How Profitable Is It To Sell A Structured Settlement? | Structured ...

Article by Rakesh Dogra

Before deciding on getting cash for structured settlement, one needs to digest the fact that he?ll have to forego a huge part of the annuity payment as interest, associated costs & buyer?s profit. When this is clear that the realization as annuity payment will be lesser than the total value of the annuity, the next question would be as to how much money to expect as cash for structured settlement?

One needs to consider a few crucial factors like the amount of settlement current interest rates, predicted interest rates, current rate of inflation, expected rate of inflation, legal fees, other miscellaneous costs etc. The final offer from a buyer of the settlement will be a combination of these factors along with his profit margin and that is how one can calculate the expected cash for structured settlement. Structured settlement companies that buy an annuity payment do so at a profit. The amount of lump sum received by an individual selling either a part or the complete settlement is not the same as the value of the structured settlements sold.

There are many companies in the financial market which are ready to buy annuity payments from the people who are ready to sale it in the open market. An annuity payment is always purchased on a discounted rate. When a buyer of structured annuity settlement organization offers a discounted sum, they are paying what the payer would have paid; only they are keeping the interest from the original payer. The value of annuity to be thus sold will be approximately half of the actual i.e. if a person has a won an amount of Rs.100, 000; he?ll get approximately Rs. 50,000 from sale proceedings. Since the buyer of the annuity payment will receive the money over a longer period of time, this much of margin seems logical.

However, once you receive cash for structured settlement it can definitely be invested into a more profitable proposition. But before one arrives at such a decision, a lot of calculations will be required to be made. A comparison of the amount of money foregone must not be any way more than the expected interest to be earned in future. A few factors need to be analyzed and evaluated before finalizing the decision of getting cash for structured settlement. The current interest rate and the expected rate in future need to be analyzed. One can therefore invest in the financial markets to obtain better returns on investment that it would be otherwise if the cash was received at regular intervals as per the original structured settlement plan.

Also, it is to be kept in mind the tax aspect of the deal. One should not forget about the tax benefits availed from the cash for structured settlements. Whether the interest rates are going to increase or decrease in future is a very unpredictable issue. So, one has to be very careful with the calculations. The received cash for structured settlement can be invested in property too. If the property rates are expected to soar in future, it will be a wise decision to sell the structured settlement for cash and save on the interest to be paid as a home loan installment.

The cash procured from the sale of structured settlement can thus be a very profitable deal. It however demands a lot of investigation on the market behavior and being very accurate with the predictions, or else there can be huge losses and nothing can be reversed. So, it can be concluded that the cash received out of the sale of a structured settlement can be re invested to yield more profits, but all this has to be done with a lot of care, after a lot of research and analysis. Also it will be very unpredictable as to how the markets fare in the future. It is hence suggested to believe in the theory; ?one bird in hands is certainly better than two in a bush?.

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