Imagine going through a long, drawn-out medical malpractice case and winning a multi-million dollar verdict. Even after paying off your attorney and other fees and expenses, you are left with more money than you ever thought you would see in your life time. You are about to make plans to pay off all of your debts and move into a big, new house when you learn one troubling detail from your attorney. Instead of getting one lump sum of $1,000,000, your attorney tells you that the terms of the settlement call for 20 annual payments of $50,000 each. That is nice, but hardly what you need or expected.
At age 72, you are now permanently disabled and probably will not be around for 20 more years to collect the money you were awarded. You were counting on a big lump sum to use to make your Golden Years as comfortable as possible. While you intend to give some money to your children and grandchildren, you also want to enjoy some of the finer things in life while you still can.
A solution to your cash flow company is when a company can buy structured settlement payments from you. A factored structured settlement is where a Factoring Company purchases the rights to collect the proceeds of your settlement over the length of the settlement terms in return for giving you a lump sum cash settlement. The Factoring Company will give you something close to the present value of the anticipated future revenue stream. A fee or surcharge will be deducted from the lump sum payment to cover the risk of the transaction and for other short and long-term expenses. The factoring company also needs to make a profit on the transaction.
The benefit to the person that uses a structured settlement factoring company is that they get immediate use of their money. They can have control over a large sum of money now and may invest it or spend it any way they want. Now, here is a word or two of caution when proceeding with a factoring transaction. If you have no will power and go crazy spending money on houses, fancy cars and very expensive items, you could conceivably run through the money you receive in a very short time. Second, if you receive a $1,000,000 as a one-time payment instead of spreading the windfall out over 20 years, the tax consequences could be substantial. Unless you are very financially astute, it might be wise to consult a certified financial planner or other financial counselor to help you manage that money.
Structured settlement factoring transactions are not limited to settlements from lawsuits. Anytime a person receives a large sum that is subject to payments over time, factoring becomes an option. Lottery winners may engage such a service. A large settlement for agreeing to an early retirement is another possibility. When you want your money now, a structured settlement factoring transaction may just be the thing to do.
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