If you are selling your structured settlement for a cash payout, or you are considering selling your settlement, you may have questions about what happens during and after the process. Here is a quick look at what to expect after you have negotiated a sale of some or all of your structured settlement payments.
How Long Does It Take?
Many companies that purchase structured settlement annuities advertise in a way that makes the process seem instant. But, in fact, it can be quite lengthy. Depending on the state, it can take up to two or three months from the time you sign the transfer agreement until the case appears before a judge. Unfortunately, it is difficult to predict when your case will appear in court because the timing will depend upon what’s on the docket ahead of it. SenecaOne can offer you a cash advance if you need money urgently in the interim.
What Happens in Court?
The purpose of the court appearance is for the judge to evaluate the transaction, make sure you understand the terms of the transaction and determine if the transfer is in your best interest. SenecaOne’s attorney will bear the responsibility of filing the petition and handling most of the other legal formalities. Your only job will be to answer a few questions from the judge, which may include:
- Do you absolutely need cash right now? Do you need money to pay essential bills or make smart investments?
- Is this the best possible way you can raise the money you need?
- Will the sale of rights to your future payments jeopardize your financial security?
- Did you consider various types of sale options (e.g. selling part of your payments versus all)?
After the court appearance, the purchasing company should write you a check typically within a few days after receiving an order from the court approving the transfer. (Usually, you also can opt for an electronic transfer.)
Will I Pay Taxes on My Lump Sum?
Typically, you will not incur a tax bill for selling your settlement. You may have paid taxes if you had elected to receive the lump sum when you settled your case, but, generally, structured settlement annuities, remain non-taxable when they are sold in exchange for a lump sum. Be aware, however, that any gains you incur from an investment will typically be taxed. Tax liability is based on an individual’s circumstances, so talk with a tax advisor.
How Do I Pay Off My Debt?
Even with a lump sum in your hand, you may feel overwhelmed by the debt you need to repay. If you are unsure about the best practices for getting out of debt, try speaking with a debt counselor to review your options.
The National Foundation for Credit Counseling is one option. It is a nonprofit organization that will connect you with a debt counselor in your area (visit NFCC.org for more information). NFCC counselors will assess your situation, help you negotiate payment plans with your creditors when feasible, and even advise on whether cashing in your settlement is your best move.
What Can I Use The Lump Sum For?
It is likely that you elected to sell your structured settlement because of a time-sensitive need for a larger amount of money than you had access to through your monthly payments.
Annuitants who sell their payments often have different reasons for selling. In any case, a judge must determine that the reason you are selling and the price that you are getting are in your best interest. A list of some (but certainly not all) of the ways you can use your lump sum payment include:
Visit a financial adviser and discuss investment options. You can buy shares of stocks, or purchase bonds, CDs or mutual funds, to name just a few options. Once retirement comes you will be happy to have the extra income from investments. It may even enable you to retire sooner.
Pay for College
As anyone who has financed a college education knows, student loans can be a nightmare. The more money you can pay upfront toward a college education, the lower the hassles and financial burdens will be later.
Buy a Car
In many instances, a car can represent freedom, and offer the ability to search for employment opportunities beyond current travel paramaters. A sensible, affordable and well-maintained vehicle can last for many years.
Buy a House
Home ownership can mean an investment in your future. Buy paying a mortgage versus rent, you are building equity not just giving money to someone else. It can also mean that you will pay less per month for a mortgage payment. Here are some of the pros and cons of home ownership.Again, the amount of money that goes toward interest on a home loan is pretty astounding if you add it up over a typical 30-year loan. If you can make a sizeable down payment on your home and shorten the length of the loan, you are making a wise investment. Better yet is if you can buy the house outright and don’t even need to worry about a mortgage payment
Make Home Improvements
If you already own a home, you can use your structured settlement to make improvements to your home, too. Improvements can not only add to your homeowner experience, but also add value to it if you are looking to sell your home in the future. HGTV takes a look at 10 things that will help to increase the value of your home.
Can I Sell My Payments Again?
If you have already sold part of your structured settlements and a new financial need arises that requires another lump sum, you absolutely have a right to sell some or all of your remaining payments. Many people incorrectly assume that if you’ve sold part of your payments already that you are not eligible to sell them again. However, it is understandable that as life continues, new circumstances may arise where you need access to a more substantial amount of cash. There is no legal limit to the number of times you can sell part of your settlement. As long as the money exists, you can sell it in as few or as many transactions as you want.
If you are considering selling all or part of your structured settlement payments, a free consultation with SenecaOne’s account representatives can help you determine what to expect before, during and after the sale. Always putting your financial needs first, we can plan your best financial path together. Contact us today.