News and Tips on structured settlement transfers.

Annuities

17
Feb 11

The Structured Settlement Seller’s Decision Guide

So you’ve got a structured settlement…and a need for cash. Sure, selling is one way to get money, but is it the right choice for you? Here are a few tips to help you decide, and help you through the process.

How Much Money do You Need? You don’t have to sell your entire settlement – buyers will happily take one or a few payments.

Do You Really Need the Money Now? Is your “emergency” for real? Is it your emergency, or is it just a family member or friend trying to get a loan?

Do You Have Other Options? If you are looking to pay off medical bills or credit cards, can these debts be negotiated or cut down some other way? What about other sources of funds for the money you need, such as a bank loan, drawing from retirement or investment accounts, or borrowing from friends and family?

How Do You Plan to Spend the Money? Will this cash solve a problem – such as medical bills – completely? If so, selling your settlement might be a good idea. But if it will pay only some of your medical bills or credit cards, and the debts are going to keep coming, selling your settlement may well be a waste of time. And if you’re selling because there’s some great new investment that you want to make, really think twice; it’s rarely a good idea.

What Are You Giving Up? Any structured settlement buyer is going to pay you far less for your structured settlement than you would have received over time. The buyer applies a discount rate to the stream of payments you are selling to determine how much he’s going to give you. Consider whether you really can give it up, and whether you really want to.

How Will You Survive? One of the reasons structured settlements are created incident to a personal injury lawsuit is to provide the injured party a means of income. This is especially important if the injury has left you unable to work for an extended period of time, or permanently. If you sell your structured settlement, how do you plan to provide for yourself without those payments? How will you pay your medical bills? If you don’t have a good backup plan, explore other options.

This is a big decision, so think long and hard about whether selling is your best option. Most states will require you to get legal and/or financial advice, and you should definitely do it – these folks can give you an objective opinion on whether selling is right 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.

15
Feb 11

What’s a Good Discount Rate for my Structured Settlement?

The short answer is: whatever you’re willing to pay.

Here’s the longer answer. The discount rate is what a structured settlement buyer uses to roll back your stream of payments to the lump sum he is going to pay you. You can think of it as reverse interest. When you borrow money from a bank, you pay interest for the privilege. When you sell your structured settlement, you are giving up a portion of it for the privilege of getting your cash ahead of schedule. This discount rate is intended to compensate the buyer for overhead expenses, interest he loses on the cash he is giving to you, the time he has to wait for his money, and, of course, profit.

Discount rates charged by structured settlement buyers can easily be in the double digits. Remember to shop around for competing offers, a process that sites like QuoteMeAPrice make easy. Check each offer for its discount rate, as well as the turnaround time (how quickly you’ll get your cash) and any other fees the buyer may be trying to charge you.

You may want to consider whether you truly need the cash, and why. Is this a true emergency? Is there some other way to get what you need without cashing out your structured settlement? If it is a true emergency, ask yourself if there is some other way you can get the money you need without sacrificing your structured settlement.

As part of the structured settlement factoring transaction (that’s the official term for selling your settlement), most states will require you to get legal and/or financial advice, and that’s a good idea. Not only can these professionals tell you if the discount rate you’re being charged is reasonable, they may be able to present you with alternatives to selling your settlement that you didn’t know existed.

Another part of the structured settlement process will require a judge to sign off on the factoring transaction. The judge will need to be convinced that this sale is in your best interest, and this is not a certainty. If the discount rate is too high in the judge’s opinion, s/he may nix the deal. However, structured settlement buyers know that this can and does happen, so they will likely keep it in mind when they make offers to you.

Even after all is signed off, there is still one final opportunity to change your mind. Every state’s structured settlement process provides for a “cooling off” period, usually a few days, which will allow you to walk away from the deal. Again, selling your settlement is a big decision, and you should take this final opportunity to decide if it’s really for you.

14
Feb 11

Why Now is the Time to Cash Out Your Structured Settlement

You may have been debating for some time when, or whether, to cash out your structured settlement. If you want to go for it, now could be the best time to do so, and here’s why.

Low Interest Rates. You may be wondering what low interest rates have to do with you and your structured settlement. Well, nothing directly. But, the companies that buy structured settlement love the current low interest rate environment, because it allows them to secure the financing they need very cheaply. Interest rates are at historic lows, and won’t stay there forever. Once they start creeping up, structured settlement buyers will need to make up for the higher interest cost somehow, and a higher discount rate to you – the money you give up so you can get a lump sum now – will eat into more of your settlement.

While you may decide that you don’t care, that you’ll accept a higher discount rate as the cost of doing business, the judge reviewing your case might not be so inclined. If a judge reviews your case and decides that a too-high discount rate is not in your best interest, he might turn down the deal.

Regulatory Environment. There always seems to be talk of revamping the legal process for structured settlements, but do an Internet search on this topic and you’ll find more chatter than ever. 2010 was a great year for structured settlement companies, and, as a result, they’ve drawn increased scrutiny for everything from business practices to the discount rate charged. Should there be a groundswell of interest in changing the whole structured settlement process, you may find yourself with fewer options than before.

The Perfect Storm. As the world climbs out of recession, consumer spending is up, and there’s plenty of talk about the “I” word: inflation. Even if inflation doesn’t grow out of control, prices for everything seem to be rising, so structured settlement buyers will have to pay more for office help, cash flow, legal assistance, and everything else. Sure, the buyers can raise their discount rates to make up for it, but if the deal takes too much out of your settlement, the courts can start rejecting the deals. Faced with the inability to make profits to sustain their businesses, many structured settlement buyers may choose to – or be forced to – get out of the structured settlement business. This could result in fewer choices for you.

9
Feb 11

Should I Invest in Structured Settlements?

You may be frustrated at the generally low interest rates being paid on most conventional investments, and are looking for something else.

The structured settlement industry had a great year in 2010. If you’re looking for a huge rate of return, purchasing structured settlements might be a way to make your money work harder for you.

Structured settlements take many forms, from personal injury lawsuits to lottery awards. But the basic premise remains the same: A lump sum is placed with an insurance company, who invests the money so that it will earn enough interest to make a fixed stream of payments at some time in the future. Lawsuit defendants love structured settlements because it allows them to set aside less than the court-ordered settlement amount, and also gets rid of the responsibility of managing the money and the payments.

For the annuitant, the chief benefit of a structured settlement is the peace of mind in knowing that a steady stream of income will be coming their way.

However, because of impending foreclosure, medical expenses, or some other reason, an annuitant may decide he no longer wants to wait for his money, and he wants to sell. If you’d like to get in on that action, what should you do?

Have some cash. You’ll need a stockpile of cash in order to pay the annuitants for their payment streams up front. If you don’t have the cash available, you’ll need a good financing arrangement that will allow you to get it when needed, and creditors who understand the business of structured settlements.

Know the Law. All states have laws governing the sale of structured settlements, designed to protect the annuitant from charlatans who would purchase his annuity too cheaply. If you’re serious about buying annuities, you’ll need a good lawyer with an understanding of the process in your state. Realize that sellers of annuities are encouraged to get legal and/or financial advice, so if you try to take advantage of a potential seller, you might wind up empty-handed. Even if the seller signs off, a judge can always nix the deal if you’re trying to get too much for too little.

Discount Rate. And that brings us to the discount rate. Structured settlement buyers (that’s you) discount the total amount of the payment stream in order to determine how much you’ll pay the seller. While this rate is often in the double digits, don’t think you can set any rate with impunity and expect the seller to accept it because he is desperate. Even if he does, the court can reject your offer.

Know the Players. A site like QuoteMeAPrice gives you a great forum to shop your best deal to prospective buyers. But understand that you may have to float a better deal to get past some of the big players in this market. There are big names and they have big reputations; even though there are complaints against them, sellers have heard of them, and that name recognition is huge. So, you may have to make better offers that aren’t profitable just to get noticed.

8
Feb 11

Structured Settlement Concepts – What’s an annuitant?

If you have a structured settlement, you’ve likely heard this term many times. The annuitant is the recipient of the ordered payments in the structured settlement. In other words, that’s you.

The term annuitant comes from the underlying investment that makes your structured settlement possible: an annuity.

If your structured settlement is the result of a personal injury lawsuit, the defendant likely found an insurance company and purchased that annuity. That allowed him to set aside an amount less than your total settlement inside an annuity contract that guaranteed a specific rate of return.

So, the defendant sets aside an amount of money less than the total court-ordered settlement; that’s good for him. He gives it to an insurance company who invests it in fixed-return investments in order to ensure that you will get the stream of payments promised to you as part of the settlement. The defendant doesn’t have to worry about managing the money set aside, and neither do you.

The annuity payments don’t just help the defendant, however – they also help you. By putting your settlement into a specified stream of payments, you are guaranteed cash flow to help you with your living expenses, medical bills, etc. This is particularly important if your injury has left you unable to work.

There is a tax benefit to a personal injury annuity – as long as the award relates to a personal injury, there is no tax on the payments. But just to be safe, before you sign any structured settlement, talk with a tax expert to get a solid understanding of how it will be treated on your tax return.

The annuity payments are virtually guaranteed. Yes, they are with an insurance company, and if that company goes belly-up, you might be left holding the bag. But most insurers set these funds aside in trust, so even if they bankrupt, you will still get your payment.

The number one benefit to being an annuitant is protection from yourself. Were you given thousands, or even millions of dollars, the temptation to spend it would be overwhelming. By putting that award in a structured settlement, you don’t have to worry about spending it or investing it badly. Someone else takes care of all that for you. So you can rest assured that the payment stream comes only to you.

Before you sell, take a hard look at your finances and make sure there is some other income that will make it possible for you to meet your expenses. Without the structured settlement, who will pay for you food? Rentals?

5
Feb 11

Structured Settlement Concepts – What’s a Factor?

If you plan to sell your structured settlement, the official name for this is a structured settlement factoring transaction. The factor is the buyer of your settlement.

Factoring – where a buyer purchases the right to receive future payments from a third party – happens in lots of industries other than structured settlements. Lots of businesses who need quick cash will sell their accounts receivable to a factor. The business gets quick cash, and the factor gets to collect from the customers.

Why would anyone do this? The answer is the discount rate. In any factoring arrangement, including a structured settlement factoring transaction, the buyer is not paying for the full amount of the future payments. Instead, he pays a reduced amount. By paying you less than what he will ultimately collect from the scheduled payments on your settlement, he makes a profit – and you get the cash you need sooner.

This reduction is called the discount rate. The discount rate that the factor applies to your stream of payments is, essentially, reverse interest that you are paying in exchange for the ability to get cash ahead of schedule. The discount rate is intended to compensate the factor for a number of things. First, he must secure the cash he needs to pay you off. That means he has to get financing from someone, and that financing costs money. Even if the factor has the cash on hand, by giving it to you he is missing out on the ability to invest that money elsewhere, so the discount rate compensates him for that, too.

Factoring is a business, and business involves overhead. Factoring businesses have offices, employees, and lots of costs to recover. Since the structured settlement process is strictly regulated and all states have statutes to cover these transactions, factors need legal help in navigating the legal system, and lawyers don’t work free. They need other people to cut the checks and keep the books, too. And, of course, the factor wants to make a profit; they are not in business to help you.

So that’s why discount rates are often in the double digits. Of course, you may not want to sacrifice that much to get cash quick, even if there is a reason for it. Even if you do, if the discount rate is too high, the court may not approve the transaction. You always have the ability to walk away from the sale during the “cooling off” period, and sites like QuoteMeAPrice allow you to understand the deal you’ll be making up front.

4
Feb 11

Structured Settlements – Winners and Losers

Wondering about the structured settlement factoring process? Wondering who comes out ahead when you sell, and who doesn’t? Well, here’s the scorecard.

The Winners

The Factor. The factoring company has two things to bring to the party: time and money. He’s got the cash to front you for your structured settlement. And he has the time to wait for the payments you sold to start rolling in. Since your payments are tied to a structured settlement, which are usually tied to an annuity issued by an insurance company, he’s all but assured to see the cash eventually. And when he does, the rate of return is far greater than any other stock or bond he could have bought. Yes, he had to pay for legal advice, and the cash he gives to you he can’t invest elsewhere, but there’s a significant payoff to be had. All he had to do was wait.

The System. Most states require you to get advice from a lawyer, and maybe also from a financial advisor, prior to selling. These folks don’t work pro bono. Whether you pay the fee or the factor does, they will get paid for their work. But hey, it’s valuable advice, and worth the investment.

You…Maybe. This depends on how much you got for your settlement, and what you plan to do with it. Factors charge a “discount rate,” sort of a reverse interest rate that you are charged in order to get your money ahead of schedule. You might be planning to pay off debts or start a business. If your debts are wiped out by the settlement, and no more bills are coming, great. If that new business takes off, great. If not, well….

The Losers

You…Maybe. Structured settlements are intended to provide you with a reliable stream of income over time. If the settlement came about because of a personal injury lawsuit, and your injuries have left you unable to work, the settlement needs to cover your living and medical expenses. If you sell, what will you have left? What will be there to take care of you?

It’s tempting to think that you truly need money now, and your immediate need may well be legitimate if you’re facing life-or-death medical expenses, or foreclosure. But check your options. Is there no other way out of your debts? Is there some other way to fund that new business that’s got you excited? Don’t trade your future for a quick fix.

2
Feb 11

Getting the Right Lawyer for Your Structured Settlement Sale

Previously, we discussed a case against structured settlement giant J. G. Wentworth that alleged the company referred structured settlement sellers to attorneys, then unlawfully charged the attorney fees back to the sellers.

If you’re selling a structured settlement, you should definitely get legal advice. But how do you know whom to trust?

First, don’t let a structured settlement factoring company try to steer you toward a “preferred” attorney or refer you to attorneys in your area. Remember that a factoring company is a business; no matter how reputable they are, they are in business to make money, not to help you. You have no way of knowing if the attorney is working with the factor, or has some relationship that might taint their advice. You want to ensure the lawyer you use is independent – and on your side.

And you don’t want to use just any lawyer. Structured settlements are a specific and regulated area, and you want to find a lawyer with experience in these transactions. Your friends or family might have recommendations. If not, check one of the many find-a-lawyer websites that are easy to come by through a simple Internet search.

Once you’ve put together a list of names, give each one a little more scrutiny. Check to see the areas in which he specializes by looking at your state’s bar association or regulatory websites. You want an attorney who has worked in business-related matters, who has likely seen a few structured settlements in his time. He may be the world’s greatest tax or divorce attorney, but if he’s never seen a structured settlement, try someone else.

Narrowed down that list? Now, take the time to interview the most likely suspects. Ask them directly whether they’ve handled structured settlements, how many, and how recently. A good candidate will have seen many recent structured settlement factoring transactions, and so will have a good idea of the discount rates you’re likely to see from competing firms, and how to guide your sale through the legal process quickly. A good attorney should also come across as professional, competent, and responsive; if he can’t be bothered to return your calls, hire someone else.

Just remember that even though you’ve hired a lawyer and he is supposed to be on your side, you are your best advocate. Ask your attorney – and yourself – every step of the way if selling is the right thing for you to do. Read every document related to the sale of your structured settlement. If there’s something you don’t understand, ask. If you still don’t understand, ask again, and don’t sign until you do.

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.

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.

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