Strategy 77 of 107 · new for the five-year plan
Sell some future structured settlement payments, only with court approval
What it is
If you receive structured settlement payments, a buyer can pay a lump sum for some of them.
Steps
- If you receive structured settlement payments, a buyer can pay a lump sum for some of them.
- State law requires a judge to approve the sale as in your best interest; without approval, federal law taxes the buyer heavily.
- Sell only part, compare several offers, and send the lump sum to principal.
Repeat: Once.
Measure: Lump sum against the total of payments given up.
Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Buyers' discount rates are often very high; you can get far less than the payments are worth.
- Payments meant for medical care or living costs should stay.
Who it fits
Average household, Single, No high school diploma, No college degree, College students, Grandmas and grandpas (62 and over), Married couples
Needs
Receives structured settlement payments
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: if you receive structured settlement payments, a buyer can pay a lump sum for some of them.
Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sources and more information
- 26 U.S.C. §5891: Structured settlement factoring transactions law.cornell.edu
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
Related strategies
- 76. Surrender a policy you no longer need, for its surrender value
- 78. Sell digital assets held outside retirement accounts
- 75. Sell vested employer shares you already own
- 74. Sell all or part of a business
- 80. A parent's or grandparent's large gift, using their lifetime exemption
- 73. Sell a rental property and pay off the home