Structured Settlement Cash Out: What You Need to Know

Written By: author image Bara Goldberg
author image Bara Goldberg
Bara Goldberg - Amanda Dobanton Esq. is a General Counsel for Fairfield Funding. She has been crucial to the growth of Fairfield Funding for the past 9 years. Prior to Fairfield, she interned at a law firm in Gwinnett County. Ms. Dobanton received a B.S. in History and Political Science from Brenau University and went on to obtain her Juris Doctorate Degree from Atlanta’s John Marshall Law School. Amanda is currently serving on the Board for the National Association of Settlement Purchasers. Amanda is a seasoned expert in the structured settlement and annuity field.

Imagine you’re facing a sudden financial crisis – an unexpected medical bill, a home repair you can’t put off, or a once-in-a-lifetime investment opportunity. If you’re receiving structured settlement payments, you might be wondering if you can get access to that money now. This is where structured settlement cash out comes in.

What is a Structured Settlement?

A structured settlement is a type of annuity that’s often used to pay out compensation from a legal case, such as a personal injury lawsuit. Instead of receiving a lump sum settlement, the recipient gets a series of periodic payments over a set number of years or even a lifetime.

Here’s a simple example: let’s say you were awarded a $500,000 structured settlement after a successful lawsuit. Instead of getting that half a million all at once, you might receive $2,000 per month for 20 years. This approach has some advantages – it provides a steady, predictable income stream and can help prevent the money from being spent too quickly.

Important Terms to Know When Cashing Out A Structured Settlement

When considering a structured settlement cash out, there are a few important terms to understand:

Factoring Company or “Structured Settlement Buyer”: 

These are the companies that purchase structured settlement payments in exchange for a lump sum. They’re also sometimes called structured settlement buyers or settlement purchasers.

Discount Rate: This is the difference between the present value of your future payments and the lump sum you receive from a factoring company. It’s the “price” you pay for accessing your money early.

Structured Settlement Protection Act: This is a law that regulates the sale of structured settlements, requiring court approval for any transaction to ensure it’s in the best interest of the seller.

It’s worth noting the scale of the structured settlement industry – annually, these arrangements pay out over $10 billion to more than 30,000 individuals.

Reasons You Might Consider Cashing Out

While structured settlements are designed to provide long-term financial stability, life doesn’t always go according to plan. Here are some common reasons people consider a structured settlement cash out:

  • Unexpected Medical Expenses: Health issues can arise suddenly and the bills can pile up fast. Cashing out a portion of your structured settlement can help cover these costs.
  • Paying Off High-Interest Debt: If you’re drowning in credit card debt or loans with high interest rates, using a structured settlement lump sum to pay them off can save you money in the long run.
  • Purchasing a Home or Car: If you need a substantial down payment for a major purchase, accessing your structured settlement funds can make it possible.
  • Funding Education: Whether it’s for yourself or a child, education costs can be daunting. A structured settlement cash out can help cover tuition, textbooks, and living expenses.
  • Starting a Business: If you’ve got an entrepreneurial dream, your structured settlement could provide the seed money to get your business off the ground.
  • Other Pressing Financial Needs: Life is full of surprises, both good and bad. From unexpected home repairs to once-in-a-lifetime travel opportunities, a structured settlement cash out can provide the funds you need when you need them.

Of course, the decision to cash out should not be made lightly. It’s important to weigh the immediate benefits against the long-term financial implications.

Pros and Cons of Cashing Out Your Structured Settlement

Like any major financial decision, a structured settlement cash out comes with both potential benefits and drawbacks. Let’s take a closer look at the pros and cons.

Pros

  • Access to Immediate Cash: The most obvious benefit of cashing out is getting a lump sum of money you can use right away for whatever pressing need you have.
  • Ability to Pay Off Debts: If you’re struggling with high-interest debt, using a structured settlement lump sum to pay it off can provide significant relief and save you money on interest over time.
  • Opportunity to Invest or Make Large Purchases: With a substantial sum of money, you could make strategic investments or major purchases that could improve your quality of life or financial situation in the long run.
  • Potential for Stress Relief and Peace of Mind: Financial stress can be all-consuming. If cashing out your structured settlement can help alleviate that stress and give you peace of mind, it might be worth considering.

Cons

  • Receiving Less Than the Full Long-Term Value: When you cash out a structured settlement, you typically receive less than the total amount you would have gotten if you’d continued receiving periodic payments. This is due to the discount rate applied by the factoring company.
  • Losing the Security of Guaranteed Future Income: Structured settlements are designed to provide a steady, reliable income stream. When you cash out, you lose that guaranteed future income, which could put your long-term financial stability at risk.
  • Risk of Spending the Money Too Quickly: Receiving a large sum of money all at once can be tempting to spend quickly. If you don’t have a solid plan for the funds, you might find yourself in financial trouble down the road.
  • Potential Tax Implications (Though Rare): In most cases, structured settlement payments and lump sum payouts are tax-free. However, there are some rare exceptions. It’s important to confirm the tax implications of your specific case before cashing out.

Fewer than one in five structured settlement recipients choose to sell their payments, and the majority of those who do sell only sell a portion of their future payouts.

The Process of Cashing Out Your Structured Settlement

If you’ve weighed the pros and cons and decided that a structured settlement cash out is right for you, here’s what the process typically looks like:

  • Contact Factoring Companies for Quotes: Start by reaching out to several reputable structured settlement buyers, like Fairfield Funding, for quotes. They’ll ask for details about your settlement and offer you a lump sum based on your specific situation.
  • Compare Offers and Read the Fine Print: Once you have a few offers, compare them carefully. Don’t just look at the bottom line – read all the terms and conditions to ensure you fully understand the deal.
  • Choose a Company and Complete Paperwork: After selecting the best offer, you’ll work with the factoring company to complete all necessary paperwork. This typically includes providing proof of your settlement, signing a contract, and agreeing to the terms of the sale.
  • Wait for Court Approval: Here’s a key step – the sale of your structured settlement must be approved by a judge. The judge will review the terms of the sale and ensure that it’s in your best interest. They’ll consider factors like your current financial situation, future earning potential, and reasons for cashing out. This process can take several weeks.
  • Receive Your Lump Sum: If the court approves the sale, the factoring company will transfer the agreed-upon lump sum to you. The funds are typically available within a few days of approval.

From start to finish, the process of selling structured settlement payments generally requires 45 to 60 days.

Alternatives to Consider Before Cashing Out Your Structured Settlement

Before committing to a structured settlement cash out, it’s wise to explore all your options. Here are a few alternatives to consider:

  • Personal Loans: Depending on your credit score, you might qualify for a personal loan with a lower interest rate than the implied rate of a structured settlement cash out.
  • Payment Plans with Creditors: If a debt is your main reason for considering a cash out, reach out to your creditors first. Many are willing to negotiate a payment plan that could make your debt more manageable without sacrificing your future income.
  • Government Assistance Programs: If you’re facing a financial hardship, you might qualify for government assistance programs. Research what’s available in your area for things like housing, food, utilities, and medical expenses.
  • Financial Counseling Services: If you’re struggling to manage your money, consider seeking out financial counseling services. Many nonprofits offer free or low-cost advice that can help you get your finances back on track.

Expert Tips and Advice

If you do decide to pursue a structured settlement cash out, here are some expert tips to keep in mind:

  • Consult a Financial Advisor or Attorney: Before making any decisions, speak with a financial professional or legal counsel. They can help you understand the long-term implications and ensure you’re getting a fair deal.
  • Only Cash Out What You Need: Resist the temptation to cash out more than necessary. Every dollar you cash out now is money you won’t have in the future.
  • Shop Around for the Best Offer: Don’t just go with the first factoring company you find. Get quotes from multiple reputable companies, like Fairfield Funding, and compare the terms carefully.
  • Read Everything and Ask Questions: Make sure you fully understand the terms of the sale before signing anything. If something is unclear, ask for clarification.
  • Take Your Time Deciding: Don’t let anyone pressure you into a decision. Take the time you need to weigh your options and make the choice that’s right for you.
  • Have a Plan for the Money: Before the lump sum hits your account, have a clear plan for how you’ll use it. This will help ensure the money goes towards your intended purpose and isn’t wasted.
  • Confirm the Tax Implications: While it’s rare for structured settlement cash outs to be taxable, it’s always best to confirm with a tax professional.

Sell Structured Settlement To Fairfield Funding!

At Fairfield Funding, we specialize in helping people get the most out of their structured settlements. We understand that life can take unexpected turns, and sometimes that steady stream of future payments isn’t enough to meet your current needs.

That’s where we come in!

Our structured settlement experts will work with you to understand your situation and help you take a decision. If a cash out is the right choice for you, we’ll guide you through every step of the process, from quoting your settlement price to court approval and getting your lump sum.

We pride ourselves on transparency, professionalism, and a commitment to our clients’ best interests. We’ll always give you honest, straightforward advice and work tirelessly to get you the best possible deal.

If you’re considering a structured settlement cash out, we invite you to reach out to us for a free consultation. Our team is here to answer your questions, provide expert guidance, and help you make the decision that’s right for you.

Learn more about us!

Conclusion

Structured settlements ensure long-term financial stability, but they don’t always align with life’s unpredictable twists and turns. If you find yourself in a situation where you need a significant sum of money now, a structured settlement cash-out might be the solution!

However, it’s not a decision to be made lightly. Cashing out your future payments means sacrificing a portion of your long-term income and potentially putting your financial future at risk. It’s important to carefully weigh the pros and cons, explore all your options, and seek expert advice before making a choice.

If you do decide that a structured settlement cash out is right for you, remember that you have rights and protections under the law. Work with a reputable factoring company, like Fairfield Funding, that puts your interests first and guides you through the process with transparency and integrity.

No matter what challenges life throws your way, know that you have options. With careful consideration and the right support, you can make the financial decisions that will help you weather the storm and come out stronger on the other side.

Frequently Asked Questions (FAQs)

A structured settlement is a financial or insurance arrangement that provides a series of periodic payments over a specified period of time, often as part of a personal injury or wrongful death lawsuit settlement.

A structured settlement cash out is the process of selling some or all of your future structured settlement payments to a factoring company in exchange for a lump sum of cash now.

Yes, selling your structured settlement payment rights is legal, but it requires court approval. The judge will review the terms of the sale to ensure it’s in your best interest.

The process typically takes 45-60 days from start to finish, including getting quotes, completing paperwork, and waiting for court approval.

No, when you cash out a structured settlement, you will receive less than the total value of your remaining settlement payment. This is because the factoring company applies a discount rate to account for the time value of money and their profit.

Yes, alternatives to consider include personal loans, negotiating payment plans with creditors, seeking government assistance, and financial counseling services.

Fairfield Funding specializes in structured settlement cash outs. We can provide you with a free quote, guide you through the process, and ensure you get the best possible deal while protecting your interests.

Glossary of Terms

  • Annuity: A financial product that provides a series of payments over a set period of time.
  • Discount Rate: The interest rate used to determine the present value of future payments.
  • Factoring Company: A company that purchases structured settlements or annuities in exchange for a lump sum payment.
  • Lump Sum: A single payment of money, as opposed to a series of payments.
  • Periodic Payments: A series of payments made over time, typically on a monthly or annual basis.
  • Present Value: The current value of a future sum of money, discounted to reflect the time value of money and other factors.
  • Structured Settlement: A financial or insurance arrangement that provides periodic payments over time, often as part of a lawsuit settlement.
  • Structured Settlement Protection Act: A law that regulates the sale of structured settlements and requires court approval for transactions.
author avatar
Bara Goldberg Finance Writer
Bara Goldberg - Amanda Dobanton Esq. is a General Counsel for Fairfield Funding. She has been crucial to the growth of Fairfield Funding for the past 9 years. Prior to Fairfield, she interned at a law firm in Gwinnett County. Ms. Dobanton received a B.S. in History and Political Science from Brenau University and went on to obtain her Juris Doctorate Degree from Atlanta’s John Marshall Law School. Amanda is currently serving on the Board for the National Association of Settlement Purchasers. Amanda is a seasoned expert in the structured settlement and annuity field.

Bara Goldberg

Amanda Dobanton Esq. is a General Counsel for Fairfield Funding. She has been crucial to the growth of Fairfield Funding for the past 9 years. Prior to Fairfield, she interned at a law firm in Gwinnett County. Ms. Dobanton received a B.S. in History and Political Science from Brenau University and went on to obtain her Juris Doctorate Degree from Atlanta’s John Marshall Law School. Amanda is currently serving on the Board for the National Association of Settlement Purchasers. Amanda is a seasoned expert in the structured settlement and annuity field.

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