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. ...

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