News and Tips on structured settlement transfers.

Cash

December, 2010


21
Dec 10

Who Can Take My Lottery Money?

Congratulations!  All of your numbers match up and you are the proud winner of a huge lottery prize!  Time to start thinking about the cars, mansions, and vacations you will buy, right?  Maybe not.  As soon as word gets out about your newfound wealth, there are sure to be others to stake a claim.  

Ex-Spouse.  It’s fairly well-established that if you win the lottery while married, the winnings become joint property.  Things get more cloudy, however, if there is a pre-nuptial or post-nuptial (yes, there is such a thing) agreement, or if the winning ticket is purchased after you’ve separated but before the divorce is final.  Much of it depends on where you live, but the court can also take into consideration the circumstances surrounding the purchase of the ticket, the duration of the marriage, whether the marriage produced any children, and so on.  Even if a court decides that your lottery winnings are all yours, your ex will likely want to revisit any child-support arrangements you might have.  

IRS.  Before you collect a penny of your winnings, the Feds will take their cut.  If you’ve won more than $5,000, 28% is taken off the top and you will receive a Form W-2G to help you report your winnings on your tax return.  If you opt for your winnings in an annuity, tax is withheld on the annuity payment each year.  

State.  If your state has an income tax, they will get a cut, too.  Additionally, if you’ve racked up a tab for, say, delinquent child support or back taxes, you’ll have to settle up before you make that shopping list.  

Everyone Else.  Of course, you’ll get requests from every charity, would-be entrepreneur, relative, friend, ex-lover, and anyone else you’ve met for money.  But be extra vigilant for underhanded attempts to get at your fortune.  Watch out for bogus invoices from companies you’ve never heard of showing up in the mail.  Collections agents may resurrect old or invalid debts and try to collect, even though they have no right to do so (they do this to people who haven’t won the lottery, too).  Lots of lawyers and financial advisors will offer their services to you, but check references to make sure they’re competent and legit.  And, unpleasant as it may be, think about your personal safety.

You.  Plenty of lottery winners have overspent and gone broke.  Think of yourself as your own worst enemy, especially if you’ve had money troubles in the past.  Avoid major changes in lifestyle; a fleet of sailboats or several vacation homes might be fun to own, but the upkeep and taxes will drain your fortune, too.  Get with that financial advisor you hired to set up a strict budget.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


21
Dec 10

Selling a Business Note

If you owned a business and sold it, the purchaser may have given you some cash and a note for the balance.  If you’d rather not wait for payments and want to sell that note now, you can exchange some or all of the future payments in exchange for a lump sum up front.  Like a sale of a structured settlement or lottery award, you will receive less in total than you would have over time, but if you need cash right away, this may be a good option.

When considering what your business note might be worth, prospective buyers consider many factors, including the following:

Note Terms.  The longer the term of your note, the less it is likely to be worth to a purchaser; they don’t like to wait for their cash, either. Five years (60 months) appears to be a rule of thumb, investors don’t like to see longer terms than this.

Interest Rate.  Of course, prospective buyers stand to make more money on a note with a higher interest rate, and will pay more for it. 

Down Payment.  A larger down payment made when the buyer purchased your business indicates a stronger business and a more creditworthy note payor. 

Business Characteristics:  Is this business in a growing field?  How established is it?  How strong is its client base?  How have sales been lately?

Assets.  The business is the collateral for the note, but what does the business own?  Does it have strong financials, a good cash balance, and valuable underlying assets? 

Liabilities.  The prospective buyer is certain to check for other potential claims against the business, such as loans, lawsuits, or tax liens. 

Seasoning.  Investors often like to see that one or two payments have already been made against the note; this is referred to as “seasoning.”  A successful payment history suggests that default is less likely in the future. 

Should you enter into an agreement to sell your note, you’ll need to assemble documents for the buyer. 

Notes and Contracts:  You’ll need the actual promissory note you received, and the contract for the sale of the business. 

Security Agreement:  This is the contract that demonstrates your interest in the business itself if the payments aren’t made on the note – in other words, it proves your collateral.

Proof of payments made on the note to date.

Financial statements and/or tax returns for the business.

This is a short list, of course, and you may be asked for much more.  Bottom line is, the prospective buyer will want lots of assurance as to the strength of the note.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


19
Dec 10

All in the Letters – A Guide to Financial Advisor Certifications

If you are shopping around for a competent financial advisor, or FA, to help you decide whether to sell a structure settlement, or the best way to invest the proceeds, you should consider their education, experience, and expertise.  One easy way to get an idea of a prospective FA’s background is to look at the letters after his name; that is, whether he carries any special certifications or professional designations.  Attainment of any of these suggests a minimum level of knowledge and/or work experience.    Here’s a guide to some of the more likely ones you’ll see when evaluating prospective advisors.

Designations of professionals with general financial planning knowledge:

CPA – Certified Public Accountant.  CPAs have studied accounting and have passed exams to earn the certification.  CPAs can specialize in a number of areas, however, so if you are seeking a CPA who has further expertise in financial planning, look for the PFS, or Personal Finance Specialist, designation.

CFP – Certified Financial Planner.  This designation is given by the Certified Financial Planner Board of Standards, Inc., to candidates who have completed extensive study in financial planning, have passed certification exams, and have attained experience in financial planning.

ChFC – Chartered Financial Consultant.  Much like CFPs, the ChFC has demonstrated knowledge of financial planning topics, passed certification exams, and has gained related work experience. 

Designations of professionals who concentrate on investments:

CFA – Certified Financial Analyst.  A designation for professionals who have at least three years of work experience and who have passed rigorous exams concentrating on portfolio management and investment analysis.

CFS – Certified Fund Specialist.  This professional concentrates on analysis and investment in mutual funds.

CIC – Chartered Investment Counselor.  Another designation that emphasizes investing.

Designations of professionals who concentrate on insurance and estate planning:

CFTA – Certified Trust and Financial Advisor.  This person has passed an exam that focuses on retirement and estate planning, investment management, and taxation.

CLU – Chartered Life Underwriter.  This is a designation administered by the American College, and goes to individuals who have demonstrated expertise in the areas of estate planning and life insurance.

This is far from an exhaustive list; many other designations exist, each with their own qualifications.  While a professional certification should not be your sole criterion for choosing a financial advisor, the institutions that award these designations usually require the professionals to maintain certain ethical standards and even continuing education.  You might consider giving a few bonus points to these professionals when choosing the one who will help you.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


18
Dec 10

Finding the Right Financial Advisor

Virtually every post here has recommended that a prospective seller of a settlement, lottery award, or mortgage note seek the advice of both legal and financial counsel.  You can open the phone book to “Accountants” “Financial Advisors,” or “Financial Planners” to get a list of names, but this isn’t enough to find someone qualified to help you. 

References.  Talk to people you know about how and where they get financial and investing advice.  Find out what types of services they got from the professionals they hired; optimally, you want someone who handles your type of settlement on a regular basis.  If you have a settlement as a result of a lawsuit, your attorney might have suggestions, but you should evaluate their recommendations with the same critical eye as any other. 

Professional Associations.  Accountants and financial advisors often belong to professional associations, such as the American Institute of Certified Public Accountants or the National Association of Personal Financial Advisors.  Find your local chapter for these organizations and talk to them.  Ask about members who’ve handled your type of situation before. 

Beware.  Beware of financial advisors who work on commission, or who work solely with one or two investment organizations.  Beware any accountant or advisor who guarantees investment returns and glosses over the risks.  If they’re anxious to get their hands on a large sum of cash, they may be too eager for you to sell your settlement, rather than give you objective advice about all of your options.

Fees.  Many financial advisors work for “fee-based,” “fee-plus-commission,” or “commission-based” compensation.  This means that they earn a commission or the products or services they sell you.  While this is legal and doesn’t mean the advisor is dishonest, it may lead him to steer you toward the products that will earn him a commission.  By contrast, a “fee-only” financial advisor doesn’t work for commission; you will pay him directly for his services.  While this means a cash outlay up front for you, it also means he has no incentive to lead you toward a particular product and may give you more objective advice.

 Certifications.  Look at any professional designations your prospective advisor has.  Designations such as CPA (Certified Public Accountant) or CFP (Certified Financial Planner) indicate that the person has certain levels of education and/or has passed certification exams.  Ask the prospective advisor about his qualifications. If he has a professional designation, check to make sure the designation is still active and good standing.  For example, you can check with your state’s regulatory agency for Certified Public Accountants to ensure a CPA has a valid license.

The Interview.  Most importantly, talk with your prospective advisor on the phone or in person.  Get the details about his qualifications, and determine whether his areas of expertise meet your needs.  Ask about prior experience with your type of settlement.  Ask him specifically about relationships with investment and insurance companies, and how you can be sure that his advice is independent and objective.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


18
Dec 10

What is Pre-Settlement Funding?

If you are the plaintiff in a personal injury case, you may have been approached about something called pre-settlement funding, litigation funding, personal injury funding, or accident funding.  Alternatively, your attorney may have suggested you consider the possibility.  So, what is it?

Pre-settlement funding is, essentially, a loan (even though it is not called a loan) against the expected value of your lawsuit, once it is resolved.  You make a promise to repay this loan once (and if) the lawsuit is decided or otherwise settled.  Of course, there will be interest on the repayment, so you will pay back more than the original amount of the loan.  Since a lawsuit can take months or even years, the plaintiff – especially if an injury has made him unable to work – might be in dire need for cash, and this is the most compelling reason to choose pre-settlement funding.  However, much like selling an annuity or structured settlement, you can expect to get much less cash from a pre-settlement funder than you would from an outright settlement.  The main reason to seek out such a settlement is some immediate need for cash.

So, consider whether you truly need cash up front.  Consider whether other funding sources are available to take care of the bills you are facing.  Carefully evaluate any offers you receive to make sure what you give up in the future is worth what you need now.

Pre-settlement funding loans are usually “non-recourse,” that is, there is no obligation for you to repay the advance, even if you do not reach a settlement or your lawsuit is unsuccessful.  As a result, the prospective lender will take a critical eye of you and your lawsuit in order to compensate them for their risk.  The amount of money that your prospective lawsuit is worth to them can vary greatly, from a few hundred to several thousand dollars.

Expect that prospective lenders will contact your attorney to talk about the specifics of your case, especially the likelihood that you will prevail.  There may also be specific requirements for a pre-settlement funding, depending on the state where you live.  Prospective lenders will likely charge a generous discount rate in order to cover their costs, the risks of taking on a loan to you, and to make a profit.  You can also expect that there will be fees over and above the discount rate, such as “legal fees,” “processing fees,” or “origination fees.”

Should your suit be successful, you’re on the hook.  So make sure that any pre-settlement funding is absolutely your best option.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


17
Dec 10

Selling a Mortgage Note (Part 2)

This is the second in a series of posts about selling your mortgage note.

At this point, you’ve decided that selling the note is right for you.  You’ve shopped your note to several prospective buyers and compared their offers.  You’ve made sure that these buyers are legitimate and free of complaints.

Now the burden of the work is on you.  You will have to assemble a comprehensive portfolio of documents and information to satisfy the seller that they’re doing the right thing.  Get together:

The promissory note;

The mortgage agreement;

(Even though the terms are often used interchangeably, a promissory note and a mortgage are not the same.  A promissory note spells out the actual terms of the loan, i.e., a certain amount of payments at $X at an interest rate of X%.   The mortgage actually pledges ownership in the property as security for payment of the promissory note.)

The original amortization schedule on the note;

Evidence of the payor’s payment history to date, including documentation to support the payor’s employment and creditworthiness;  

Information on any third party you have used to collect payments on the mortgage;

Proof of a current hazard insurance policy in force on the property;

Proof of clear title to the property, including title insurance, and;

Proof that real estate taxes on the property are up-to-date.

Expect that the prospective buyer will be doing due diligence of his own.  He will check the title to the property and the creditworthiness of the payor.  He will also likely do some sort of appraisal of the property.  Some mortgage note buyers limit their purchases to property worth over a certain amount, or limit their purchases to certain types of property, such as modular homes.

Like any other major sale, you should consult with an attorney to make sure the sale agreement, and all of the underlying documents, are in order. 

Once you and the buyer are satisfied with the condition of the property and have reached an agreement to sell, there will be a closing, much like a closing to buy a home.  This might occur in person, but can also be done via express mail.  The most important document in this arrangement, however, is the Assignment of Mortgage, which officially turns the payment stream over to the buyer.  Again, check the terms of this document to make sure the seller has not changed the deal from the original offer.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


15
Dec 10

Selling a Mortgage Note (Part 1)

A mortgage note is a promise from one party to another repay a mortgage loan.   This promise is secured by a piece of real estate.  So, if you have a home and you are paying the mortgage, you are making payments to someone who holds a mortgage note on your house, usually your bank.

If you happen to hold a mortgage note where someone else is making payments to you, however, you may be able to sell all or part of the note for a lump sum of cash.  This is much like the selling of structured settlements or lottery payments that has been discussed in prior posts.  If you sell the note, you give the buyer the right to collect future payments in exchange for cash up front.

The first step in selling your mortgage note is to shop around. An Internet search can produce numerous companies that buy mortgage notes.  Using a service like Quote Me a Price enables you to get several quotes from interested buyers all at once.  Examine prospective deals carefully.  Look for the discount rate – a rate the buyer uses to determine how much he’ll offer for your mortgage – as well as any fees that you will be expected to pay, such as legal fees or processing expenses.  Seeking a financial advisor to help evaluate offers is a great idea.

Much like the sale of other settlements, you can expect to receive less cash now than you would have received in total over the life of the mortgage.  Note buyers do this to compensate for their operating costs, to justify the risk of taking on a stream of future payments, and also to make a profit.  How does a buyer decide how much to pay for your mortgage?  The buyer sets the aforementioned discount rate based on a number of factors, such as the creditworthiness of the mortgage payor; the type of the property (residential, commercial, industrial); the condition of the property; the appraised value of the property; the number of payments left in the mortgage; and the terms of the mortgage, especially the interest rate.

You should evaluate carefully the companies that bid on your mortgage note.  Typing the company’s name into an Internet search engine can yield information about the companies courting you, but this is just a starting point.  Also check the Better Business Bureau (www.bbb.org).  Your State or District Attorney may have information on official complaints, if any, filed against prospective buyers.  The economic downturn and nationwide foreclosure crisis has revealed countless cases of botched paperwork, unclear ownership of mortgage notes, and fraud, so take plenty of time to do this homework.

Should you take up an offer, what happens next?  Details next post.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


14
Dec 10

Spotting the Bad Guys

If you’re selling a structured settlement, lottery award, or other stream of payments, you already know that the companies who buy these settlements do so in order to make money.  Any Internet search will reveal plenty of court cases and complaints that prove bad guys really are out there, and they may be coming for you.

You should always get several offers for your settlement.  Using a service like Quote Me A Price will help you shop it around to numerous buyers.  But how else can you check them out?

Check for Complaints.  A simple Internet search can yield information about the companies you are considering.  But since it’s easy to trash a company online, also check with the Better Business Bureau and your District or State Attorney’s office for formal complaints against made against prospective buyers of your settlement.  Common complaints include taking longer than promised to make the sale, or the company changing the terms of the sale from the original bid.

Outrageous Discount Rate.  The discount rate is what the prospective buyer uses to determine how much cash he is willing to pay for your settlement today.  Companies consider many things when figuring this rate, such as the cost to borrow the cash they will need to pay you; lost interest revenues on the cash they will pay you; the risk of taking on a stream of future payments, the operational costs of doing business (a.k.a. overhead), and, of course, profit.  Opinions vary on what constitutes a “reasonable” discount rate, but the higher the discount rate, the less money you’re going to get.  Compare the offers you’re getting and, as always, think hard about whether selling your settlement is your best option.

Big Fees.  Check any deal you get carefully for “attorney fees,” “processing fees,” “service fees,” or anything else that looks like an extra charge.  If you get stuck paying this, it is just one more chunk out of your settlement on top of the profit the buyer will make.  Even once you agree to a deal, keep checking the fine print every step of the way to make sure the seller isn’t changing the terms on you midstream.

High Pressure.  Beware any company that tries to get you to settle quick, discourages you from soliciting offers from other companies, hides the fine print, uses “their” attorneys or financial advisors to convince you you’re getting a good deal, or any other tactic that makes you feel uncomfortable.  Don’t reveal other offers you’ve received to prospective buyers.  Selling a structured settlement is an important financial decision, and should never be rushed.  Always get your own, independent advice.  Be skeptical and don’t trust the settlement buyer blindly – even if they’re not trying to cheat you, anyone can make a mistake.  

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


14
Dec 10

How to Say “No”

If you have come into some money, either by selling a structured settlement or winning the lottery, there will be an onslaught of people who will come forward, hoping for a piece of your newfound fortune.

If you were raised in a household where saying “no” was considered rude, or worked in a job where “no” was always a wrong answer, you’ve been conditioned to be polite, even at your own expense.  Now is the time to shift your thinking and start looking out for you.  Doing things solely for the benefit of others will lead to resentment, and possibly financial ruin.  Put yourself first.  Give yourself permission to say no.  Remind yourself – as often as necessary – that you have the right to say no to anything you don’t want.  Need something more specific?  Here are some graceful exits from the pressure to say yes.

To Salespeople:

Amazing how the guys who wouldn’t give you the time of day when you were poor suddenly want to talk to you now that you have money.  When you encounter a pushy salesperson, try these:

“I need some time to think about it.  I will call you if I decide to buy.” (Even if the salesman claims his offer won’t be good tomorrow, he’ll probably honor it.  And if he doesn’t, go elsewhere.)

“I run all significant purchases by my spouse.  I’ll let you know if we decide to buy.”

Charities:

These are good causes, and the reps are as slick as the best salesmen in getting you to loosen the purse strings.  Don’t want to be bothered?  Try:

“Sorry, but my financial advisor and I have planned out all of my charitable giving for the year.”

“Yours is a fine organization, but I have already worked out my will with my tax advisor.  If I reconsider, I’ll let you know.”

“I check with my tax advisor on all charitable giving.  Send your information to my P. O. Box and we will consider it.”

Family: 

This is the hardest of all.  Expect to be reminded of all the times they were there for you.  Expect to be called ungrateful, disrespectful, and uncaring.  Don’t you know how hard Uncle Bob’s life has been?  Don’t you love us?

“I’m sorry, but I have never met you and have never heard of you.  I don’t know how we are related.” (Of course, this one won’t work on your mom.)

 “Cousin Joe, we haven’t talked since we were kids.  Why are you calling me now?”

 “Sorry, but my financial advisor and I have already worked out the budget for this year.”

 “Son, I can’t pay off your mortgage, but I can give you $_____.”

 “Mom, I love you and Dad with all my heart.  But this money has to support me and the kids.  We have to plan our finances around that.”

 If none of these work, there is a somewhat less graceful way to say no.  Practice it again and again if need be.  It’s:

 “NO!”

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.


12
Dec 10

Congratulations, Lottery Winner!

Who doesn’t dream of watching that late-night lottery drawing and looking down at the ticket in your hands to find…you’ve won!

If you have been so lucky, keep your celebrations in check for the moment and consider how your life is about to change.  Any Google search can yield loads of stories of lottery winners who got rich quick and got poor faster.  Don’t be one of them.  Taking the time to really think through what you’re going to do next can make all the difference in your financial future.

Keep it Quiet.  It’s unwise to announce to the world you’ve won the lottery until the prize has been claimed and you have a solid plan for how you will manage that money.  Keep your ticket in a safe place where no one will steal it, or mistake it for garbage and throw it away. 

Don’t Wait Too Long.  There is always a time limit on when you can claim your winnings.  Find out how much time you’ve got and plan accordingly.

Talk to Experts.  How will you protect yourself and your newfound money?  Assemble a team to help.  You’ll need a lawyer and a financial advisor; so, without tipping anyone off, ask your friends, family, and community for references.  Interview the most promising candidates, looking for those who handle high-income clients and, optimally, those who’ve dealt with lottery winners before.

Prioritize.  You probably want to quit your job and pay off your mortgage.  But do you also want to help family?   Start a business?  Give to charity?  A good financial advisor or CPA can look at your existing finances and the coming lottery winnings, and help you plan out the best way to meet your goals.  Consider also how you’ll want to structure your estate, so that your money will go where you want when you are gone. 

Lump Sum or Periodic Payments?  Once you go to lottery headquarters to collect your prize, you’ll be given the choice of a lump sum up front, or periodic payments for a number of years.  If you take periodic payments, you are counting on the lottery authority (usually the State) to invest your winnings for you.  You may think that you are a better investor than the government, but don’t overestimate your ability.  Another option is to take the periodic payments, and then sell that payment stream to someone else.  Again, a good financial advisor should help you figure out what’s best for you. 

Lay Low.  Once you claim your prize, the lottery authority will release your name to the public.  Prepare for the onslaught.  Family, even those you’ve never met or haven’t talked to in years, will appear, asking for money.  Salesmen will come calling, as will charities.  You can’t save the world, so you need to protect yourself.  Get a new, private phone number.  Get a P.O. Box so that you don’t have to give out your home address.  Most importantly, learn how to say no.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

Let Companies Compete to Buy your Structured Settlement!