If you have been wondering how to get your structured settlement money in a lump sum, you should know there are both advantages and disadvantages for doing so. The fortune of having this kind of windfall lies in knowing that a guaranteed annuity helps you to be financially secure for the rest of your life. Getting a recurring payment installment changes the outlook of your future for the better.
Another advantage is that you insulate yourself somewhat against inflation. Over time, money depreciates because of progressive increases in prices and the cost of living. There is more value for your money if you can act now on investments, property and purchases now instead of later.
The drawback for receiving a one-time payment is the tax disadvantage. The structured settlement payment is not taxed, but the moment you shift that money to a one-time payment, you must pay taxes on that income. This sobering reality reduces the actual amount of your funds.
What if you could get your structured settlement payments all at one time, though, there are pros and cons to receiving your money in a single disbursement. Knowing what both scenarios entail could help you decide whether it is better to receive a monthly check or a single lump sum payment.
The obvious immediate gain with a lump sum is that you have access to your money without delay. Rather than waiting for a longer period of time and saving money to make a large purchase or large investment (in a new business or other capital venture, for example), you can pay larger sums of money up front. This seems a better option for those who are elders, have serious health challenges that prevent consistent employment patterns or have the burden of overwhelming financial obligations. Imagine getting rid of high-interest debt right away.Another advantage is that you insulate yourself somewhat against inflation. Over time, money depreciates because of progressive increases in prices and the cost of living. There is more value for your money if you can act now on investments, property and purchases now instead of later.
The drawback for receiving a one-time payment is the tax disadvantage. The structured settlement payment is not taxed, but the moment you shift that money to a one-time payment, you must pay taxes on that income. This sobering reality reduces the actual amount of your funds.
Cashing out with – or selling your annuity to – a reputable company will also reduce the amount of money you will receive. Remember that these companies are in business to make a profit and will make you an offer for less than the full amount you are owed. In exchange for the company advancing you a cash amount up front, you will have to:
- Sign over the rights to your pay installations
- Agree to share part of the payment with the company
- Get an advance on part of your award and resume installments on the remainder.
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