laws also require that the transfer of the settlement rights be in the best interest of the payee.
How does this work?
When a structured settlement holder calls an agent with the help of a team will review the settlement for sale, circumstances surrounding it’s owner want to cash out and the reasons the applicants needs the cash. If the request passes this stage, they then offer the payee an upfront sum to surrender the stream of payments, coupled with a discount rate.
READ ON:I have a structured settlement and I need cash now
The discount rate offered is generally between 6 percent and 29 percent, can be comapared to the interest you would pay on a loan, says Grover Christopher Collins, a managing partner at the Collins Law Firm in Nashville, Tennessee. Therefore, the lower the discount rate, the better the deal.
“You can negotiate,” Collins says, “It’s not a take-it-or-leave-it preposition, and you can also shop around”
However, once the offer is accepted by you, the company will file a petition for the transfer of the structured settlement in court in the state the comapny is in.
“The judge is the final arbitrator of whether it gets approved or not” Collins says. The structured settlement company’s reputation , the discount rate, what the person needs the money for are some of the riteria considered before a ruling is made in the court.
Exact processess will vary depending on jurisdiction, but from the time the one to whom money is paid calls out to the time they receive money can take as little as 62 days or up to 90 days, Collins says.
David Lewis, senior vice president and general counsel with stone street capital LLC, says few people sell off their entire transactions at once. Payees usually sella a part( small or big ) of their payment , just enough to meet their current financial needs, and offers from companies are detailed in disclosure statements with discount rates and all the information they need to make an informed decidion. Lewis mentioned other factors that determine payout amount include: the size of payments, in what state the payee resides resides and the payments they want to sell.
“It gets pretty complex and, regrettably, has become more complex recently. The amount is a function of many factors, and these factors are more sensitive today then they might have been (in 2008)” says Lewis.
Lewis uniquely points to insurance companies that have witnessed their credit ratings downturn. The cost of fund and capital also rised, and development throughout the credit markets can exhibit huge implications in the structured settlement industry. Shortly after the 2008 banking crisis, fear about the vulnerability of assets and cash kept in some institutions spread. Despite this, many people weren’t looking to cash in their payments in a panic that doesn’t exist, Lewis says. A judge would most likely decline your request if fear is the reason for selling payments anyway.
‘If someone called for that reason, we wouldn’t do business with them and would just tell them not to be worried. We would be buying that abbuity anyway, so if we thought it wasn’t going to be good, we wouldn’t be buying it in the first place”, says Lewis.
I hope this article answered your question: “I have a structured settlement and I need cash now“. Whether you decide to sell or not, the ball lies in your court. I trust you will make the right decision after all *cheers*