How to Sell a Structured Settlement: The CPA’s Guide to Liquidity

The liquidity trap of a structured settlement is that you’re asset-rich on paper but cash-poor in reality. After all, you can’t use next year’s payment to fix your roof today or pay off your outstanding medical debts any sooner.

The secondary market for structured settlements exists to solve this problem, allowing you to sell your rights to future payments in exchange for a lump sum of cash today. It’s a legitimate financial maneuver, but it’s also a minefield of predatory fees, aggressive brokers, and complex legal hurdles.

As a CPA, I look at this transaction through the lens of numbers and risk. If you sell your settlement, you’re essentially taking out a loan against your future self. This means that you need to ensure the cost of that capital makes sense.

So today, I’m explaining exactly how to sell a structured settlement, covering the math, the legal requirements, the timeline, and how to avoid the sharks that infest this industry.

The Time Value of Money

Before you sign a single document, and before we go into the process, you must understand one financial concept: your Time Value of Money (TVM).

Put simply, money available today is worth more than the same amount in the future. That’s because money today can still earn interest. So if I offer you $100 today or $100 five years from now, the wiser move is to take it today. For it to be worth accepting later, I’d need to offer you $100 plus a premium.

When you sell a structured settlement, the buyer uses this logic in reverse in order to maximize their profits. The whole point is giving you cash now for money that they won’t receive for years — and therefore, they must calculate the present value of your future payments.

The formula involves a discount rate, which is the percentage the buyer charges to wait for the money.

• Lower Discount Rate: You get more money.
• Higher Discount Rate: You get less money.

In 2024 and 2025, standard discount rates range between 9% and 16%. So if a company quotes you a rate of 20% or higher, walk away — they’re overcharging you for the risk.

With that in mind, let’s break down the process, step by step.

Phase 1: Assessment of Your Actual Needs

Most people assume that they have to sell their entire settlement. This is a common misconception.

In reality, you can (and should) only sell what you absolutely need to cover your immediate financial obligations. In my opinion, selling the entire annuity strips you of long-term security.

There are two primary methods of the partial sale:

• Period Certain Sale: You sell payments for a set time (e.g., the next 36 months of checks). After that period ends, the checks revert to you. You can also sell a portion of each incoming check, like the first $1,000 of the $3,000 check you receive every month. This way, you have consistent income.
• Partial Lump Sum: You sell a specific dollar amount from a future balloon payment.

Besides the benefit of only reducing your total payout by a certain amount, asking for only what you truly need has another benefit.

Judges have to approve these sales and will base their decision on your best interests. So if you want to sell your settlement to buy a luxury car, the judge will likely deny you. If you want to sell it to pay off high-interest credit card debt, buy a primary residence, or pay for education, the judge will likely approve it.

Phase 2: Shopping the Market

This is where most people lose money.

That’s because the structured settlement industry is split into two types of companies: lead generators and direct funders.

• Lead Generators: These companies do not pay for your settlements with their own money. Instead, they spend millions on TV ads and aggressive cold-calling campaigns, and when you call them, they take your information and sell it to a funder — taking a massive commission in the middle. This commission comes out of your pocket in the form of a higher discount rate.
  
• Direct Funders: These companies use their own capital to buy your payments, eliminating the middleman. Because they don’t have to pay a broker fee, they can typically offer you a lower discount rate (and more cash).

This is important because the industry has a reputation for harassment. You might call one company for a quote, and suddenly your phone rings 20 times a day.

You need a partner, not a pest, so look for companies that emphasize education over sales pressure. I like Strategic Capital because they operate differently than the TV giants. They function with a philosophy of transparency and will often tell a potential client not to sell if the math doesn’t make sense. This both protects your savings and improves your chances of success.

In my opinion, finding a company that acts as a fiduciary-style partner rather than a hungry salesperson is the single most important step in this process.

Phase 3: The Contract and Disclosure Statement

Federal and state laws require the buyer to provide a disclosure statement, which must arrive at least three to 10 days before you sign the transfer agreement.

This disclosure statement is your “truth in lending” document. It must clearly show:

• The Gross Amount: The total dollar value of the future payments you are selling
• The Discount Rate: The annual percentage rate used to calculate the price
• The Net Amount: The exact check amount you will receive
• Expenses: Any legal fees, processing fees, or court costs deducted from the total

Red Flag: If the company tries to hide the discount rate or bundles “administrative fees” into the discount without explanation, pause the deal.

Reliable firms present these numbers plainly. They want you to understand the math because a confused seller often leads to a rejected court case later.

Phase 4: The Legal Process

You can’t just sign a contract and get paid.

Because structured settlements usually arise from personal injury cases, the government protects you from making bad financial decisions. That’s why every state has a Structured Settlement Protection Act (SSPA) that mandates that a judge must review and approve the sale.

Here’s how the legal process plays out:

1. Petition: Your buyer (the funding company) will hire an attorney to file a petition in the court in your county — you won’t have to hire one yourself.
   
2. Notice to Interested Parties: The buyer must notify the insurance company that pays your annuity (e.g., MetLife, Prudential), which will have the right to object if the sale violates the original settlement terms (which is rare).
3. The Independent Professional Advice (IPA) Letter: Many states require you to consult with an independent professional (CPA, attorney, or financial planner) to review the deal. This person signs a letter stating you understand the financial implications.

Afterward, you’ll need to wait 45–60 days. It’s far from an instant process — scheduling a hearing takes time since there are so many moving parts. So if a company promises you cash in three days, they’re either  lying or offering you a high-interest cash advance that will eat up your final payout. 

Legitimate processes follow the court’s schedule.

Phase 5: The Hearing

You will likely need to appear in court when all is said and done. This intimidates many sellers, but it’s a standard procedure that takes maybe 15 to 30 minutes.

Your buyer’s attorney should prep you for this hearing. If you’re working with a reputable firm, they will have already vetted your financial situation to ensure you pass the judge’s scrutiny.

The judge will ask questions like:

• Do you understand that you are giving up guaranteed future income?
• How do you plan to use this money?
• If you sell these payments, will you still be able to pay your rent and feed your children in the future?
• Did you shop around for this rate?

But note that the judge is not there to interrogate you; they’re there to protect you and decide whether the transfer is in your best interest and does not cause undue hardship to your dependents.

Phase 6: Funding

Once the judge signs their final order, the legal process concludes. However, you do not get the check that afternoon.

The court clerk must officially enter the order into the record, and the insurance company must receive a certified copy of the order and send an acknowledgment letter confirming that they will redirect the payments to the buyer.

Once the buyer receives this acknowledgment, they release the funds. This usually happens within three to five business days after the court hearing.

Common Pitfalls and Scams

The structured settlement market attracts bad actors, so it’s important to remain vigilant.

1. The Cash Advance Trap

Some brokers offer “immediate cash” while you wait for court approval. They promise to get $2,000 in days, but they also charge exorbitant interest rates on this advance — sometimes exceeding 50%. When your final check arrives, they deduct the advance plus the massive fees.

My opinion? Always avoid these advances.

2. The Aggressive Upsell

Suppose you want to sell $20,000 out of your total $100,000 settlement. In most cases, the broker will try to convince you to sell the full sum.

As tempting as it might be, stick to your plan and only sell what you need.

3. Stealing the Quote

If you get a great quote from Company A and call Company B to shop around, Company B might say, “We can beat that,” but refuse to put it in writing until you drop Company A.

If they won’t put it in writing, the offer does not exist.

4. Forum Shopping

Some shady companies try to file your case in a different county or state because they know the judges there are “easy.”

This is often illegal. The sale can be voided later, and you could face legal trouble, so ensure the case is filed in the county where you actually reside.

Why the Buyer Matters

I mentioned Strategic Capital earlier. I often use them as an example because their business model aligns with my mindset as a CPA: An educated seller is a seller who is going to be able to make the best possible decision.

In an industry where many brokers view you as a lead to be squeezed, you need a buyer who views you as a counterparty in a legal contract.

A good buyer will:

• Encourage you to take the weekend to think about it.
• Explain the tax implications (structured settlements are tax-free; selling them usually remains tax-free, but you need to be sure).
• Provide a clear, line-item breakdown of the discount rate.

A bad buyer will:

• Call you seven times a day.
• FedEx you a contract overnight and demand you sign it within 24 hours.
• Tell you “courts don’t matter” or try to skirt legal requirements.

How to Sell a Structured Settlement: My Quick Checklist

If you have a real need, here’s a quick checklist to get started:

1. Identify the Need: Determine the exact dollar amount you need.
2. Verify the Asset: Find your original settlement paperwork.
3. Solicit Quotes: Contact 2–3 buyers. I would advise contacting only direct funders.
4. Compare the Effective Rate: Look at the discount rate and the final net check.
5. Review the Disclosure: Read the federally mandated disclosure statement.
6. Consult a Pro: Have a CPA or attorney review the offer.
7. Sign and Wait: Sign the papers and wait 45–60 days for a hearing.
8. Appear in Court: Answer the judge’s questions honestly.
9. Receive Funds: Use the capital to solve the problem you identified in Step 1.

Selling a structured settlement is a powerful tool for liquidity because it breaks the shackles of a fixed income stream. But, like any financial tool, it requires precision and caution to use correctly.

Treat this as a business transaction and not a desperate scramble for cash, and you will come out ahead.