Tumblelog by Soup.io
Newer posts are loading.
You are at the newest post.
Click here to check if anything new just came in.

How to Calculate a Structured Settlement

In case of an injury, you can apply for a settlement. The settlements that you receive in the form of annuity is termed as structured settlements. Suppose you are about to get a total settlement for $600,000 over a period of 25 years then you will receive a monthly payment of $1000. The complainant also may decide to pay the amount in a lump sum; however there is a particular way to liquidate the settlement amount as lump sum.

Paying off the settlement as a lump sum amount occurs mainly in the form of pay out an immediate debt, buying a home, car or something like that etc. The person may choose to sell the structured settlements too. It all involves calculating the present value of the settlement.

Calculating the present value mainly involves time value of money, which itself depends on the factors like inflation and all. Here are the basic steps that you will have to follow to calculate the present value, which you need to calculate in order to sell structured settlements.

  • First of all, you will have to find out the remaining amount of the settlement that is still left to be paid. If there is not pay out till date then this amount is same as the settlement amount as decided earlier.

  • Next you will have to contact a company which deals in the liquidation of these types of settlements. These companies mainly find out the discount rate for you. The discount rate mainly depends on factors like the present inflation rate, risk involved in the settlement etc.

  • Then you will have to multiply the remaining lump sum amount with the discount rate, it will give you the final structured settlement amount. The final amount will obviously be much less than the original amount.

  • You should not go for liquidating all the amounts, you better choose the amount which you need the most at present. It will not only fulfill your current needs, but also ensure a regular monthly income for the coming days. Settling with all the money will definitely bring down a financial risk for you.

Don't be the product, buy the product!