What Is A Structured Settlement: $1000 Giveaway

We’re trying something a bit different today, namely co-hosting a $1000 giveaway with a group of other personal finance blogs.  It extends from now through January 31st, with a single $1000 cash prize.  Your chance of winning will depend on the number of entries, but I’m willing to bet they’ll be significantly higher than your chance of winning the lottery.  

Regular PoP readers – please let us know in the comments if you like giveaways like this, or if you’d rather we abstain from them in the future.  

This giveaway is brought to you by StructuredSettlement-Quotes.com, America’s #1 structured settlement and annuity marketplace.  To give some flavor on what our generous $1000 patrons do, here are few things to file in your mind when it comes to structured settlements.

 

What Is A Structured Settlement?

It’s a settlement payment agreement between two parties where instead of paying in one lump sum, a series of cash payments are made, often over a period of many years.  Basically, it’s an annuity, but it’s usually being paid out because of some harm that has taken place.  For example, say you were maimed in a car accident.  The insurance company might offer you $15K/year for your medical expenses over the next twenty years.  That’s a structured settlement.

 

When Might You Be Offered One?

In all likelihood, any situation where you’re being offered a structured settlement is likely to be very stressful.  Remember, you’re maimed from a car accident!  The prospect of $15K/year in medical expenses can be pretty overwhelming to think about when your jaw is still wired shut.

Even if it’s a less extreme case, in all likelihood, if you’re being offered a settlement, you’ve still probably been harmed in some way, and your acceptance of that settlement generally releases the entity who has harmed you from additional future responsibilities.  That can be pretty stressful, especially if you’re not 100% sure what future harm might come to you from this that you would have no recourse for.

 

What Should You Consider When Faced With A Structured Settlement Offer?

First, figure out if you’re willing to accept the settlement and release the harming entity from future liabilities.  That’s a tough one.  And it can be emotional.

Figure Out What Value The Structured Settlement Has To YOU

Use the DCF example that we applied to the cash flow from our duplex to figure out what your structured cash flow settlement is worth to you today.  Don’t forget to take into account taxes that you might have to pay on the settlement as income in your calculations.  If you were given a lump sum, where would you invest it so you’d have enough money to cover those yearly medical expenses?

Look Into A Lump Sum Option

If the settlement does not have a lump sum payout option, it’s also possible to sell an annuity.   This is where you get to compare the amount you are being offered for the purchase of your annuity with your DCF calculation of the worth of your settlement.  The offer amount is probably going to be less than the DCF value you’ve calculated.  After all, the company that’s offering you this lump sum wants to make a profit, and it’s hard to blame them for that.  But on top of just the numbers, I would encourage you to think of a few additional items:

  • How urgently do you need cash now?
  • Do you want to shoulder the risk of your settlement payor being unable to pay you in future years?
  • What kinds of rights of survivorship are attached to your settlement?  If you have dependents, will they be able to inherit your structured payments the way they would a lump sum that becomes part of your estate?

 

I hope dearly that none of the readers of Planting Our Pennies has to endure the harm that generally predicates an offer of a structured settlement.  But file these questions in the back of your brain somewhere just in case.  Because when you’re stressed and faced with multiple convoluted settlement offers, you’re going to want to figure out which way is up before signing on the dotted line.

 

Click away below to add your own entries to the pile.  This giveaway is open through January 31, and the winner will be notified promptly.  
Sorry, the giveaway has ended.

 

Regular PoP readers – do you guys hate giveaways like this, or would you like to see more of them?

6 comments to What Is A Structured Settlement: $1000 Giveaway