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3 Reasons to Think Twice About Putting a Structured Settlement Up For Sale
A structured settlement is a large amount of money that has an agreement in place to break down the amount into payments and spread over a period of time. Many times this agreement is made between an individual and the payer to ensure the amounts are applied sustain the individual over a long period of time. The recipient will receive the entire amount on a weekly, bi-weekly or other payment schedule.
Structured settlements can be initiated from lottery or casino jackpot winnings, litigation or insurance awards. In some situations an individual can inherit an annuity stream from the estate of an individual who has passed. However, as anyone knows unforeseen situations do come up that may require access to more cash than a person has in the bank. Usually a loan is taken out as mortgage on the home or unsecured debt in the form of credit cards etc. but, you can also sell all or part of the monthly payments you receive from a structured settlement.
Unfortunately, there can be downsides to this type of arrangement and you should be aware of the potential financial impacts that may occur:
- There are many companies out there who will gladly pay you a single amount to receive the monthly income stream for the term of the agreement, however they will heavily discount the amount you get to make a profit from the transaction.
- Structured Settlements were designed to provide a way for an individual to manage their money and provide a consistent source of funds to pay bills and etc. Getting a single lump sum can be a financial disaster if you do not have the will power to invest the money wisely. There have been many who have been left with no future after blowing the entire amount on purchases like cars, boats and trips to the Caribbean.
- Accepting a large amount of money through a settlement loan may trigger significant tax burden to the individual that received the money. This alone can be a reason to avoid a structured settlement sale.