Iowa Birth Injury Attorney

As with anything else in life, there are up sides and downsides when selling your structured settlement or annuity payments. If you are considering doing this, it’s best to consider all aspects of the transaction and how it will affect your life and your finances.

The primary benefit of holding on to your structured payments lies in the security of possessing a regular stream of income.

This said, there are circumstances under which it is advantageous to take a lump sum payout. This can allow you to make a large purchase (such as a house) or investment without incurring debt. If you have a large amount of high interest credit card debt, having a lump sum of cash to pay it off with is generally preferred.  Another reason to take a lump sum payout is if you are elderly and/or in poor health and have a lowered life expectancy (although under some conditions, such payments can be left to an heir).

The primary downside is that when you cash in your structured settlement payments for a lump sum, you will earn less than the future value. However, in an inflationary economy, this disadvantage is offset slightly when you factor in that the lump sum funds you get today are worth more than the structured payment amounts you would be receiving in twenty years or so.

Another thing to keep in mind is that while your settlement stays tax-exempt, if you take that lump sum cash for settlement and develop a new stream of income with it through an investment – say for example you use the income to purchase rental property – the new source of income may be  taxable, as does any interest that is earned.  It is always suggested that you consult with your tax or other skilled advisor relating to financial transactions.

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