Cash Out Structured Settlement

But cash "now!" means settling for fewer dollars today than the total stream

"It's my money and I need it now!"

That cable-TV declaration, which has spawned dozens of YouTube parodies, invites owners of financial instruments called "structured settlements" to cash in their guaranteed streams of future income for upfront lump sums.

But cash "now!" means settling for fewer dollars today than the total stream of payments would add up to. When is that trade the right decision?

What structured settlements are

Structured settlements are a stream of payments that a consumer can win after an accident, workers compensation claim or legal judgment. Whoever has to pay out a structured settlement will buy an annuity contract from an insurance company. Settlement payments are guaranteed over the life of the contract. They're certain, predictable.

But circumstances can change. Perhaps you want to buy a house, start a business, get married -- whatever life serves up that makes your pockets feel empty.

Sell your settlement? Yes

Ken Murray, CEO of J.G. Wentworth, the firm behind many of those TV commercials, argues that selling structured settlement payments can be a better alternative to taking out a loan, because it doesn't require any credit checks and you're not left with debt. "Selling structured settlement payments is the safest financial transaction a consumer can enter into," he says.

Murray points out that most states have laws that govern how a settlement can be sold, and they require a judge to look over the deal to review its fairness.

But he cautions that it's "not a good idea if the consumer does not have a legitimate need" for a lump sum, or if the payments are required for living expenses.

Sell your settlement? Maybe

Selling a structured settlement should be "a 'go slow' decision rather than reactive or impulsive," advises Henry L. Strong, president of JMW Settlements Inc., a national settlement planning firm. A beneficiary should "recognize the true value of what they have and make all their decisions based on good information," he adds.

David Kaufman, CEO of Voyant Advisors LLC, whose firm provides modeling and investment management tools to financial planners, suggests anyone thinking of trading future income for a lump sum should ask two key questions: "Can I be financially disciplined? Does it make sense in terms of my financial strategy and long-term goals?"

He suggests modeling out different scenarios, with a financial planner or on your own, to "get a sense of the true value of the settlement ... make it part of your plan and go for it."