There are a variety of lenders and institutions willing to buy a structured settlement in exchange for a lump sum cash payment. There are pros and cons to selling your structured settlement, and it is important to understand exactly why you wish to do so and if it makes sense for your particular personal and financial situation.

First, let’s look at the disadvantages of selling a structured settlement payment:

• You will be receiving less money from an up-front settlement payment than you would have received if you had continued to receive structured settlement or annuity payments for the length of their term. There is a discount involved in selling any settlement payment - the fact that structured settlement buyers exist means that they are making money from you.
• You may incur significant state and federal tax liabilities on your up-front payment, whereas your structured settlement payments may be tax-exempt.
• Buyers of structured settlement payments may participate in unethical business practices. The industry is relatively unregulated, and it is important to find a reputable buyer.
• There is a significant amount of paperwork and red tape to go through when selling a structured settlement, and you may not see your lump sum payment for one to three months after the process is initiated.

Now for the advantages:

• There is no credit approval required to get money up front from your structured settlement payments. The fact that you are receiving regular payments eliminates the credit risk from the buyer’s point of view.
• Receiving the lump sum up front gives you an amount of liquidity you would not have had with structured payments or an annuity stream. This may be important to you if you wish to put a significant amount of money down on a home, investment, business venture, etc. You must consider the tradeoffs involved and truly examine whether you feel you will handle the instant access to cash in a responsible manner.
• The discount factor aside, you will receive the value of your money in current dollars. If you feel that you can manage your money in a way that protects against inflation, this could be important. The regular payment values of a structured settlement plan will erode in value over time as inflation is factored in.
• There is always a slight risk that the company providing your structured settlement payment may not survive for the term of the payments, or default on the payment plan. Receiving your money up front removes that risk.
• You may wish to receive your money up front if you feel you will not outlive the term of the structured settlement payments. For example, if you will be receiving structured settlement payments over a span of 20-30 years and the end of the term is outside your projected life expectancy, you may opt for a lump-sum payment to eliminate some unknown factors in your estate planning.