Structured settlements are untaxed payment streams paid as damages after a personal injury. If you are receiving structured settlement payments and you need immediate cash, it’s possible that your payments can be sold to a structured settlement buyer or settlement funding company.

Attorneys negotiate structured settlements in personal injury cases in order to avoid taking a case to trial, or a defendant might make payments over time after he or she loses the case. An insurance company sets up a structured settlement by purchasing one or more annuities.

That insurance company then distributes the compensation on a regular schedule for a predetermined period of time. Structured settlement payments may be distributed annually, quarterly, or monthly.

Can You Sell Your Structured Settlement Payments to Pay Off Debts?

Receiving payments from a structured settlement is a benefit for many personal injury victims, especially those who have considerable medical expenses for long-term care. But if you need cash for your immediate expenses, a structured settlement may not meet your needs.

Instead, selling the structured settlement payments – for a single lump sum – may be the way to deal with your debts. You’ll need to contact a settlement funding company that buys structured settlement payments and ask that company to review your situation.

To sell a structured settlement, you must have approval from the court, so it may take several weeks – or even months, in some cases – before you obtain your lump sum payment. Being prepared and having all of your documents organized expedites the process.

Can You Sell All or Part of Your Structured Settlement?

When you speak with a structured settlement buyer, the company will explain your options. Typically, those options will include:

  • selling all of your future structured settlement payments
  • selling a part of your future structured settlement payments
  • selling a group of your future structured settlement payments for a specific length of time

After a structured settlement purchaser determines that you’re eligible to sell your structured payments, you’ll work with the company to determine how many payments you are selling and what you will receive as a lump sum.

Then, after a waiting period determined by your own state laws, you sign a sales contract with the buyer, who then submits a request for the court’s approval.

What Documents Will You Need?

Every structured settlement purchase is different, but generally speaking, you will need:

  • copies of your settlement agreement and annuity contract
  • any other legal documents that are pertinent to your settlement
  • a government-issued ID
  • proof of residency

What Are the Tax Implications of Selling a Structured Settlement?

Federal law prevents the Internal Revenue Service and the states from taxing income from structured settlements. However, compensation for punitive damages is taxable, and compensation for lost wages that weren’t lost due to an illness or physical injury are also taxable.

A number of factors will determine how much you can receive for your structured settlement payments, including but not limited to the dollar figure of each payment, how often you receive the payments, and the dates you are scheduled to receive them.

To receive an estimate or to learn more about the requirements for selling a structured settlement, speak to the funding professionals at Universal Funds. It would be our privilege to assist you.