A structured settlement is nothing but an agreement between two parties where the settlement is divided in equated installments rather than taking a lump sum payment. This type of settlement is extremely popular these days and it is one great way to manage your financial needs efficiently. Moreover, with the help of such a settlement you can save upon your taxes over a period of time. However, selling a structured settlement is not a child’s play by any stretch of imagination and you would need to make sure that you are considering all the hidden issues/costs which are associated with it. It has been observed that usually people don’t analyze these issues and they end up in no man’s land. Selling your structured settlement is more like viewing an iceberg. In the below paragraphs you will be made aware of such hidden issues so that you don’t repent after selling your structured settlement.
Structured settlements: The most sought after form of investment
Both structured settlements and lump sum payments are non-taxable and as it is mentioned above that you will be able to save a lot of taxes by resorting to such a payment option but this is not the only thing for which these structured payments have become popular. In fact, there is more to them. Through such settlements, you get a guaranteed pay irrespective of the current market standards. Moreover, there won’t be any burden of large sum of cash to be paid out. That being said, there is a lesser amount of control as well as flexibility in structured settlements. For example, if you face an emergency and you are in an urgent need of a big sum of money, you cannot get a large sum or increased payment by selling the settlement. Such unavoidable circumstances people usually resort the factoring companies which use cash in buying these settlements. So whenever you approach such companies for carrying out transactions of this sort you easily make yourself exposed to the numerous hidden costs and frauds associated with it.
Questions to ask whenever you are on the verge of selling structured settlements
In order to lessen the risk of falling into such wrong hands, some of the important points have been listed below for your reference. You can easily ask these questions whenever you plan to sell these settlements. They will definitely stand you in good stead
• the first and foremost thing to consider in such settlements is the tax factor. Is the payment non-taxable? This is an extremely important question from money standpoint. If the payment turns out to be non-taxable then rest assured, it will be a very costly affair to say the least. Therefore the golden rule is never get into any structured settlement if it is non-taxable.
• Secondly, prior to selling the settlement, you should reach out to the insurance company and know what might happen if the factoring company don’t get payments from them. Who is going to pay them? Once you have this condition documented somewhere, only then opt for selling the settlement but not before that.
• Thirdly, there should always be a documented disclosure of the terms and conditions of the contract. That’s of paramount importance. Never accept anything without having proper documentation.
• Lastly, always do your own research and never refrain from seeking advice from financial advisors when you decide to sell your structured settlements. In this way, you can greatly minimize the risk of falling in prey of frauds.
Volatility: The biggest drawback of structured settlements
Another major issue in selling structured settlements is that you are never entirely sure how much you would be getting in return in the years to follow because it is directly related to inflation. Since inflation can never be predicted, you will always be in the risk of getting lesser than what you had expected at the time of selling the settlement. It is also a very good idea if you can hire a financial advisor for yourself so that such situations can be handled effectively. Temporarily, it might cost you but in the longer you would be benefitted and will certainly augur well in planning your investment goals.
So, you can see by going through the above lines that to sell a structured settlement is certainly not as easy as one might have thought. There can be a lot of things which might need the attention of financial experts so that you don’t end up on the losing side. Do as much research as you can from your end prior to selling your settlements. Proper planning is required so that you can gain the maximum profit out of it. Moreover, you need to be fully aware about the consequences which can happen as a result of such a settlement. You should also chalk out an action plan so that if the structured settlement goes bust then there is a back-up to bail you out of trouble. Therefore, it can be concluded that structured settlements are no doubt a great way to plan your investments but it can also be equally dangerous if it back-fires. There can be chances of getting bankrupt; however, by following the above steps you can greatly help yourself in gaining more rather than losing.