Generally, the answer is no. The laws regarding structural settlements are designed to protect you from abuse, and the ability to use structured settlements as collateral would void that intended purpose. The payments however, can be claimed as a form of income so that if you want to buy a house, the payments represent the same financial ability that a take home paycheck of the same amount would provide.
Once in place, can structured settlements be traded back for a lump sum settlement?
No. You are given special tax treatment with regard to structured settlements' proceeds, and you cannot then take that in a lump sum fashion and invest it again.
Do I get interest on structured settlements?
No. The interest is a part of your structured settlement agreement and is therefore, tax-free. You do not then get interest on top of that. This however, is not to say that if you get your regular structured settlement payment and don’t spend all of it, that you cannot invest that remainder into another account and draw interest from that. That interest however, would be taxable.
I see ads for turning my cash payments into a lump sum. Is that like renegotiating the structured settlement?
On the surface, they may sound the same, but they are not. Structured settlements may not be paid out in any different fashion than initially agreed upon. What these ads talk about is selling the payments to them. They would receive the payments just as you would have over time.
What they do for you is to buy them for a far lesser amount than the gross proceeds than you would get over time. Remember though that they are taking certain risks that are attached to inflation, and they also need to make money in the transaction. Consequently, the amount that they give you will be substantially less than the face value of the structured settlement. Structured settlement buyouts ads sound like they are giving something nice. But this is real business and you most certainly lose money long-term in exchange for getting it sooner.
Depending upon the term of structured settlements and the company making the offer, you may lose 50% of the total amount to be paid to you over the long run. If you need to go this route, don’t settle for the first deal that comes your way. Talk to as many companies as you can find and let them know that you are checking many deals. They are not all the same.
You should also seek the advice of your attorney before signing anything or taking any payment from anyone. Structured settlements can have many different requirements and are subject to different laws. Before you enter into any agreement regarding your structured settlement, you want to make sure that you don’t put yourself in legal trouble or find that there are things that you are agreeing to that are not in your best interests.
More on Structured Settlements
