Are you currently receiving structured payments each month as the result of a lawsuit or lottery winnings? If so, chances are that these monthly payments simply are not enough to allow you to accomplish any of the big goals that you have set for yourself, such as purchasing a new car or putting a down payment on a home. Thankfully, you can turn those small monthly payments into a much larger lump sum payment by choosing to sell your future payments to an investment firm or other third party investor. However, before choosing to sell your monthly payments, there are a few facts that you should know.
You Will Not Receive The Full Value Of Your Payments
As with any other type of investment, investors are willing to purchase the rights to your structured settlement because it provides them with the opportunity to make a profit. In order to turn a profit on this investment, investors will need to purchase your settlement for a fraction of what it will be worth in the future. What this means for you is that you will only receive a percentage of what your total settlement would have been worth if you had collected it over the course of several years.
While you will receive a smaller amount of money by choosing to sell your structured payments, it is also important to note that you will no longer assume any of the risk that comes along with collecting these payments. If the person or company responsible for paying your structured settlement ever files for bankruptcy is unable to meet their financial obligations, the company that purchased your structured settlement will absorb any financial loss instead of you.
You Will Be Required To Pay A Higher Tax Rate On Your Lump Sum
The amount of taxes that you pay on any settlement money is based off the total amount of money that you receive at one time. Consequently, the total amount of tax that you will pay on your settlement will be much lower when receiving this money in multiple small payments. However, when choose to get a lump sum payment, your earnings will fall into a higher tax bracket and consequently be subjected to a higher tax rate. This can further reduce the amount of money you receive for your settlement.
You Don't Have To Sell All Your Payments
While there are many investors that are more than willing to buy your entire structured settlement, you should know that you are not obligated to sell all of your payments. If you wish to continue receiving a residual income while also enjoying the benefits of a lump sum, you can choose to sell only a portion of your payments. When choosing to utilize this option, you will still continue to receive a check each month, however, the amount of this check will be reduced in order to reflect the future earnings that you have sold.
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