Obtaining a structured settlement is a financial option that is used to provide routine, tax-free payments to recipients over an extended period of time. Instead of dealing with the stress of a large lump sum of money, the receiver is fully protected from irresponsible spending with their annuity. Unfortunately, there may come a time in a person’s life when their structured settlement is not cutting it anymore. You might have experienced an emergency situation where you need a lump sum of cash immediately or have unpaid bills that are piling up. In these cases, you can sell your structured settlement annuity for quick cash.
How to Sell Your Structured Settlement
The process of selling your structured annuity isn’t difficult, but it can be a time-consuming process that takes months to finalize. You will first need to determine how much you want to sell within the annuity according to the specific amount you’ll need. You will then need to go before a judge who will grant you permission to sell back this amount.
Choosing a company that buys out structured settlements is quite easy because there are so many available. You need to check with the Better Business Bureau to check the reputability of any company you’re going to use. Ideally, the company should have an A+ rating with the BBB and have few customer complaints. The funding firm needs to provide their clients with a competitive rate, allowing them to get the money they need without spending more than they can afford. Funding companies that buy out structured settlements charge a fee for giving you cash upfront. The fee can range from eight percent of the total amount you’re asking for to 30 percent, depending on the company you’re using.
The Cash-Out Process
Cashing out your annuity involves paperwork and a little patience. Once you’ve found the right company, you’ll need to send in specific forms that detail your settlement, the amount you’ll need and personal identification information. On average, it takes recipients about 45 days from start to finish to receive their lump sum of cash.
As part of the Tax Relief Act, you will not owe tax on your structured settlement cash-out as you would when receiving regular monthly payments. This is a beneficial aspect to cashing out because you won’t deal with a hefty federal and state tax that has to be paid upon receipt of your money.
The Bottom Line
Selling out a structured settlement provides you with a quick sum of cash you might need for emergencies, bills and other expenses. While you’ll find the process to be relatively easy and tax-free, it is not without its downfalls. The rate you’ll pay the funding company to give you a large sum of cash takes away from what you would otherwise receive when getting regular payments. If you are still confused as to whether or not cashing out is the right option for you, speak with a legal financial advisor to obtain more information regarding your unique situation.