If you settled a personal injury or tort claim, your guaranteed future payments from that structured settlement are likely a critical asset. But when a sudden expense arises, you’ll likely be in a situation, like most Americans would be, where your limited savings won’t cover your unexpected expenses. 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 sellers with certain qualified structured settlements can transfer the rights to their future structured settlement payments in exchange for funds now. By selling all or some of your future payments, this solution can provide you with the needed lump sum cash payment.
We’ll break down the qualifications needed to transfer rights to future payments from a structured settlement to an interested buyer or investor, as well as the applicable laws that may apply to your situation. CrowFly’s resources and team of transaction navigators are here to help sellers like you understand what to expect from the transfer process, and, more importantly, provide information on other options to investigate first.
Evaluate Your Best Interest Regarding Your Structured Settlement
First, it is important to determine whether selling structured settlement payments is the best move for you. Transferring the rights, or “selling” future structured settlement payments, is an irreversible process. Once the transfer is final and you (the seller) have received money for all or some of your future payments, there is no going back to receiving those scheduled future payments. Selling structured settlement payments is an important decision that should be carefully thought through. The experts at CrowFly can help you decide if selling your future payments is right for you.
When deciding if selling your structured settlement payments 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:
Family changes (expecting a baby or losing a caregiver)
Going back to school
Moving your family
Major home repair or critical car replacement
How much of the future payments do you need to sell in order to meet your current need?
Selling future settlement payments involve some loss of value. So, make sure you are not selling more than you need. At the same time, selling your payments multiple times compounds the fixed costs in the process, so it’s important to avoid putting yourself in the position of selling multiple times within a short period of time.
CrowFly has a free calculator tool that enables users to discreetly and immediately estimate the value of their future structured settlement payments in order to decide whether it’s worthwhile to consider the options to transfer rights.
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 financial institutions, advisors, and lending companies you can consult. For example, unsecured personal loans are an option, but they can range widely in interest rates — from 5% to over 30% — while selling your payments will generally cost less than the equivalent of 6%.
Consider your local bank. If you can take out a home equity loan, interest rates will be substantially better. One bank stated their APRs (similar to interest rates) were ranging from 9.375% to 4.275% (as of 1/15/2020).
Check quoting resources such as 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 my future financial security?
If you need the monthly payments from your settlement in order to get by, we recommend that you do not sell them. Look to the other options above or consult a personal financial planner. If you still have no other option, sell the payments that are furthest out if you can, but only after building a plan for how you are going to make up for the lost income.
Can You Legally Sell Your Structured Settlement Payments?
Not every seller 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 be sure to review 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
(iii) 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.
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.
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 settlement payments 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 the rights to structured settlement payments. For example, some states have required 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 available 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. Each company 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 structured settlement factoring 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, sellers are always encouraged to take enough time to evaluate each of the quotes they receive.
When selecting the right company to move forward with, 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 or factoring company 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.
Some companies buy 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 connect sellers 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 people who are looking to purchase forms of safe, consistent, fixed-income in the future, the better deal you can get.
Formalize the Sale
Once you are working with a company to sell your settlement payments, you will be asked to fill out or provide several documents. Although the details vary, submitting certain documents is required to:
Confirm you have the right to sell structured settlement payments,
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 of items needed may seem daunting, but CrowFly will be there to help.
The required documents include:
Annuity Policy or Benefits Verification Letter: Issued by your insurance company, this document outlines the details of the annuity, including payment stream details.
Authorization Letter: The document where you authorize CrowFly to receive certain information about your structured settlement.
Disclosure Statement: Legally required as part of every structured settlement payment transfer, this document discloses the agreed-upon terms of the transfer.
Purchase and Sale Agreement: This is the agreement between you and CrowFly regarding the structured settlement and the terms of the transfer. It outlines the various rights and obligations.
Statement of Independent Professional Advice: Some states require sellers to seek independent professional advice, while other states simply allow you to waive this right in writing. This document makes it clear how you’ve decided to proceed with receiving advice.
Statement of Marital Status: This document includes information about your past and present marital status.
Statement of Dependents: This document includes information about the number of dependents in your name.
Spousal Consent: This document evidences your spouse’s, if you have one, consent to the transaction. Identification: Any copy of a government issued photo ID, such as your driver’s license, government ID card, or passport, is acceptable.
Funding Application: This is your application to sell your structured settlement payment rights.
Seller Wiring Instructions: Here, you’ll indicate how and where you would like to receive your lump sum. This document gets signed and notarized.
Each state may have modified requirements asking for these or additional documents.
No personally identifying information will be sent to an individual buyer. They are provided to your local court in a petition that CrowFly will help file. A judge in that court will schedule a hearing to review the material, where they will also confirm that you wish to proceed with the transaction and that your financial need is urgent enough to require selling the payments.
Once the court confirms everything is in order, the judge will provide an order that directs the insurance company to transfer the rights to your future payments to the structured settlement 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.