What Happens When You Sell a Structured Settlement?

by Lee Wyatt
(last updated August 23, 2013)

Just about everyone has seen those commercials that tell you how easy it is to sell a structured settlement. That once you sell that settlement, all of your financial worries will disappear. But what happens when you sell a structured settlement? Do you really get all that money without any kind of consequences? The truth is, as with most things in life, there are consequences. Here are a few things that happen after you sell your settlement that you should be aware of, before you sell it.

  • Common restrictions. Throughout the United States, there are some fairly common restrictions to actually selling a structured settlement. These restrictions are found at both the state and federal levels and must be met prior to the selling of your settlement. For example, most settlements will require court approval before any sale can be considered legal. In addition, the vast majority of states in the Union also have statutes that regulate the transfer process, so check and see if your state has any prior to actually selling anything.
  • Financial consequences. Despite what many people may like to think, selling a structured settlement often has some rather serious financial consequences associated with it. The biggest of these consequences is that to get that single lump sum, you are usually selling off a rather significant portion of the money you would have gotten over time. In fact, it could easily be said that you only get a fraction of what you would if you had simply waited.
  • Tax consequences. There are also some rather hefty tax consequences. For example, when you sell your settlement, you are almost certainly guaranteed to jump into a higher tax bracket, which means that you will be paying more taxes (and thus having less money). If you stay with the structured settlement, then you pay the taxes on each payment that you receive, and it is pretty much treated as a regular income.
  • Look for the best offer. If you are determined to sell a structured settlement, then you need to look around for the best possible deal. Do not simply take the first one that comes your way. While the offers you see on the television may be decent, make sure that you do some comparison shopping to make sure that you can find the best possible deal, and keep the largest percentage of your original settlement.
  • Get professional input. Prior to undertaking any firm steps towards selling a structured settlement, make sure that you get some professional help and advice. It is always a good idea to consult an attorney, and if at all possible have an attorney guide the process of selling your structured settlement. While it may cost you some of the money, it will also help protect you from any potential problems that may arise.

Author Bio

Lee Wyatt

Contributor of numerous Tips.Net articles, Lee Wyatt is quickly becoming a regular "Jack of all trades." He is currently an independent contractor specializing in writing and editing. Contact him today for all of your writing and editing needs! Click here to contact. ...

MORE FROM LEE

Evaluating Hybrid Cars

When purchasing any new car, it is important to consider your options. Here are some things to keep in mind when you ...

Discover More

Do Fog Lights Really Help in Fog?

Fog lights have become an increasingly common piece of equipment on just about every kind of four wheel vehicle there is ...

Discover More

Chicken Salad

Chicken salad is one of the easiest salads to make, and beloved of light sandwiches around. Not only is it exceptionally ...

Discover More
More Money Tips

Strategies to Save Money

Saving money doesn't have to be complicated. The trick is to start small and make saving a habit. You can quickly ...

Discover More

Getting Your Credit Report

Today more than 50% of all credit reports have errors. You are entitled to a free credit report annually, take advantage ...

Discover More

401K Planning

Taking the time to understand your 401k and strategies for building wealth will pay off in the long term. Following the ...

Discover More
Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 3 + 1?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)