News and Tips on structured settlement transfers.

Cash

January, 2011


19
Jan 11

Structured Settlement Concepts – Annuities

If you’re the owner of a structured settlement, you may hear the term annuity a lot in connection with your settlement.  What does it mean, anyway?

An annuity is defined as a financial product sold by financial institutions that is designed to accept funds and then pay out a stream of payments to the individual at a later point in time.  Annuities have lots of uses, but in the case of a structured settlement, they allow a defendant in a lawsuit to set aside an amount of cash less than the court-ordered amount.  The amount that goes into the annuity is invested, allowing the amount to grow until it is sufficient to make payments to the plaintiff over the course of several months or years. 

So why would a settlement be arranged like this?  Why doesn’t the defendant just pay you what he owes?  Most likely, the defendant doesn’t have that kind of cash on hand to pay the total lawsuit award, so the structured settlement allows him to satisfy your claim with the cash he has.  Typically the defendant will purchase the annuity through an insurance company.  The defendant pays in enough to be invested and make the future payments, and he’s done.

But there’s another purpose to the structured settlement annuity, and it’s meant to protect you.  If you’ve been injured in an accident, you may be disabled and unable to work.  The structured settlement ensures that you will have a steady stream of cash to pay your living expenses for a fixed amount of time.  It prevents you from spending everything right away, and because the payments come in intervals, there’s no chance the money will burn a hole in your pocket.  The structured settlement protects you from you.

However, you may be facing unforeseen circumstances, such as medical or legal expenses, or tuition, and need access to the full amount of your settlement now.  So, you may sell all or part of the structured settlement payment stream for a lump sum of cash.  Just remember:

  1.  You will get less in a lump sum than you would have received over time.  The buyer of your settlement will use a discount rate to reduce the amount of your total settlement to today’s dollars.
  2. Structured settlement buyers are companies looking to make an investment and turn a profit.  They are not in business to help you, so make sure that selling is your best and only option.
  3. The sale of a structured settlement will take some 45-60 days, or even longer depending on your state.  If you need money sooner than that, selling your settlement won’t help.
  4. Selling is forever.  Once the payment stream is sold, you will never have access to it again.  If living without your annuity is an unpleasant thought, don’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.


15
Jan 11

Buying Structured Settlements – The Basics

If you’ve been looking for a good investment that’s relatively secure and offers an incredible return, you may have stumbled across the purchase of structured settlements.  A structured settlement is established to pay the plaintiff in a personal injury lawsuit to ensure they have a steady stream of income over time.  However, the plaintiff often wants cash now to pay medical or legal bills, go to school, or to invest.  That’s where you come in.

You’ll need cash.  In order to pay the seller, you’ll need a cash reserve – or access to one.  You’ll need a lump sum to cover the discounted value of the settlement you’re buying.  The cash will come, eventually, but you’ll need to keep your business afloat in the meantime.

Get A Lawyer.  The process of selling structured settlements is highly regulated.  This has been the case since 2002, when too many complaints about unscrupulous vendors, and tax concerns, motivated the passage of IRC 5891.  This regulation requires each state to make rules about the sales of structured settlements.  So, the language in every contract needs to be exact, documents will have to be filed with the court, and there will usually have to be a court hearing. 

What Will You Charge?  What makes money for the buyers of structured settlements is the discount rate, the percentage by which a buyer reduces the amount of the total settlement and determines how much to pay the seller.  Be savvy when calculating this.  You need to know your operating expenses and overhead, the interest you’re paying for the cash on hand, and how much profit you want to make. 

Build Reputability.  Structured settlement sellers are smart, and know that there are uncscrupulous players all over the market.  If you make a bid on their settlement, they will research you through the Internet and also the Better Business Bureau.  You are competing with big, sophisticated players, so you may have to bid higher to get those first few references.    Common complaints against settlement buyers are changing the deal after it’s signed, or taking longer to close than promised.  You’ll you’re your business considerably by being a vendor that sellers can trust.

Not So Fast!  Part of the “qualified state statute” required by IRC 5891, in most states, is a cooling-off period.  This is the amount of time after signing a contract in which the settlement seller can back out of the deal.  So, just getting one client doesn’t mean your business is assured. The buyer can back out.  Part of the

Wait.  Yes, you purchased a structured settlement in hopes of huge returns, but this means waiting months, perhaps a year, to get cash on this deal.  In most cases, this is monthly, sometimes annually, but you will need to support yourself and your business until the money starts rolling in.

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
Jan 11

Why So Many Hoops?

If you hoped to sell your structured settlement for quick cash, you may have become disappointed when you learned how many steps were involved in the process.  Collecting offers, reading contracts, getting financial and legal counseling, a cooling-off period, a court appearance.  While it may be frustrating, these procedures exist for a reason:  to protect you.

Structured settlements have been used in the United States for about 40 years.  They allow a defendant to settle a claim with a plaintiff without an enormous cash outlay up front.  Meanwhile, the plaintiff gets regular payments to help support themselves, and preferential tax treatment.

However, by 2002, Congress and the IRS realized that many structured settlement recipients were selling their annuities for lump sums.  Since there was no financial advice or court oversight, these annuitants often sold for small lump sums, then spent the full amount, defeating the financial security purpose of most annuities.  There was no safety net; just sign a contract, and all was done.  As a result, it was believed many annuitants were being taken advantage of.  There were also questions regarding the tax treatment for these sales.

In response to these concerns, IRC 5891 was born.  This new regulation required structured settlement sales to be approved by a state court in accordance with a “qualified state statute.”  If they weren’t, they were subject to a severe excise tax penalty.  In response to this new regulation, most states have passed something called the Structured Settlement Protection Act (or a similar name).  Now, most sales of structured settlements require the seller to get financial and/or legal counseling.  A cooling-off period is required, where the seller can change his mind and back out of the transaction.  And, in most states, the seller must appear in court.  Sellers should be prepared to answer questions about why they’re selling their settlements, and to explain how they plan to use the proceeds.  Courts also look at the details of the transaction, and can reject it if they believe it is not in the best interest of the seller. 

While this may seem frustrating, the point is to protect you from companies looking to turn a quick profit by preying on your need for fast cash.  Remember that annuities are designed to provide you financial security over time, so selling one should be a major financial decision.    You should always protect yourself by seeking out the best offer, and making sure that this is the best solution for you.  If selling your settlement won’t meet your immediate cash needs, or if you have no other income to take its place, you should reconsider selling.

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
Jan 11

Selling a Structured Settlement – Warning Signs

If you’re reading this, you’re probably giving serious thought to selling all or part of a structured settlement you own in order to gain quick access to cash.  If you decide to go through with it, though, understand that the companies who buy settlements are in business to make money, and you have to protect yourself through every step of the transaction.  So, consider the following list of red flags that should make you reconsider the deal.

Bad Reputation.  Before you even accept an offer, you should research prospective buyers to see if they’ve racked up consumer complaints.  The Better Business Bureau and/or the Attorney General for your state are the best places to find what other consumers have said about your potential buyer.  The more complaints you find, the bigger the red flag.

Warp-Speed Deal.  Typically, a structured settlement sale averages about 45-60 days from initial offer to closing.  It can take longer than that, depending on the state where you live.  If a company is promising to close your deal in just a few weeks or days, they’re likely trying to prey on your need for quick cash.  They can’t keep that promise, and you shouldn’t use them. 

Unrealistic Starting Offer.  If you’ve used a site like QMAP to get competing offers from several structured settlement buyers, great.  You should always get multiple offers.  But don’t just bite at the biggest offer you get.  A common complaint about settlement buyers is that the company reduced its offer after the initial contracts were signed; so, an opening bid that’s way out of whack compared to other companies may mean the buyer is trying to lure you in…and may try to pull a fast one later.

Changing the Terms.  Disappointed sellers have complained – often – that as soon as the ink is dry on the initial contract, the buyer will begin whittling down his price and/or introducing fees.  Yes, if you back out, you’ll have to start the process all over again with another buyer, but it’s worth not being taken advantage of.

Pressure.  Like any big financial decision, beware high-pressure tactics to get you to sign a contract right away, take an offer without getting competing bids, or to ignore changes made to the initial deal after the contracts are signed.  And make sure you read and understand every agreement you’re given before you sign; if you have questions and the buyer avoids answering them or just tells you not to worry, consider it a deal-breaker.

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.


13
Jan 11

Structured Settlement Concepts – Due Diligence

In short, doing due diligence means to do your homework before selling a structured settlement.  The first thing you should do, of course, is decide if selling the settlement is the right decision for you, and how much of your settlement you plan to sell.  But the next step is to make sure you know what you’re getting into – and with whom.

You should always shop your settlement to several buyers.  QMAP is an ideal way to do this, because it lets you get quotes fast, and the buyers know they have to compete to win your business.  Although it’s tempting to look at the lump sums offered for your settlement and leap at the biggest one, it’s not wise.  What you have now is a list of prospective buyers, and you need to start checking them out. 

A simple Internet search is a starting point for checking out companies, but don’t bother with their websites that will undoubtedly show only the good news.  Specifically, you’re looking for other sellers’ experiences with this company.  Do they have a good reputation, or are there lots of reports of sellers being burned?  Also, if there’s a general lack of information about the company, it could just mean they’re a startup, but this could also be a red flag.

Of course, it’s easy to trash someone on a website or a blog, so you’re not done yet.  The Better Business Bureau collects complaints against businesses.  Check their website and look for complaints against the buyers on your list.  If there are lots of complaints, you may not want to use that company, even if they’ve given you the best offer.  A common complaint against structured settlement buyers is that they lure sellers in with a good offer, then, once the ink is dry on the contract, start reducing the offer, or introducing fees.  If you see complaints like this against your buyer, it’s a safe bet they’ll pull the same stunt with you, too.

Another source of information is the Attorney General for your state.  Many attorneys general amass and record complaints against vendors, which you can review online. 

Even if you’re satisfied with your prospective buyers’ reputations, and like the offers you’re getting, it’s still imperative to read all of the contracts and agreements very carefully.  Look for hidden fees, changes to the initial offer, or anything else that wasn’t part of the deal.  Also beware any company that promises to give you cash in a week or two – even the speediest structured settlement sales will take about 45-60 days, maybe longer depending on your state.  Finally, get advice, both legal and financial.  Your state may require it, but even if not, it’s worth your while.

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
Jan 11

Why It Pays to Shop Your Structured Settlement

You’ve got a structured settlement and you’re ready to sell it for cash now.  You’ve found a willing buyer and the offer’s not bad.  So, why not go right ahead?

Like buying a house, a car, or making any other major financial decision, you should always compare your options if you’re looking to sell your settlement.

The main reason should be obvious:  making sure you’re getting the absolute best offer for your settlement.  If a prospective seller knows he has no competition, there’s no reason for him to offer you more.   A site like QMAP is great for putting the details of your settlement out there, and letting prospective buyers come to you.  Since they know they’re competing with other players in the market, they’ll make offers that are worth your while.

Another reason, though, is to let you compare the details of every deal.  The discount rate buyers are using will affect the lump sum you’ll get for your sale.  You’ll also be able to see whether any of the buyers are trying to charge you additional fees that will cut down on the total amount you’ll receive.  You can also compare the time frames in which the buyers plan to complete the transaction.  Typically, a sale will take some 45-60 days to close if all goes smoothly, but companies can vary.

Sometimes a prospective settlement buyer will float a lowball offer in hopes of getting you to bite.  If you shop around, however, you have the option to turn him down and go elsewhere.  Once rejected, that prospective buyer may come back with something even better.  Remember, though, that you should never disclose details of offers you’ve received to other prospective buyer. 

Having a sampling of prospective buyers to choose from also gives you the option to check the reputations of each of them.  Checking the Better Business Bureau will let you see if the company has any complaints against them.  Even if a buyer has offered you the most money, if they’ve racked up loads of complaints, reconsider using them.  Disappointed sellers may have complained that the transaction took longer than promised, that buyers charged hefty or hidden fees, or that buyers changed the terms of the deal midstream.

One final reason to have a list of prospective buyers:  things can change.  Sometimes a prospective buyer will make an offer only to retract it before closing the deal.  If this happens, you’ll essentially have a Plan B in the form of other willing buyers.

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.


11
Jan 11

When NOT to Sell Your Structured Settlement

Turning a future payment stream into a neat sum of money now may seem enticing, but it’s a big decision.  Because you will undoubtedly get less for selling your settlement than you would have received over time, many of the blog posts here on QMAP and articles all over the Web on structured settlements encourage prospective sellers to get financial and legal advice before doing so.  In fact, many states require it.  

But you might save yourself the trouble of consulting with professionals if any of the following conditions apply to you.  If they do, you probably shouldn’t sell your settlement.

You don’t need the money.  You don’t need, truly need the money for something important, such as medical expenses, staving off foreclosure, or college tuition.  Even if there is a true need for the money, is there someplace else you could get it?

The money won’t completely solve the emergency.  If you’re looking to pay off expenses but what you’ll get for selling your settlement won’t take care of what you owe, selling may not be a good idea.  Structured settlements are designed to help you support yourself and cover your medical expenses over time, especially if you can’t work any longer.  Once those payments are sold, the money is gone, and your debts remain, what will you do?

You need the money in less than 45 days.  Even the fastest structured settlement sale will take 45-60 days.  If you don’t have, or barely have, that much time, you may be cutting it too close.

You’re a spendthrift.  Be honest with yourself.  Whenever you get any money, does it immediately start burning a hole in your pocket?  If you’re unsure how well you’ll resist the temptation to spend, leave that settlement alone.  Again – a structured settlement is intended to take care of you.  If you sell it, how will you manage?

Your spouse, kids, etc., want to spend it.  Even if you’re a fantastic money manager, if you’ve got someone in the family who always seems to need money, reconsider the sale.  Once they know you have cash on hand, they’re sure to want some, they’re sure to have a persuasive reason, and they’re sure to promise to pay you back.  Someday.

You’re planning to use it for a risky investment.  Just about everybody has daydreamed of stumbling onto that undiscovered opportunity and striking it rich.  It’s nice to think that you could convert your structured settlement into a tidy seed that can be planted in the stock market, a great new business idea, or some other no-fail investment.  Except that investments and new businesses often do fail.  And, even if you’re lucky, will the return on that investment exceed what you’re paying (in the form of the discount rate) on the sale of your settlement?  If not, better to keep what you have.

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.


8
Jan 11

Why Would I Want A Structured Settlement?

You were injured by a negligent person or product, in an auto accident, or through no fault of your own.  You’ve fought for your day in court, dealt with lawyers, sifted through piles of paperwork, all to make sure the party that hurt you will pay for what they’ve done – and won’t do it to anyone else. 

And now, after all this, your lawyer is offering you a settlement.  Not the big money that you expected or deserve, but a stream of fixed payments over time.  What good is this?  What gives?

Of course, what you’re being offered is an annuity – also called a structured settlement.  Why do settlements like this happen?  Why can’t the defendant just hand you a big fat check?

There are more reasons for this than you might think.  First, and most obvious, the defendant simply doesn’t have this kind of money to give over.  So, the defendant goes to an insurance company (usually) and, with less than the settlement amount, invests in an annuity designed to pay you fixed amounts monthly or annually, over a period of time. 

You think, hey!  That’s not fair!  The defendant hurt me!  He should have to pay up now, right?  Well…there are still other reasons why an annuity for you is a good idea.

While having a huge lump sum of cash in hand right now may sound appealing, another purpose of the structured settlement annuity is that it allows you a certain measure of security in your finances.  Especially if you’ve been hurt and can’t work, the annuity allows you the peace of mind in knowing that money is coming on regular intervals, so that you can plan your medical and living expenses.  If the injured party is a minor, it gives them even further security by allowing for a financial future they would not otherwise have had.

Another great reason is that an annuity protects you from yourself.  If you’re prone to overspending, tend to buy all the latest gadgets or splurge whenever the mood strikes, an annuity prevents you from doing this by spacing out your payments over time.  It may not be fun to deny yourself, but if you aren’t willing or able to go back to work and earn a living, you’ll need something to take care of you – and that’s an annuity.

Another great advantage of an annuity for a personal injury lawsuit:  as long as it’s for a personal injury, the annuity payments are tax-free.  This prevents further degradation of your settlement.

Of course, if you have compelling emergency expenses, such as medical or legal bills, educational expenses, or something else urgent, you can sell that annuity for a lump sum of cash.  Enter the details on QMAP and find out what buyers are willing to pay you.  Then all of your settlement is in your hands, under your control, and ready to work for 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.


8
Jan 11

Structured Settlement Concepts – Time Value of Money

If someone gave you the choice of receiving $1 million now, or $1 million one year from now, which would you choose?

Most people would choose to get $1 million now.

That, in essence, is the time value of money.  It’s realizing that $1 million dollars now, even though the amount does not change one year from now, is NOT the same as having $1 million dollars a year from now. 

Lots can happen within a year, so why would you wait to get your money?

More importantly, if you have the $1 million now, you have the freedom to do whatever you want with it.  Specifically, you can invest it now – and let that money earn even more money for you.

That is the basic concept at the heart of selling a structured settlement.  The person who has a structured settlement doesn’t want to wait.  He wants the ability to do whatever he wants with his money now.  He may want to invest it.  It sounds perfectly logical.  The old adage “time is money” absolutely applies.  Money you have in hand now is more meaningful to you than what you’ll receive in the future.

Many companies that are in the business of buying structured settlements like to refer to the “time value of money” argument to persuade you to sell.  Why wait, when you can get – and invest – your money now?  This sounds great, but you should also consider the amount they are planning to give you for your settlement.

All buyers of structured settlements give an amount in lump sum that is less than you would have received over time.  The buyer figures out this lump sum amount by applying a discount rate to your settlement.  That means, the buyer takes the total amount of the payments he is buying, and works backward to determine the interest earnings and profit percentage he wishes to earn, in order to figure out what he is willing to give you.  This is called the discount rate.

So – what is this discount rate?  If the prospective buyer doesn’t tell you outright, there are plenty of online calculators you can use to plug in the terms of the proposed deal and figure out what percentage the buyer is using to discount your deal.  Often, this discount rate is in the double digits – the buyer is in business to cover his costs and make a profit, after all.  Besides, he is also taking on the waiting by giving you your money now.  But if this discount rate is higher than returns you could get elsewhere, and you don’t have some other compelling reason to sell your settlement, consider that you might do better investing the money on your own.

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.


7
Jan 11

Selling a Structured Settlement – What You Should Know

In case you have high hopes of turning your structured settlement into some sort of windfall overnight, think again.  There are a few things you should know.  Have a seat.

Have Reasonable Expectations.  Buyers of structured settlements are in business to make a profit.  Before they can even hope to profit, they’ve got to cover their costs:  staff costs, communication costs, legal fees, and so on.  That’s why buyers offer so much less for your settlement than the combined amount of the payments you would otherwise receive.  This is the discount rate – a sort of reverse interest rate used to scale back your annuity payments to a lump sum the buyer can afford to pay you, and still come out ahead.

Don’t be in too much of a hurry.  A typical structured settlement sale involves getting offers; providing documents to support the payment stream; getting advice from lawyers and/or financial advisers; a “cooling off” period mandated by the laws of your state; a court appearance (usually); and sending the finalized court order to the annuity insurance company.  Typically, even if everything speeds right along, this will take 45 – 60 days, at least.  If you were hoping for money sooner than that, you need to look elsewhere.

Have a really good reason.  As pointed out above, you’re not going to get more money on this deal than you would have received over time.  So, you need to have a good reason – a really, really good reason, for cashing in your annuity.  A financial emergency that can be resolved through the lump-sum of your sale might be a good enough reason.  But if you’re just looking for a one-time payment for play money, or to sink into some iffy investment, you’re probably making a mistake.

Watch out for yourself.  This is a big decision.  Even though you should get legal and financial advice before selling your settlement, and even though a court will look over the deal before approving it, you are still your best advocate.  You will still need to do due diligence on the prospective buyers, looking at how many complaints they’ve racked up with the Better Business Bureau, and determining if they’re reputable.  You will still need to read all of the contracts and agreements every step of the way, to make sure the buyer hasn’t changed terms on you.  You will still have to make sure all your questions are answered about this deal, the discount rate, all the fees you’ll be charged, and make sure you’re comfortable with your decision to sell.  Unscrupulous players are everywhere.  And even if everyone’s honest, any lawyer or financial adviser can make a mistake, so you must always look out for 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.

Let Companies Compete to Buy your Structured Settlement!