How to Sell Your Structured Settlement for Cash Now

If you want to sell your structured settlement or annuity payments, you’ll need to follow a specific process. Researching reputable structured settlement funding companies, accepting a buyout offer, and getting court approval for the sale can take several months. 

To sell, you’ll work with settlement buyers or factoring companies that specialize in buying settlements and providing a cash payout. You can liquidate the entire settlement or a portion of your upcoming payments. Still, deciding to sell a structured settlement is a big decision, with many factors to consider. Let’s walk through the process together.

Is Selling Your Structured Settlement a Good Idea?

Selling a structured settlement means getting a lump sum now instead of waiting for smaller payments over time. While cashing a structured settlement or annuity gives quick access to funds, it means getting less than your original settlement amount. Factoring companies determine worth based on a formula that considers interest rates, payment dates, market rates and fees. 

Still, there are pros and cons to selling your settlement. For one, you’ll get immediate access to a lump sum of cash that allows you to address urgent needs or seize other time-sensitive opportunities. But accepting a cash-out offer also means you lose future income and the financial security that comes with consistent payments.

Here are the most common reasons to sell a structured settlement:

• Facing unexpected medical expenses or emergencies
• Pursuing investment opportunities or higher education
• Needing to pay off debts or purchase a home

How to Sell Your Structured Settlement: Step-by-Step

The process of selling a structured settlement may vary slightly depending on the funding company you choose and your state laws, but the process will generally follow this format:

1. Verify Your Settlement Can Be Sold

Before initiating the selling process, it’s crucial to thoroughly review your structured settlement documents to find out if your settlement can be sold. Pay close attention to:

• Payment schedule and amounts
• Terms and conditions, including any restrictions on selling as mentioned in your structured settlement agreement, identification
• Any court orders or approvals required for the sale

2. Decide If Selling Makes Sense Financially

Decide if selling is a good idea, depending on your financial situation and goals—future and current. 

Consider consulting with a financial advisor or legal expert specializing in structured settlements. They can provide personalized advice and help you understand the potential implications of selling.

3. Source Quotes From Reputable Companies

Contact multiple structured settlement buyers and request quotes based on your settlement details. Compare offers to identify the most favorable terms that align with your goals. 

Our buying resource features the top structured settlement funding companies to help you comparison shop.

4. Accept Cash-out Offer

Carefully review each structured settlement cash-out offer, paying attention to the lump sum amount, discount rate, and any fees involved. It is possible to negotiate with buyers before accepting an offer.

5. Attend Your Court Date

Cashing out a structured settlement requires a judge’s review and court approval before finalizing the sale. The review can take anywhere from 45 to 60 days.

6. Retrieve Funds

Upon completion of the sale, you’ll receive the agreed-upon lump sum payment from the buyer. Funding times vary depending on the buyer you choose; some can process payments in less than a day, while others take one to two weeks to release funds.

Cashing Out Your Structured Settlement: Things to Consider 

Selling a structured settlement is not a decision to make lightly.

The Court Approval Process

A judge’s approval is required for any sale, regardless of whether you opt for a lump-sum or partial sale. Once you accept an offer, the structured settlement funding company will file a petition in court to transfer the structured settlement. Depending on your state’s laws, this process can take up to 60 days, delaying your access to cash.

During approval, a judge will consider your living expenses, current and future financial needs, and life expectancy. This helps protect you from unethical structured settlement buyers and from making a financial decision that’s not in your best interest.

The Costs and Fees Associated With Selling

Choosing to sell structured settlement payments or initiating an annuity buyout will cost you money. Structured settlement buyers levy a discount rate, which reflects how much your payments are worth in the future. The further out your payments are, the more they are discounted. The higher the discount rate, the lower the present value or lump sum payout for the same future value. 

Common discount rates for structured settlements typically range from 8% to 18%.

Tax Implications of Selling Your Structured Settlement

In most cases, you won’t owe taxes on the money you made from a structured settlement sale. However, specific types of structured settlement transfers may be taxable. These include settlement compensations awarded for lost wages due to unfair treatment or emotional distress not linked to physical injury, and money awarded for punitive damages. Certain annuity sales and inherited annuities are also taxable. Talk to a financial advisor or tax professional about your tax implications before committing to any sale.

If you need money quickly, you have alternative options, such as a bank loan, accessing your home equity, help from family and friends, selling a life insurance policy, or liquidating investment portfolios.

Bottom Line

Before moving forward with a structured settlement buyout company, it’s important to understand the process, assess your needs, and carefully evaluate structured settlement buyout offers. Seek guidance from financial advisors or attorneys before deciding to sell a structured settlement.