Many people, over the course of their lives, end up in a situation where they have been awarded a large sum of money, which has then been placed into a structured settlement. The reasons for this cash award run the gamut, from lottery payouts to life insurance or even a medical malpractice judgement. Just the malpractice cases resulted in $3.6 billion paid out to plaintiff, and it’s no secret how large the payouts for life insurance or the lottery can be. Finding out a large amount of money you are owed is due to be split up and paid to you slowly can be more than simply disappointing, it can be enraging. There are benefits of a structured annuity, however, but if those benefits do not outweigh the effect of their downside, there are options. However, it is important to understand both sides first.
- Pros: They are tax free as long as you are not in control. The payments, as well as the sum held back, are both covered under this law. The structured settlement ensures that the money will not be spent immediately, but provides income for an extensive period of time. For example, most plaintiffs that are awarded a lump sum spend it within the first five years and then end up being dependent on the government.
- Cons: The most obvious negative is not having access to money that is yours. Many see this withholding as a patronizing move, resenting not being permitted to control their property. If a person wins a large lottery payout, they expect to be able to live as they see fit, yet 48% of those who have received a lottery payout still work after. Another sticking point is the early withdrawal fees in the event that a person is forced to take some of their money before the time allowed by the government. Such a withdrawal prior to age 59 and a half usually is then subject to a 10% early withdrawal fee.
If, after due consideration, you decide that a structured settlement is not the best route for you, it is possible to get cash for your structured settlement. Selling your annuity is actually relatively easy. Do some comparison shopping to make sure you find the best rates, no need to simply give away money, after all. Luckily, 92% of those who sell annuity payments later report that they are satisfied with the decision they made. Chances are, you will be too.
