The structured settlement buyout system works well enough that it's used for injury compensation and lottery winnings alike. Yet many of the people relying on these payments for their bills and daily needs don't completely understand how they work or what can be changed about the arrangements. Before you decide to take a buyout offer that gives you a lump sum of cash, make sure you know the truth about these common structured settlement myths.
Immediate Transfers are Available
When a big bill lands on your desk or you spot an amazing deal on a new car, it's tempting to cash in at least some of your settlement so you can make your payment in time. Keep in mind that arrangement take anywhere from 30 to 90 days to complete. You need to complete a court hearing and a few other steps before receiving a check or bank transfer. Some companies can complete the process in under a month, but expect to wait a minimum of two to three weeks before receiving your money.
All Settlements Qualify for Buyouts
Due to the laws regarding settlements, nearly all types of payment plans qualify for lump sum disbursal when you work with the right kind of buyout company. However, your state may limit what kind of lump sum option you can take based on the tax status of the arrangement. Tax-free settlements usually face the most limits. Pension plans are also blocked from being sold in this manner throughout the country due to federal restrictions.
You Must Take the Entire Settlement
Some companies carefully word their advertisements to give the impression you must sell all your annuity payments at once for a single lump sum of money. This is far from the truth - you can sell just a single payment to get a little extra money before the next year rolls around, or package a few together to pay off a student loan without interrupting your future cash flow. Sitting down and doing the math on various arrangements can help you best balance your desire for money upfront with the benefits of sticking with long-term payments.
Buyouts are Required for Investing
With hundreds of thousands of dollars owed to you over 30 years or longer, you might start dreaming of the business you could start or the passive income available through smart investing. Don't make the mistake of thinking you need all that money at once to start investing. Alternative options include:
- Investing part of each annuity payment to slowly grow your portfolio over the years
- Using your long-term payments to cover tuition costs so you can boost your income from work
- Taking out a loan for your business with an interest rate lower than the fees associated with buyouts
Investments don't always pay off either, so taking all your money out of a structured settlement and putting it in the stock market could leave you with just a few pennies. Try to save your money for investments with guaranteed pay-offs or difficult situations like overwhelming credit card debt and medical bills.
Judges Advise on Buyout Deals
Standing before a judge and explaining your desire to sell off your settlement is part of the buyout process. This leads many people to mistakenly think the judge won't let them go through with a bad deal. It's not the judge's job to give you advice or protect you from a mistake, so get advice before reaching the court hearing stage.
A structured settlement buyout can change your life, but it's up to you whether that change is for the better or worse. Take your time when making a decision and compare the options from every angle to make sure you get as much money as possible when you need it the most. Continue here for more about this topic.
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