News and Tips on structured settlement transfers.

March, 2011

29
Mar 11

Cashing Out My Structured Settlement – How Much Will I Get?

In their ads, structured settlement factoring companies promise cash fast. They may also promise to beat all other offers. But, realistically, how much can you expect to get when cash out a structured settlement?

Well, if you had visions of getting a huge lump sum for your structured settlement, you should revise your expectations. You will likely be quoted a lump sum that is far less than the total amount of the payments you were scheduled to receive. The reason for this is the discount rate.

Structured settlement buyers cash out settlements for less than the full amount in order to compensate for what the time value of money costs them. By giving you cash, they don’t have the cash available to invest elsewhere. If the buyer had to borrow the cash used to buy out your settlement, he is paying interest on that loan. Because he has to wait for the scheduled payments to arrive, he also has opportunity costs – the money is unavailable to spend on some other, potentially more lucrative opportunity.

The discount rate is the buyer’s valuation of these costs. And, in addition to compensating him for lost opportunities, the discount rate is designed to compensate him for his operating costs, such as office expenses, employees, and legal expenses.

There is no “typical” discount rate that you can expect a structured settlement buyer to charge. Often, the rate is in the double digits. There also is no standard as to a “fair” discount rate – it is essentially what you are willing to tolerate in order to get a lump sum of cash quick. Your structured settlement factoring transaction will have to be approved by a court, however, and it is possible that a judge may refuse to grant permission for the sale to continue if he believes the discount rate is too high, or that the structured settlement sale is not in your best interest.

But don’t count on a judge as your only measurement of the fairness of the sale. You should still get legal and financial advice (your state probably requires it) and get an objective opinion about whether the transaction is right for you. In addition to looking over the sale, he may be able to direct you to other options for getting the cash you need that you may not have considered.

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
Mar 11

Structured Settlements – Truth Versus Fiction

The TV ads are enticing. They tell you to sell your structured settlement and get cash now! But how many of these promises are actually true?

Get Cash Now! Beware any structured settlement buyer that promises to complete the sale of your settlement in less than 45 days. All structured settlement sales are governed by state law with specific processes that must be followed. Even the fastest states will take 30-45 days to turn around your sale. If you need money sooner than that, sorry – you’re out of luck.

Get the Biggest Payment! The only way to know if a structured settlement buyer is giving you the best deal on your sale is to compare prices. A site like www.quotemeaprice.com allows you to post the details of your settlement and get quotes from competing companies, so that you know who’s offering the most money. But no matter who you choose, understand that the amount you receive will be only a fraction of the total amount of your entire settlement. Structured settlement buying companies make money by buying a settlement for pennies on the dollar.

No Hidden Fees! No matter what a structured settlement buyer promises you, be sure to read every document and agreement thoroughly for any additional costs. Your state will probably require you to get the advice of an attorney, too – make sure your lawyer is independent (not “recommended” or “preferred” by the structured settlement buyer) and has dealt with structured settlement factoring transactions before. Buyers have been accused of charging fees even though state law specifically prohibits them.

We’re the Industry Leader! There are some big players in the structured settlement market with well-known names. But no matter which buyer you choose, check them out through the Better Business Bureau to make sure they are legitimate and to see what types of complaints, if any, have been filed against them.

It’s Your Money! Yes, it is your money, but once you sell your structured settlement, it’s not your money anymore. Understand that these companies are in business to make a profit, and that they are not looking out for your best interests – that’s your job. Once you sell your settlement, how will you meet your living expenses? How will you support yourself? Do you truly need to sell? If you do sell, will your money needs be resolved, or will the same problems keep coming back? Remember that you are giving up a fair amount of your settlement if you sell, so you should give this decision serious thought.

26
Mar 11

How to Get Good Advice for Your Structured Settlement Sale

If you’ve decided to sell your structured settlement, then you’ve learned that your state has a process for making sure the sale is approved by a court and is in your best interest. But how do you really know if you’re doing the right thing?

Most states require you to get legal advice, at a minimum. Some states also require that you get financial advice. Even if your state doesn’t require either of these things, you really should consider them both. A good lawyer and/or financial advisor can take an impartial look at the structured settlement sales deal and let you know if you’re doing the right thing.

Whichever you choose, make sure that the lawyer and/or financial advisor you choose is someone you found on your own. Many complaints against structured settlement buyers allege that the buyers steered sellers to a “preferred” or “recommended” provider of legal or financial advice. Unfortunately, in these scenarios, the lawyer or financial advisor is partial to the seller, and can’t be trusted to give you independent advice.

Check the regulatory agency for lawyers in your state. You’ll be able to see lawyers in your area and the practices where they specialize. You want a lawyer familiar with financial law, bankruptcy law, or structured settlement factoring transactions. It’s the same with financial advisors. A good FA might present options for your financial woes that you never considered before.

Regardless of whom you choose to work with, you are your own best advocate. Do an internet search to find the structured settlement factoring law for your state. Download that law and read it. Become familiar with its provisions. You may find that it requires the structured settlement buyer to pay fees for which he is trying to charge you; if so, fight back. If there’s anything in the statute that you don’t understand, don’t be afraid to ask questions.

The buyer of your structured settlement will make lots of money on your transaction, so you should carefully decide if selling is the right decision for you, and if the buyer you’ve chosen is giving you the best deal. The way to do that is through solid, independent advice.

24
Mar 11

Understanding the Structured Settlement Sales Process

The ads of singing people who “need money now” seem so joyful, you want to run right out and sell that structured settlement. After all, why wait for your money over a period of months and years? And the people in those ads are so happy, the process must be easy and the right thing to do.

In fact, the sale of structured settlements is a controlled process that is governed by state law.

Structured settlements were first used in Canada some 30 years ago, but quickly grew in popularity in the United States. They are very popular for settling personal injury lawsuits, because they allow the defendant to purchase an annuity for less than the full amount of the lawsuit settlement. The amount placed in the annuity earns interest and is able to pay the plaintiff over time.

The sale of a structured settlement is called a structured settlement factoring transaction. In 2002, because the IRS and Congress perceived abuses by the factoring industry and a loss of potential tax revenue, Internal Revenue Code Section 5891 was enacted to provide a severe excise penalty for any structured settlement factoring transaction that was not pursuant to a state court proceeding.

As a result of IRC 5891, every state now has laws governing the structured settlement sales process. If you’re selling your structured settlement, it’s important that you find your state’s law regarding the process and become familiar with it. You don’t have to be a lawyer, but get an understanding of the basics. Depending on the state where you live, the structured settlement buyer may be required to pay for you to get advice from a lawyer or financial advisor, for example.

An Internet search can lead you to the appropriate statute for your state, which you can download and read for yourself. Your state’s structured settlement process likely requires you to hire an attorney to get his advice, also. Be sure to hire an attorney of your own choosing who has experience in structured settlement sales. Most importantly, don’t let the buyer of your settlement “recommend” or send you to a “preferred” attorney – s/he won’t be independent, and may not look out for your needs.

Though the process of selling your settlement may seem frustrating, it is actually designed to protect you. A structured settlement is intended to provide for your needs over a long period of time, so selling that settlement is not a decision to enter lightly.

22
Mar 11

Structured Settlements and Bankruptcy

Meeting everyday expenses can be difficult enough, but it’s even worse if you’ve been hurt in an accident and have medical bills and other expenses. This is one of the reasons why structured settlements are so popular in personal injury lawsuits. A defendant can set aside a lump sum of cash that is then put into an annuity and invested. The annuity makes regular payments to the plaintiff to help with those expenses.

But even with a structured settlement, you still may not have enough income to pay all your bills, and may find that you have to declare bankruptcy. If so, what happens to your settlement?

The good news is that most states exempt structured settlements from bankruptcy proceedings. So, even though your other assets – if you have any – might be at risk, your settlement will be intact.

This is not the case if you sell all or part of your settlement for a lump sum of cash. Once you do that, it is up for grabs if you happen to go into bankruptcy. Of course, it is more likely that you would spend the entire lump sum before going into bankruptcy. If this is the case, the money is gone, as is the structured settlement. This is one of the many reasons you should give long, hard thought to any decision to sell a structured settlement.

In addition to its protection from bankruptcy, you should also consider the other benefits of structured settlements:

Invested by Professionals. Structured settlements are usually administered by insurance companies, who have professional investment advisers working to put those funds where they will earn interest sufficient to make your payments. So, if an investment “expert” promises that you can do better by letting him handle your money, keep in mind that you already have a professional taking care of it for you.

Tax Advantages. As long as your structured settlement is for a personal injury (as opposed to punitive damages), it is exempt from income tax. So is the interest that is earned on your annuity. If you sell your structured settlement for a lump sum and then invest it, those interest earnings are fully taxable.

Spendthrift Protection. The periodic payments that you get in a structured settlement prevents you from spending all of your money too quickly. Most lump-sum payments are obliterated within five years, and the plaintiff is left with nothing. A structured settlement protects you from yourself.

22
Mar 11

Structured Settlement Sales – Is Bigger Better?

If you’ve got a structured settlement and are considering selling it, you have hopefully used a site like www.quotemeaprice.com to get bids for the portions of your structured settlement that you are considering to sell.

Still, once you get those bids, how do you know which to choose? Do you take a slightly lower offer from one of the big players in the structured settlement market, or do you take a chance selling your settlement to a company that is not as well-known?

It all boils down to “due diligence.” Essentially, that means you have to do your homework to make sure a company bidding to buy your structured settlement is reputable, and whether you trust that company enough to give them your business.

Once you get a short list of companies bidding on your settlement, an easy way to begin checking them out is with a simple Internet search. Are there lots of articles about them? Lots of complaints? If there is absolutely no information at all, it could mean that the buyer is a brand new company; not necessarily a bad thing, but you have no history to go on. This is all starting information, and you need to go further.

Your next stop should be the Better Business Bureau. There, you can review complaints that have been made against prospective structured settlement buyers. Most companies will have some complaints against them, so the content of the complaints should be your focus here. Do the companies change the deal after the fact? Did they fail to pay up on their settlements? Did they sneak in hidden fees? This will tell you what red flags to watch for when you begin the sales process.

Another added check might be the state attorney, or some other regulatory that handles consumer complaints, to see if your prospective buyers have encountered problems in your state.

Even once you’ve selected a vendor, be it a major player or a start-up, you can’t drop your guard. Review carefully every contract and document given to you as part of your structured settlement sale. Talk to an independent attorney who’s had experience with structured settlement sales, and talking to a financial advisor is a good idea, too. Make sure this is a good deal for you, or at least the best deal you can get. And don’t forget – you have the “cooling off” period right after the deal is done where you can pull the plug on the whole thing, if you want to.

19
Mar 11

Structured Settlement – Your Best Bet

You were injured and filed a lawsuit, or you won a lottery, or some other settlement, yet your benefits are being paid to you as a structured settlement. Why do you have to wait for your money? Why can’t you get it now?

Structured settlements actually got their start in Canada. They’ve become a favorite in personal injury lawsuits for a number of reasons. First, the plaintiff can pay a settlement to an insurance company that is less than the actual total lump sum settlement stipulated in court. How? Because the plaintiff puts a set amount of money aside with an insurance company, who then invests that money into a conservative investment whose rate of return generates the stream of payments that constitute your annuity. The time needed to grow that lump sum into your annuity is one reason why you have to “wait” for your money.

Another reason is your benefit. Structured settlements are intended to cover your living expenses for a period of months or years. Most people don’t have the discipline or investment skill to manage such a large amount of money on their own. So, the annuity lets someone else (the insurance company) manage the money, and the annuitant (that’s you) gets it – and spends it – only as needed. No matter what a “financial advisor” may tell you, you won’t beat the interest earnings on your investing without some special skill…or divine intervention.

Tax-free treatment is another big reason that structured settlements are so popular. As long as your damages come from your actual injuries, and not from compensatory or punitive damages, your annuity payments are tax-free. So, take that into consideration if you believe that your investment can overcome the return on your structured settlement. Anything you earn must beat both the insurance company and your tax rate.

If you truly don’t need this money, great – why not play with investing it elsewhere? But if you got it as a result of a personal injury settlement, and can’t replace that income elsewhere, selling should be your last resort.

Should you decide to sell, a site like www.quotemeaprice.com allows you to seek out bets from interested buyers quickly and easily. Buyers will tell you the amount they are willing to pay for all or part of your structured settlement. This allows you to get the best deal. True, you won’t get anything close to the amount you would have received over time, but if you are desperate for cash, you will be able to get more than if you called only one buyer.

18
Mar 11

Structured Settlement – Cash It Out?

The late-night ads beckon, promising a big lump sum settlement if you cash out your structured settlement. You’ll get cash now, or so they promise. Consider a few things before you sell.

How Will You Spend the Money? You may think that you have a serious emergency on your hands that justifies selling your settlement, but do you really? If you’re paying bills, can they wait? Or can they be negotiated? If you’re paying for repairs, is there any other way to take care of it? If you’re giving the money to friends or family, can’t they get the money anywhere else? Sometimes, with enough hard thought, you’ll find that money “emergencies” really aren’t.

I Can Beat that Interest Rate. Your structured settlement is likely being managed and paid by an insurance company, who received a lump sum (perhaps from a defendant in a lawsuit) and is investing it in conservative investments so that you will receive guaranteed payments over several months or years. These investments are likely very conservative and not earning a high rate of return, and you may have had financial “consultants” tell you that you can do better. The truth is, however, that you probably can’t, at least not without taking on a huge amount of risk. Also consider that your structured settlement is tax-free. If you sell it, and invest the proceeds, any money you make won’t be tax-exempt.

How Long Are You Planning to Live? Structured settlements are typically intended to provide the annuitant (that’s you) with a stream of income to meet your living expenses for a period of months or years. If you sell your settlement, that income will be gone. How do you plan to take care of yourself, especially if you don’t have a spouse to do it for you, or if you can’t work.

How Disciplined Are You? Selling your structured settlement will result in a lump sum of cash at your disposal. This isn’t necessarily a good thing. Even the most disciplined person would have difficulty resisting the temptation to spend a large amount of cash right away. Even if you’re disciplined, there’s sure to be a family member or friend with some “urgent” need that can be met with a “loan.” If you don’t have control over the money – that is, if it’s still locked into an annuity – you don’t have to worry about saying “no” to a seemingly legitimate need.

16
Mar 11

What Happens to a Structured Settlement if I Die?

It’s not a pleasant thought, but if you have a structured settlement, you may have wondered what would become of those payments if you should head to the Great Beyond.

The short answer is, it depends on how your settlement was designed.

If your settlement is set up so that it pays only while you, the annuitant, is still alive, then there will be nothing for your beneficiaries if you should make an early exit. Not surprisingly, this would be the structure of choice for defendants in a personal injury lawsuit, because it ends their liability if the annuitant dies. However, as you might expect, plaintiffs usually want more flexibility than this.

Another option for a structured settlement is to have the payment stream be fixed over a certain period of time or a certain number of payments. This may be called a “guaranteed period” or “period certain” because, even if the annuitant should die, the payments continue until the specified period comes to an end. If the annuitant is no longer alive, the remaining payments go to his/her beneficiary, or his/her estate if no beneficiary has been specified.

Yet another possibility is to structure the settlement to pay a “joint and survivor benefit.” In this case, the payments go to the annuitant, but, in the event s/he dies, the remaining payments go to a specified “survivor.” This would usually be someone like a spouse or child. Like the guaranteed period, it ensures that the structured settlement will be paid in full, even if the annuitant does not live that long.

Finally, your structured settlement may contain a “commutation rider” which provides for a designated beneficiary to receive a discounted lump sum payment in lieu of the remaining payments if you should die. Typically, the commutation rider will call for the beneficiary(ies) to get 90% of the remaining settlement if the annuitant dies; this is more than the beneficiary would likely get if s/he sold the payment stream to a structured settlement buyer.

So, should you sell your structured settlement now in order to make more money for your beneficiaries? Well, hopefully you and your lawyer had a long conversation about your anticipated needs before you even agreed to the settlement. But, even so, selling it is a major decision. If you should die, remaining payments made to your beneficiaries are generally tax-free. It’s difficult to discipline yourself from spending the entire lump sum if you sell, and any interest you earn on the investment of the funds is taxable – not tax-free, like your structured settlement.

Hopefully, you will enjoy a nice long life with your structured settlement payments. But take a look at your settlement agreement so that you understand what will happen if you’re no longer around.

13
Mar 11

Structured Settlements and Kids

Unfortunately, bad things don’t just always happen to adults. When a child suffers a terrible injury and a lawsuit follows, the end result might be a structured settlement.

When the plaintiff in a personal injury lawsuit is a child, the court usually will put part of the settlement into a blocked bank account designed to pay current and future expenses. This bank account will remain restricted until the child reaches the age of majority (usually 18). Lawyers’ fees and other expenses will also be paid from the settlement. If Medicaid was used to pay some of the child’s medical expenses, they may also have a claim to part of the settlement (check with your lawyer about this). The remainder is placed into a structured settlement. Since a minor child cannot legally enter into a contract, the process of making the settlement binding is called confirmation, court approval, guardianship, or minor’s compromise proceeding.

Just like for adults, a structured settlement is typically a lump sum that is placed in an annuity that will invest the money then make a stream of payments to the annuitant (in this case, the child) over time. The idea of the structured settlement is to ensure that the child has a stream of income to meet his needs for months or years. This might be a lifetime if the child is permanently and totally disabled. Parents and attorneys for the child should review any proposed structured settlement carefully to determine if the amount of the settlement will be sufficient for the child.

But what if circumstances change and you need cash sooner than the annuity will provide it? It is possible to sell a child’s structured settlement, but it’s more difficult than selling one that an adult controls.

Structured settlements for minor children will often have a no-sale provision designed to prohibit its sale in a factoring transaction. Even with a no-sale provision, however, a court can approve a structured settlement sale if it can be demonstrated that there is a great an immediate need for the cash, and that the child’s needs are better met by selling the settlement than waiting for the next payment. You can expect, however, that the court will scrutinize a claim like this very carefully.

Once your child reaches adulthood and gains control of his settlement and that restricted bank account, the temptation to spend it all now will be immense, and it’s tough to expect an 18-year-old to have the maturity to know that he’ll need the money later. At this point, the best gift you can give your child is solid financial advice, maybe even the services of a financial planner, to help protect him when you aren’t around.

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March, 2011

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