News and Tips on structured settlement transfers.

Cash

January, 2011


30
Jan 11

Why Structured Settlements are a Good Idea

It was bad enough that you suffered because of someone else’s negligence, and you’ve had to deal with the hassle of going through lawyers and courts for compensation for your losses.  After all that, the defendant now wants to pay you with a structured settlement.  Instead of getting what you’re owed right away, you’ll have to wait months or even years for the whole thing.  Why would you want that?

Structured settlements were first developed in Canada in the 1970s and have grown in popularity ever since.  Structured settlements can be used to pay various types of settlements, such as lottery winnings or personal injury lawsuit awards.  In the case of a personal injury lawsuit, the defendant purchases an annuity, usually through an insurance company.  The amount the defendant puts into the annuity is invested, and over time it makes regular payments to the plaintiff.  For the defendant, the upsides are that (1) he doesn’t have to put down the full amount of the settlement, because the seed amount will earn interest over time, and (2) he can turn it over to the insurance/annuity company and be done with it.   

For the plaintiff on the receiving end of the structured settlement, the idea of getting paid over time and not right away may be frustrating, but there are several advantages.  First, you have a reliable source of income for the next several months or years, which can be very important if your injury has left you unable to work for a living.  Second, structured settlements for personal injuries are typically tax-free, so you get to keep the full amount (caveat:  media reports indicate the IRS is stepping up its review of structured settlements to make sure the awards are legitimately tax-free.  If you’re entering into a structured settlement, consult with a tax advisor to make sure you understand if and how they’ll be taxed).  Third, by entering into a structured settlement and getting it over with, you may avoid a lengthy legal process that will cost even more time and legal fees.  Finally, because the insurance/annuity company does the investing of the funds for you, there’s no risk of you getting a huge settlement, only to invest it poorly or spend it all right away; structured settlements protect you from yourself, and maybe even from spendthrift family members who’d be only too happy to get their hands on your money.

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.


29
Jan 11

Spotting a Raw Deal

The idea of trading in your structured settlement for quick cash is enticing but can be full of pitfalls.  Should any of the following warning signs appear while you’re negotiating the sale, it may be time to back off.

Your first and only offer.  If you’re desperate for cash, it’s tempting to jump at the first offer you get.  But if you haven’t taken the time to shop around, do it now.  A site like QuoteMeAPrice allows you to put the details of your settlement out there and see what buyers are willing to pay.  And there’s another reason not to jump too soon:  buyers will often float a low offer first in the hope that you’ll bite.  If you take your time, they might just advance a better offer rather than let you walk away.

“Don’t Worry About it.”  If the offer you get is skimpy on the details, or there is anything in a document you don’t understand, ask for more information.  If the prospective buyer of your structured settlement hesitates to tell you , gives you an explanation that doesn’t make sense, or just tells you that everything’s fine and you shouldn’t worry, worry!  You should back out of the offer altogether, or go over the documents with your attorney to hash out your concerns.

Just a Few Tweaks.  A frequent complaint lodged against structured settlement buyers is that the final deal differed from the initial offer.  Beware revised agreements that the buyer says has been “tweaked,” or contains “minor” differences.  The buyer may be reducing your offer by changing the discount rate, or he may be trying to sneak in additional fees that weren’t part of the deal.  Again, don’t let your need for cash motivate you to sign something you don’t understand – you’ll only regret it later.

Pressure.  There seem to be more and more buyers of structured settlements out there.  Why?  Buying your settlement promises them a virtually guaranteed stream of payments, and a rate of return far better than most conventional investments.  As a result, competition is high and so is the desire for results.  Structured settlement buyers know that, in this economy, many sellers are under pressure for fast cash to stave off foreclosure or cover unexpected expenses.  If a prospective buyer seems to be hounding you to accept his deal, is threatening to withdraw it if you don’t sign right away, or keeps pressuring you to accept changes to the original deal, walk away. 

Most states allow for a “cooling off” period in all structured settlement sales, and many require you to seek legal or financial advice before selling.  All of these will help you spot a bad deal and back out if necessary.  But in the end, you are your most passionate advocate.  If it just doesn’t feel right, take a step back and reconsider.

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.


28
Jan 11

Structured Settlement Concepts – Factoring

When you sell all or part of your structured settlement for cash, this transaction has an official name:  A structured settlement factoring transaction.

Factoring can occur in lots of business situations.  For example, a business might sell its accounts receivable to a factor in order to get cash now, instead of waiting to collect from its customers.  But for purposes of this article, we’ll stick to the factoring of structured settlements.

A factor is a person or company who agrees to buy all or part of your structured settlement in exchange for cash.  You get the cash you want now; the factor, on the other hand, gets a virtually assured stream of future payments that will total far more than the cash he gave to you.  So the factor stands to make a huge rate of return on the settlement you have sold to him.

A factor decides the amount he’ll give you by applying a discount rate to your settlement.  The factor considers his desired profit margin; the costs he incurs as part of doing business; and the cost of borrowing the cash he used to pay you, in order to figure the discount rate.  This is essentially interest in reverse; instead of paying you to borrow your cash, you are giving up a percentage of your settlement in order to get cash earlier than scheduled.

The most important quality in choosing a company to buy your structured settlement is reputability.  Get competing bids from QMAP and check the companies making them.  Do they have numerous complaints from the Better Business Bureau?  Or, by contrast, do you seem hard pressed to find any information about them at all, as if they recently got into the structured settlement business?  You want to make sure your company exists and will be able to come through with a payment when the sale of your settlement closes.  Some sellers of structured settlements have been burned by companies who didn’t pay up when the settlement deal closed. 

A structured settlement factoring transaction follows a process governed by the laws of your state.  Virtually all states require you to get legal and/or financial advice prior to selling, and you may be asked to justify in court why you want to sell.  Be prepared to wait at least 45 days.  Most importantly, realize that the factor is not your friend.  He is not interested in making sure you get a fair price for your settlement, or in making sure that selling is the right thing for you to do.  Ultimately, you, and no one else, are on your side.  Read every document you get from the factor.  Ask your lawyer or financial advisor anything you don’t understand.  Be on the lookout for any subsequent change to the structured settlement sales deal you initially agreed to.

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.


27
Jan 11

Flying By Night

So you’ve got this structured settlement.  You decided to sell.  You looked around for willing buyers, provided all the documents, signed all the papers, waited through all the “cooling off” periods, and now the deal is done.  Your structured settlement is sold.

Only problem is, the buyer says he’s cash strapped, and won’t pay you.  Additionally, he won’t let you out of your agreement to sell your structured settlement to him.  So, now he has your money, but you have nothing.

This terrible scenario has actually happened to sellers of structured settlements.  Reputable buyers would, at a minimum, release you from your agreement so that you still have your annuity.  But there are plenty of new players in this game, investors who want to turn cash into huge returns by buying annuities.  This is fine…unless they don’t have the cash to pay you.

Your first and best defense is to shop your structured settlement around to several buyers.  A site like QMAP makes this easy by allowing you to publish the details of your settlement and allow the bids to come in.  But in any case, don’t take only one offer, and beware taking the first offer.

Many structured settlement buyers will float a quick, lowball offer in the hopes that you are desperate enough to take whatever comes along.  Try waiting awhile.  You may find that that same buyer is willing to make a better deal later on.

Another warning sign is an offer that is significantly higher than all the others you’re getting.  Again, this can be a lure tactic.  Once you’ve signed on, the structured settlement buyer might start making excuses to lower his offer.

Due diligence is incredibly important, too.  Check the Internet for complaints against prospective buyers.  Check to see how many transactions they’ve accomplished.  Are they established?  Are they brand new to this business?  If they’re a startup, this doesn’t necessarily mean they aren’t worth selling to, but you should ask about their ability to pay you for your structured settlement. 

To see if any complaints have been lodged against a prospective buyer, check the Better Business Bureau.  If others have reported them for dragging their feet in the sales process, changing the terms of the offer, or not paying on a sealed deal, reconsider using them.

Always protect yourself by reading every document that comes to you as part of the deal.  Make sure that the initial terms don’t change.  Make sure there’s nothing that allows them to delay payment to you once the deal is finalized.

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.


26
Jan 11

Why Wouldn’t I Sell?

It seems like a no-brainer.  You’ve got this structured settlement that you were awarded as part of a personal injury lawsuit.  Sure, you get regular payments, but you have to wait to get all the money that you’re due.

And then you see an ad from a company that promises fast cash to sell your annuity.  You think about all you could do with a big lump sum of cash.  Couldn’t you do so much more with the money now, other than waiting around for it?  Why wouldn’t you sell?

You’re Going To Need It.  If you were, say, 200 years old, and don’t think you’re long for this world, selling might make sense.  But the whole point of making you wait for annuity payments is to make sure you don’t spend it all.  If you were injured, especially if you’re now unable to work, the annuity is designed to ensure that money will be available to meet your medical and living expenses.    Otherwise, you just don’t know what’s coming next.

You’re A Spendthrift.  How many times have you seen a news story about some rocker or movie star who has racked up millions overnight and spent them even quicker?  With all that money, you’d think they could hire an army of financial advisors to monitor their cash flow. 

You don’t have millions.  If any money you get seems to burn a hole in your pocket, if you’re easily seduced by ads of fancy cars or jewelry, or if you’re given to impulse buying (and lot’s of buyers’ remorse), think twice before selling your annuity.  The annuity was meant to protect you – not just from creditors or medical bills, but from yourself. 

You Don’t Have a Good Plan.  What do you plan to do with the money you get from your structured settlement?  You should already know that you will net far less in a sale than you would have gotten over time, and you won’t get anywhere near the amount of your original settlement.

Are you planning to pay off debts?  If so, will the proceeds from your sale take care of your debts once and for all?  Or will you still have bills to pay?  Is there no other way to restructure or pay off what you owe?

Are you planning to fund a business?  If so, how solid is your plan?  Is this an established industry, or something new, exciting…and really risky?  Even no-fail businesses do.  And when you lose, how will you make ends meet?

Are you planning to invest elsewhere?  If so, do the guaranteed returns on this investment beat the discount rate (the reverse interest rate you are being charged to get your cash now)?  If not, this is probably a loser.  The higher the investment return, the higher your risk.

Annuities are meant to protect you and meet your needs for many years to come.  If it disappears, how will you manage?  If you can’t answer that question definitively, you probably shouldn’t sell.

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.


24
Jan 11

Truth In Advertising

It’s late at night and you’re watching TV.  On comes a funny, catchy ad, promising you “Cash NOW!”  for your structured settlement.  They’ll beat any offer!  Get a large lump sum!  No hidden fees!  So you start thinking about all the things you could do with a big wad of cash now, rather than having to wait months or years for the whole thing. 

Always remember that companies that purchase structured settlements are in business to make a profit.  This doesn’t mean that buying (or selling) a structured settlement is illegal, but it does mean that the company doesn’t make money unless it can convince you to sell.  So, take all those alluring promises with a grain of salt.

Cash…Later.  You may be desperate for cash if you’re facing foreclosure, medical bills, or mounting credit card debt.  But no matter how willing you are to sign your settlement away, you’ll have to wait for cash.  Why?  Because every state has a process that must be followed.  Completing your sale will take at least 45-60 days, and could take longer, depending on where you live.

You Can Beat That Offer With a Stick.  Even if a structured settlement buying company promises to give you more cash than anyone else, find out for yourself.  Always shop your settlement around to several companies.  A site like QMAP gives you the ability to do this quickly.  And no matter how persuasive a company might be, never reveal the offers you’re getting elsewhere – just ask what their best deal is.  Also know that many companies will float a low offer first to see if you’ll bite – if you wait, you might just get a better one.  And also beware offers that are much higher than the others you’re getting – some companies dangle a high offer to lure you in, only to drop it later. 

Not-so-large Lump Sum.  All buyers of structured settlements use a discount rate to reduce your total stream of payments to the amount they’ll offer you.  If you want quick cash, the discount rate is the “price” you’ll pay to get it.  The offer won’t be the full amount of your personal injury award, and it won’t even be equal to all the payments you’re scheduled to get.  This discount rate can often be in the double digits.  If you wouldn’t be willing to pay double-digit interest on a loan, would you be willing to “pay” it as part of a structured settlement sale?

Hide-and-Seek Fees.  A company may promise “no hidden fees,” but don’t take their word for it.  Always look over any offers, contracts, agreements, or other documents you get very carefully.  Look out for any fee, whether it’s for “processing,” “handling,” “filing,” or anything else.  Any fee will come out of your settlement sale.

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.


23
Jan 11

Who Wants Your Annuity?

Someone who has a structured settlement and is considering a sale of it may wonder who would want to buy.  And why? 

The purchase of structured settlements as an investment opportunity is getting more play in the media.  It’s new (not really)!  It’s different (well, OK)!  It gives a great return (correct)!  The allure is understandable:  for an up-front infusion of cash, an investor can take over an existing stream of payments.  Because structured settlement buyers use a discount rate to figure how much they’ll pay, they can control their profits – and rate of return.  With discount rates often in the double digits, the return on a structured settlement can easily beat any stock or bond available in today’s markets.

The current recessionary economy has also created a boon for settlement buyers.  With the economic downturn, structured settlement annuitants are highly motivated to sell.  They need cash to pay medical bills, to survive unemployment, or to hold off foreclosure.  The more desperate the seller, the more likely they’ll accept a highly discounted settlement, and take the deal fast.

Another reason investors love structured settlements:  security.  Most annuities are created when a lawsuit defendant takes a lump sum to an insurance company and purchases it.  The insurance company is able to invest that cash and earn enough interest to make the payment stream to the plaintiff.  These investments are locked in, and usually protected.  As a result, the payment stream is relatively secure.  As long as the insurer stays in business, the payment stream is a certainty.  The only thing the buyer has to do is sit and wait.

But getting into this business can be tough.  Of course, you’ll need access to cash in order to make those initial purchases.  You’ll also need a reserve of cash to meet operating expenses while you’re waiting for those first settlement payments to come in.  You’ll need help navigating the regulatory environment surrounding the sales of structured settlements.  All states have a strict process and timeline for sales, and all of them include a “cooling off” period in which the seller could change his mind.  You might invest a lot of time and resources into a purchase, only to have the seller back out at the last minute. 

Finally, there are a number of very big players in the market who do a high volume of structured settlement buys.  In order to get noticed in a bidding environment like QMAP, you’ll have to make your bid stand out – this may mean taking a lower profit.

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.


22
Jan 11

Before You Cash Out

So, you’re thinking that now might be the time to cash out your structured settlement.  You’ve got bills to pay.  There’s a business you want to start.  There’s an investment you want to make.  Is this a good idea?

Hopefully, you already know that selling all or part of your settlement will bring you less in a lump sum than you would have collected over time.  Maybe you’re prepared to accept that.  But, still, is it worth it?   Well, the only good reason to sell is if what you’re getting into will pay more than the settlement you’re giving up.  Consider the following situations; if yours doesn’t match any of them, you probably shouldn’t sell.

A Real Need.  It’s easy to tell yourself you really need money when you just really want money.  Money for a vacation or new gadgets is not a need.  Money to buy a new car probably isn’t a need if you can afford to repair the old one.  Money to pay for outstanding debts or medical bills might be a need, but will selling your settlement give you enough to do so?  And are you sure there’s no other way to get them paid?

Even if the sale of your settlement pays your bills, will it pay them all?  Or will more keep coming in the mail?  A sold settlement is sold, and gone forever.  If the sale won’t solve your problems in full and for all time, don’t sell.

A Backup Plan.  You probably got a structured settlement because you were injured, and the annuity is intended to take care of you – and your expenses – for a certain period of time.  Close your eyes and imagine your life without it.  Is there any other money coming in?  Do you have other savings?  If not, especially if your injuries have left you unable to work, you probably shouldn’t sell.

A Good Idea.  But you’re smarter than everyone else – you’ve got a no-fail business deal that’s going to make you rich.  Or, your financial advisor has told you about some secret new investment that will pay far more than any stocks or bonds available.  Really think about that one.  New businesses, even with the best ideas and backing, fail all the time.  And there’s no such thing as a no-fail investment.  Be particularly wary of anything a financial advisor says is “new,” or “secret,” or “undiscovered,” or anything else that sounds too good to be true.

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
Jan 11

Why a FA is an Annuitant’s Best Friend

So, you’re thinking about selling that structured settlement.  Hoping to get a big cash payout.  Got big plans for that money.  So, what next?

Your state may require you to consult with an attorney and/or financial advisor (FA) before you finalize the sale of your settlement.  Even if it doesn’t, finding some good advice is a great idea, even if it costs you a few bucks.

What am I really getting?  A good financial advisor can look at the details of the deals being offered to your by competing buyers (if you haven’t shopped your annuity to more than one buyer, do it now – QMAP offers a free and easy way to get competing bids) to give you a good idea which one is best for you.

Should I Sell at All?  A financial advisor will ask you about the reasons why you’re looking to sell your settlement.  A good FA will try to find alternatives to selling.  Remember that an annuity is designed to ensure you can cover your expenses for a fixed period of time, so you should be sure you’ve exhausted all other possibilities before you sell.   A good FA might find something that you haven’t yet considered. 

Dirty Tricks.  When you seek out a financial advisor for help, find one who’s had recent experience in selling structured settlements.  Chances are, he’s seen what buyers try to do to bump up their profits:  change the deal midstream; introduce new “processing,” “legal,” “administrative” fees; or something similar.  The buyer’s costs should be met as part of the deal, so if you’re asked to pay in additional fees, consider this a red flag.

Details of the Deal.  A financial advisor can look at what’s being offered to you, and figure out how you’ll really come out in the end.  The discount rate is what buyers use to scale back the total amount of your annuity and figure out what they’re willing to pay.  A good FA can figure competing discount rates.  The lowest discount rate – although it means the best lump sum payment for your annuity – can be a sign of trouble if the prospective buyer tends to float a favorable offer, only to pull it back later.

Who Are You?  Still, don’t just trust anyone who hangs a “Financial Advisor” shingle outside his door.  All those letters after his name should mean something, and a few quick Internet searches will tell you what.  Ask him specifically about his experience with structured settlements, and find out how recently he’s handled one.

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.


20
Jan 11

Dude, Where’s My Money?

If you’ve decided to sell your structured settlement for a lump sum, you’ve hopefully shopped it around to several buyers (if you haven’t, QMAP offers a fast and easy way to do this – try it now!).  You may have noticed that the amounts being offered you are less than the total of your settlement.  Why so much less?

The answer is simple:  the discount rate.

A discount rate is a percentage that a buyer of a structured settlement uses to figure how much your settlement is worth now.  Think of it as interest in reverse:  when you borrow money, you pay the lender interest for the privilege of allowing you to use his money.  When you sell a structured settlement, you are paying the buyer for the privilege of getting an up-front cash payment.

This may seem unfair, but put yourself in the buyer’s shoes.  You are compensating the buyer for many things.  Of course, he’s in business to make a profit.  But on top of that, he has operating costs:  office rent, utilities, a support staff, legal fees, and all of the overhead that goes into running a business.   If he doesn’t have the cash on hand to buy your structured settlement, he has to get it somewhere, and pay interest on it.  Even if he has the cash available, by giving it to you he loses the ability to earn interest on it himself.

Most importantly, because the stream of payments is not accessible to the buyer right away, you are compensating him for having to wait until the payments become available.  After all, money now is worth more than money you will get at some later date. 

Opinions differ on what a “reasonable” discount rate should be.  In a 2010 New York court case, the judge evaluating the sale of a structured settlement criticized a 20% discount rate.  Other experts set a range of percentages.  The best way to determine whether your discount rate is fair is to look at all the offers you’re getting for your settlement.  If one buyer’s discount rate is far higher than all the others, they should be removed from consideration unless they have lots of other good qualities.  If one buyer’s discount rate is far lower, this is a red flag, too; buyers will often float a generous bid in order to get your initial commitment, only to change the terms or add additional fees later on.

If possible – and some states require it – find a lawyer or financial advisor who has handled structured settlement sales recently.  See if what you’re being offered is consistent with recent events in the marketplace.  This is a great way to make sure you’re getting the best possible deal.

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.