by John Darer CLU ChFC CSSC RSP CLTC
Speaking of raising "dough", SSQ's "Baker's Dozen", entitled "13 Reasons to Sell Your Structured Settlement" fails to "rise" to a suitable level of accuracy. Taking such financial advice from StructuredSettlement-Quotes (SSQ) at face value, could be harmful for your financial health.
SSQ says "In some instances annuities are inherited--a person who has inherited such a structured settlement may choose to sell and have their inheritance in its entirety, up front'.
The beneficiary of a structured settlement receives remaining guaranteed periodic payments (such as guaranteed lump sums or income payments) from a structured settlement that are due after the original annuitant's death. Payments are made according the same schedule that payments were due to the beneficiary's decedent. Due to inherent transaction costs and the profit margin for investors, If the beneficiary sells the inherited structured settlement payment rights via SSQ (or anyone else) he or she will NOT receive the inheritance in its entirety.
More suspect information from SSQ
A. The Sell Structured Settlement for Charitable Contribution Idea
SSQ 'Some people desire to make a large contribution to charity, such as a scholarship or endowment, and need their money in a lump sum in order to be able to do so.
Charities are always happy to receive donations, whether as a lump sum or as periodic payments.Anyone who has been solicited by a charity knows that tithing in one year will certainly bring a repeat call for follow up donations. By keeping your structured settlement payment rights intact you can actually give more money to the charity.
B. Sell Structured Settlement For Investment Real Estate Investment Idea
SSQ "Many people cash in their structured settlement in order to purchase real estate. Taking the lump sum received from the sale of the structured settlement and using it to purchase rental properties could end up bringing in a rental payment which exceeds the previously received monthly disbursements—a smart choice!'
SSQ seems to suggest that you trade income that is tax-free for a discounted present value and then invest the discounted lump sum in a property with the hope that the rental income exceeds the sold structured settlement payments. It's not that simple. SSQ fails to consider the taxability of income, real estate transfer taxes, title insurance and other closing costs, possible costs of restoring the rental property to be in rentable condition (e.g. painting, tiling, carpeting, general repairs), brokerage commissions, or the cost of insuring and maintaining the real estate and annual real estate taxes. making a financial decision without considering the impact of the other factors.
C. Sell Structured Settlement To Help Friends and Family
SSQ "Many more people need ready cash in order to help friends or family members who find themselves in financial need. Parents may cash in their structured settlement in order to help their children, whether it is for educational needs, or perhaps to purchase a home of their own".
Anyone who has taking a commercial airline flight and paid attention during the pre-flight safety briefing, has heard the instruction to make sure you're own oxygen mask is securely in place before attending to others. The same goes for your income stream. There are a myriad of factors that must be considered whether selling your structured settlement would make any sense to help out friends and family.
D. Buyer's Remorse
SSQ "A person who has agreed to a structured settlement may suffer from "buyer's remorse," later and wish they had received their money in a lump sum, thus motivating them to sell their structured settlement.
What is buyer's remorse? It is when "a consumer switches from one state to another when making a purchase, where the state before they've made the purchase has enormous positive influence, and the purchase afterward loses a great deal of that. Before making a purchase, a buyer is faced with a great deal of choices, giving them a sense of agency and power in the world. They have money or credit to spend, and get to exert their dominance over the marketplace by placing their purchasing power.After the purchase, however, all options have vanished. Buyer's remorse may set in as they see themselves locked into a single decision, which may or may not have been the best, and seek their purchasing power reduced. No longer acting from a position of control, many people react by seeking to distance themselves from the purchasing act, to reaffirm their sense of having had a wide field of choices. Buyer's remorse is, in this way, seen as a very simple state of cognitive dissonance, where the desire to retain complete control and infinite possibilities clashes with the reality of actually exerting that control by limiting those possibilities" Source: Wisegeek
There are a myriad of factors that must be considered whether selling your structured settlement would make any sense. One major factor is that a sale of a structured settlement within months of it being created will set you up for a substantial capital loss. Only the settlement purchaser is making money. Avoid a knee jerk reaction. Work with a credentialed financial professional.