Congratulations! You’ve just been awarded the largest amount of money you’ve ever had from a court settlement.

While this sounds exciting, handling a lump sum can be stressful. You might have the option to choose how to access your cash.

What is the best choice for your court award? Keep reading to find out.

Lump-Sum Payment vs. Structured Settlement

When you are awarded a large amount of money, you might have the option to choose to access your cash through a lump-sum payment or a structured settlement.

While a lump sum payment seems like the obvious choice, it isn’t always the best one.

Lump-Sum Payment

A lump-sum payment can be overwhelming, especially for someone who just went through a traumatic experience.

If you are currently receiving needs-based government experience like SSI or Medicaid, opting for a lump sum payment can jeopardize your eligibility. Government assistance uses asset standards to determine eligibility.

Proceeds from the settlement are subject to income tax, another downside of choosing a lump sum.

Plus, if you aren’t great with money, you could be tempted to blow through your lump-sum payment.

Structured Settlement Payments

The first benefit of structured settlement payments is that proceeds and growth on them are income tax-free. The payments and the rate of return are guaranteed.

This means that the market can take a dive without affecting your structured settlement.

During the court process, you can decide on a settlement plan that works with your lifestyle. For example, if you know you have future expenses coming up, like the purchase of a home, you can receive a series of larger lump sums.

Cashing Out a Structured Settlement

If you do opt for a structured settlement, there is another way to access your cash in a lump sum payment. You can sell part or all of your future payments for a one-time lump sum amount.

There are companies that help you cash out by buying the rights to your future structured annuity payments. There is a legal work process both the company and lump sum receiver must go through before the sale is complete.

You’ll need to get approval from a state judge to sell your payments and request cash. This can take a month or longer.

When you go to court, you’ll likely need to justify your cash-out request before getting court approval. Using the money to buy a new car or pay medical bills is usually acceptable while taking a luxury vacation probably isn’t.

Keep in mind that when you sell your structured settlement payments to a factoring company like Wepaymorefunding.com, you won’t receive the full amount of what your payments are worth.

It’s important to find a company that offers a fair rate for this reason.

Access Your Cash From a Court Award

When awarded a large amount of money from the court, you might have the option to choose a lump-sum payment or a structured settlement. In most cases, a structured settlement is the better option.

If you need to access your cash from your structured settlement ahead of the payment schedule, you’ll need to sell parts or all of your future payments. You’ll need a good reason for selling to get approved by a judge.

For more personal finance tips, check out the other posts on our website.