When you've been set up with a structured settlement plan after winning a court case with an insurance company or other party, you may decide to sell your settlement for cash at a later date. Many people seek cash for structured settlements because they no longer want to wait for each installment payment to come in as initially agreed upon. Getting a lump sum of cash for structured settlements may help you manage your budget better, but there are some important tax implications and things to consider before you proceed with the sale.

How Cash Settlements Work

Only some states allow you to sell your structured settlement for cash, so you will need to determine what State and Federal laws are in place. Your cash settlement sales proceeds are tax free and you will have immediate access to those funds, but you will need to get court approval to ensure you won't incur any type of tax penalty. Once the cash settlements are approved in court, you can have your insurance company wire the funds directly to your bank account.

Many people prefer a lump sum cash settlement instead of installment payments because they need money to pay for an unplanned expense, want to pay down their mortgage quickly, or they want to cover the costs of tuition and education expenses. Cash settlements do offer several financial advantages, but they are not for everyone. Some people are just better off receiving installment payments or they would end up spending a lump sum payment too quickly. You need to consider your financial habits and priorities when you are thinking about getting cash for a structured settlement.

Getting Cash for Settlements

If you are interested in proceeding with the process of getting cash for structured settlements, you will need to review all State and Federal laws and guidelines and request approval from a judge. The courts will want to know why you want to sell your structured settlement, because you had previously agreed upon an installment plan with the insurance company or other party under the structured settlement contract. Be prepared to provide solid reasons for selling your structured settlement and explain what you plan to do with the funds. If you don't get approval from the court, your sale could be subject to taxes. You can still sell your settlement for cash without court approval, but you will not be able to take advantage of the tax benefits.

Once you get approval for the cash settlement, it's in your best interest to shop around for the best rates from different buyers. You'll find that many financial companies offer different quotes based on a percentage of the total annuity amount, so don't be afraid to shop around until you find the best deal. When you select a company for the cash settlements, you will need to sign a disclosure document that outlines all of the conditions and terms of the sale. The cash settlement sales process can take up to 90 days, but once it has been approved, you can expect to receive the funds within 10 days.