Structured Settlement

Sell Annuity: Common Questions Answered

Below are some very common questions regarding structured settlements that you might have been wondering about yourself, particularly if you have been recently awarded a structured settlement.

Many people wonder if they will be able to use their structured settlement as collateral for a loan to buy a home, a new car or even pay for college tuition. The typical answer is no but there are some exceptions. These laws surrounding the structured settlement are designed as a way to protect you and keep your money safe. Some exceptions are that the structured settlements can be considered income and since they are guaranteed, many lenders will accept it as proof of income or additional income and will approve you for a loan on that basis.

Will I be paid interest along with my structured settlement? If you are asking this, you are not alone but the answer is no. The interest is considered a part of your structured settlement and is tax free. This is why you get tax breaks when you accept the structured settlement instead of lump sum payments.

Another common question is whether or not you can “trade in” your structured settlement payments for a lump sum payment or renegotiate the way you would re-mortgage a home loan, etc. And the answer is no, you can not trade it back in. When you agree to a structured settlement, it is a legal binding contract that is set up a certain way for a reason and typically ordered by a judge. You will get tax breaks and other benefits from doing this that taking and investing again would void so the law doesn’t allow it this way.

On those same notes, there are some companies that buy your structured settlement payments in exchange for giving you one lump sum payment at a time. The law prohibits you to make changes to the original structure settlements so what actually happens is you sign the payments over to the said company and that company then gives you the money up-front for a fee. You will typically lose money this way as well as the tax breaks and in some states and some situations it is illegal so get all the facts before you choose this option.

If you have other questions about your structured settlement, make sure that you talk to your attorney or the judge that is involved. Your specific case could be different than what is included here for special reasons.