How to sell your structured settlement
If you settled a personal injury claim, your guaranteed future payments from that structured settlement are likely a critical asset. But when a sudden expense arises, if you (like most Americans) have limited savings, using that settlement money could be the only way to meet your immediate financial need.
There is no way to reverse a structured settlement agreement and receive a lump sum. However, the good news is that annuitants with certain qualified structured settlements are able to transfer the rights to their future payments in exchange for cash now.
Below is a breakdown of the qualifications needed to transfer rights to future payments from a structured settlement as well as the applicable laws. It includes what annuitants like you can expect from the transfer process, and, importantly, information on other options to investigate first.
Evaluate what is in your best interest with your structured settlement
First, it is important to determine whether selling a structured settlement is the best move. Transferring the rights, or “selling” structured settlement payments, is an irreversible process. Once the transfer is final and you (the annuitant) have received money for your future payments, there is no going back to receiving scheduled future payments. So think through the decision carefully.
When deciding if selling your structured settlement is the right step, it is helpful to ask these questions:
- Do you need cash right now to cover an emergency or other immediate need? Examples of an immediate need might be:
- Medical emergency
- Family changes (expecting a baby or losing a caregiver)
- Going back to school
- Moving your family
- Major home repair or car replacement
- How much of the future payments do you need to sell in order to meet your current need?
- Selling future payments involves some loss of value. So, make sure you are not selling more than you need. At the same time, selling multiple times multiplies the fixed costs in the process -- so it’s important to avoid putting yourself in the position of selling multiple times in a short period.
- CrowFly has a free calculator tool that enables users to discreetly and immediately estimate the value of their future payments in order to decide whether it’s worthwhile to investigate further into the transfer option.
- Is there any other way to pay for this immediate expense in order to continue to receive structured settlement payments?
- CrowFly does not recommend any particular vendor, but there are many resources you can consult. Unsecured personal loans can range widely in interest rate -- from 5% to over 30% -- while selling your payments will generally cost less than the equivalent of 6%.*
- Consider your local bank. If you have the ability to take out a home equity loan, rates will be substantially better. One bank stated APRs (essentially interest rates) ranging from 9.375% to 4.275% (as of 1/15/2020).
- Check quoting resources like NerdWallet or Bankrate.
- There are also loan aggregation platforms such as Prosper or LendingClub.
- Will selling the rights to future structured settlement payments negatively impact future financial security?
- If you need the monthly payments from your settlement to get by, we recommend that you do not sell them. Look to the other options named above or consult a personal financial planner. If you still have no other option, sell the furthest out payments you can -- only after having built a plan for how you are going to make up the income.
CrowFly cannot provide financial advice. However, we are available to answer questions about the process of selling a structured settlement. Call 833-CROWFLY (833-276-9359) to have a free, no-obligation discussion about the options as well as a quote.
Confirm you can legally sell your structured settlement payments
Not every annuitant is able to transfer the rights to their future structured settlement payments. Before moving forward, it is necessary to confirm that the asset you have is, in fact, a structured settlement. Those with workers’ compensation claims, social security payments, or other non-court approved settlements may not qualify for transfer, so take a look at the policy that you have.
To qualify you must have future payments from a settlement as described in 26 U.S. Code § 5891. Structured settlement factoring transactions:
- The term “structured settlement” means an arrangement which is established by (i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or (ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and under which the periodic payments are (i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and (ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.
The federal government calls the process “structured settlement factoring transactions” under this law. In short, the sale of a structured settlement must be authorized in advance through a court order in the correct jurisdiction (meaning where you currently live). To qualify under federal law, the court must confirm that selling your structure would not violate another court order or any other law and that it is in your best interest and the best interest of your dependents.
Each state also has its own rules regarding the transfer of ownership. For example, some states have waiting periods between getting a quote and signing an actual contract to sell. Some states require all documents to be physically signed, while others allow for verified electronic signatures. CrowFly has organized a state-by-state reference to point potential sellers to the applicable laws in their unique state. Feel free to contact CrowFly directly for more help.
Choose a transfer company
If a transfer is the right move for you and is legal under federal and state law, the process of selling may begin. There are many companies available to transfer the rights to your future structured settlement payments. And each must adhere to the applicable federal and state laws and work with the court and insurance company backing your payments. However, each will have slightly different approaches and will likely leave you with a different amount of money in the end.
It is helpful to contact purchasing companies for quotes. To request a quote from CrowFly, please visit our Get Started page. There is no obligation to use CrowFly’s services. Rather, annuitants are always encouraged to take enough time to evaluate each of the quotes they receive.
When selecting the right transfer company, it is important to understand each company’s discount rate. The discount rate represents the percentage at which your future payments will be discounted on a yearly basis in order to determine the present value, or how much a buyer will pay you. Some people think of this as similar to the interest rate charged for a loan. It is different, but still a helpful and familiar comparison: the lower the rate, the more money you get to keep; the higher the rate, the more money you lose.
For example, some companies buy your future structured settlement payments in order to hold them and directly collect the asset. Others buy future payments and package them together to sell to large institutions in bulk. CrowFly works to also connect annuitants directly to a new class of buyers: individual investors. By broadening the purchasing pool, we can get more competition for your payments and, therefore, higher offers. The more buyers who are looking for safe, consistent, fixed income in the future, the better for you.
Formalize the sale
Once you have selected a transfer company, you will be asked to fill out or provide many documents. Although the details vary, all of these are required to:
- Confirm you have the right to sell the asset,
- Confirm you have all the right information to make a good decision, and
- Enable the court to approve the process.
Think of it like buying a home. Everyone in the process wants to make sure that all the paperwork is in order. The list may seem daunting, but CrowFly will be there with you to provide no pressure help. This includes:
- Annuity Policy - Provides details of payments you are entitled to.
- Disclosure Statement - Your official quote from a potential buyer for selected payments.
- Funding Application - Standard information collected and provided to courts regarding your request.
- Purchase and Sale Agreement (PSA) - The actual agreement to sell your payments.
- Statement of Dependents - If you are representing a dependent.
- Independent Professional Advice (IPA) - Confirming if you will hire your own advisor.
- Authorization and Benefits Verification Letter - Required to enable communications with the insurance company to confirm policy details.
- Statement of Marital Status - Depending upon the contents, this may require an additional Spousal Consent or Divorce Decree to ensure appropriate parties are included.
- Wiring Instructions - Where money should be sent.
Each state may have modified requirements requiring these or additional documents.
Just like in the purchase of a house, all of these documents are provided to the buyer. In this case, they are also provided to your local court in a petition we file. A judge in that court schedules a hearing to review the material. At the hearing that judge will also confirm with you in person that you wish to proceed with the transaction and that it is urgent enough to require selling the payments.
Once the court confirms everything is in order, they will provide an order that confirms that the insurance company should transfer the rights to your future payments to the buyer.
Once the judge issues an order, the insurance company will confirm to the buyer that they are making the transfer. At that point, you receive funds directly to your bank account.
Free, no-obligation quote and guidance from CrowFly
CrowFly is committed to creating a positive experience that is built on trust, accessibility, and transparency for individuals and families who have structured settlements. Contact CrowFly at 833-CROW-FLY (833-276-9359), email email@example.com, or visit crowfly.com to get started today.