Change a settlement from structured to a lump sum?
Question by Doris Dotterly: Change a settlement from structured to a lump sum?
Is it possible to change a structured settlement into a lump sum? Right now a family member of mine has insurance pay for everything they need medically as they need it, but I’d like to switch so that the money not being used would be earning passive income. Is this possible if it’s been 13 years since it was settled?
Best answer:
Answer by max’s mom
Yes, it is possible, though there can be detrimental tax consequences and the money is then also available to creditors to pay other debts. In a structured settlement, the person receiving the money does not pay taxes on the sum that is put into the structure and I think when you take that money out you probably have to pay taxes (which can be up to 1/3 of the money) and probably penalties. Talk to an accountant, banker or financial advisor before making that decision – trust me!!!.
There are firms out there that will buy your structured settlement – like Peachtree and some others – but you will usually do much better financially if you go through a bank or accountant and avoid paying their large upfront profit fees. Another option might be to change the nature of the settlement so that it is an annuity paying income every month or changing the terms of it without busting yourself w/ tax consequences. Again, you will get your best advice from an accountant or financial advisor at the bank
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