You can sell part of a structured settlement and keep the rest: a block of upcoming payments, one future lump sum, or a fixed slice of every payment. A partial sale needs the same court approval as a full one, under your state’s structured settlement protection act. We refer partial transfers to buyers who handle them rather than placing them ourselves.
How a structured settlement sale works in general, from who can sell to how long the hearing takes, is set out on our page about selling structured settlement payments. This page covers only the partial options: the shapes a partial can take, what they do to the numbers and what the court looks at.
The ways to sell part of your payments
A partial sale means you transfer the right to some of your future payments and the insurer keeps sending you the rest. The common structures are below.
| Structure | What you sell | What you keep |
|---|---|---|
| A block of upcoming payments | For example, the next 60 monthly payments | Every payment after the block |
| A single lump sum | One scheduled lump sum, such as a payment due in eight years | Your monthly payments and any other lump sums |
| A portion of each payment | For example, $400 of each $1,000 payment | The other $600 of each payment, for the whole schedule |
| Later payments only | Payments from a set year onward | The payments due before that year |
The idea is the same one behind a partial purchase of a private note: sell only what covers the need, so the payments you rely on keep arriving. Not every buyer offers every structure, and the insurer has to be able to split the schedule as the court order describes.
What each choice does to the numbers
The figures below are illustrative. They assume $1,000 a month with 240 payments left, a buyer discount rate of 10% a year, and they are before legal and court costs. Real offers depend on the insurer, the payment type, your state and the buyer.
| What is sold | Payments given up | Lump sum, about | Cash per $1 of payments |
|---|---|---|---|
| All 240 payments | $240,000 | $103,625 | $0.43 |
| The next 60 payments | $60,000 | $47,065 | $0.78 |
| $400 of each payment, all 240 months | $96,000 | $41,450 | $0.43 |
A buyer prices payments by their present value: each future dollar is discounted for the time the buyer waits. Dollars due in the next five years are discounted far less than dollars due in year 18, which is why the block of near-term payments brings about 78 cents for each dollar given up while the long slice brings about 43 cents.
That does not make the near-term block the right answer for everyone. It takes away all of your income for five years, while the slice leaves you $600 every month. A payee who lives on the payments may be better served by the slice even though it converts at a lower rate. A single lump sum due in eight years would bring about $22,541 for a $50,000 payment at the same rate, and it leaves the monthly income untouched.
Court approval applies to every partial
Selling a few payments is still a transfer of structured settlement payment rights, and it goes through the same process as selling them all.
State protection acts
Nearly every state has a structured settlement protection act. A judge must approve the transfer and find that it is in your best interest, taking into account the welfare and support of your dependents. The insurer that issues the annuity and the party that owes the payments receive notice and can respond.
The IRC 5891 excise tax
Section 5891 of the Internal Revenue Code imposes a 40% excise tax on a buyer’s factoring discount, roughly the difference between the payments bought and the price paid, unless the transfer is approved in a qualified order. A qualified order is one made under a state statute by a court that makes the required findings. In practice, no legitimate buyer closes without the order, and that hearing is the main protection you have against a bad price.
Disclosure and advice
Before you sign, the state acts generally require a written disclosure statement showing the payments being sold, their total, the discounted present value, the lump sum, the fees and the net amount you will receive. Many acts require that you be told in writing to get independent legal, financial and tax advice, and some states require the court to find that you received it or knowingly waived it. Read the disclosure line by line and ask for anything you do not understand in plain terms.
Each later partial is a new petition
If you sell a block now and more payments later, each sale needs its own court approval, and the judge will see the earlier orders. A pattern of small sales is harder to justify than one sale sized to a clear need.
Points that matter more on a partial
- Costs are per transfer. Legal and court costs run about the same whatever the size of the sale. As an illustration, $2,500 of costs is about 5% of a $47,000 lump sum but 25% of a $10,000 one, so very small partials can be poor value.
- Life-contingent payments stop at death. Buyers price that risk and may ask for medical records or life insurance. Payments due soon carry less of that risk than payments decades away.
- A split payment means two recipients. The order must say exactly which dollars go to the buyer and which to you, and some insurers charge an administrative fee for splitting.
- Tax treatment needs checking. Payments for a physical injury are generally excluded from income under IRC 104(a)(2), but ask a tax adviser how a lump sum would be treated in your case.
How to size a partial sale
Start with the amount you need, then add the costs you expect. Find the smallest sale that covers it, and compare structures by what each leaves you: steady monthly income, a future lump sum, or both. Ask each buyer for the discount rate, the gross lump sum and the net figure after costs, and compare offers the way you would compare offers on a note. If a loan, a payment plan or simply waiting would cover the need, keeping every payment is a sound choice.
Where we fit in
Partial transfers are one part of this market we refer out rather than handle ourselves. If you are weighing one, send us the payment details and we will point you to buyers who handle structured settlement transfers, so you can get more than one quote and deal with them directly. Get independent advice before you sign, and remember that the judge, not the buyer, has the final say.
Related questions
Can I sell only some of my structured settlement payments?
Yes. Common partials are a block of upcoming payments, a single future lump sum, or a fixed portion of each payment. The rest keep coming to you from the insurer.
Does a partial sale still need a judge's approval?
Yes. Every transfer of structured settlement payment rights needs court approval under your state's protection act, and each later sale needs its own approval.
Why does the near-term block bring more cash per dollar?
Buyers discount each payment for the time they wait. Payments due soon are discounted less than payments due many years out, so each dollar sold converts to more cash.
Does Note Brokering buy structured settlement payments?
Not for partial transfers. We refer those out. We can point you to buyers who handle them so you can compare quotes.