News and Tips on structured settlement transfers.

Annuities

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.

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.

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.

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.

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.

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:

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.
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.
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.
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.

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.

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.

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.

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