News and Tips on structured settlement transfers.

Sellers

21
Feb 11

Your Structured Settlement and the Time Value of Money

If someone offered you a choice between $1,000 today, and $1,100 one year from now, which would you take? Most people would take $1,000 today. How is it, then, that money you have in your hand now is worth more than some future promise of more money?

There are a couple of reasons. One is that the prices of goods and services may increase to the point that the future $1,100 won’t have the same buying power as today’s $1,000. Another reason is that there is a risk that the promise of $1,100 in a year won’t come true.

So, how does this concept apply to your structured settlement?

If you are attempting to sell your structured settlement, you may have noticed that prospective buyers are offering you far less than the total amount of the payments you are trying to sell. The buyers are using a discount rate to scale back the total amount of the scheduled payments to the amount they are willing to pay for them. This is the time value of money in action. Buyers use a discount rate as a way to compensate for the fact that they’ll have to wait for their money – they have to wait until your structured settlement pays out. Buyers also want to be compensated for the expenses they’ll incur in the factoring transaction, their overhead, lost interest on the cash they’re giving away, and, of course, profit.

Meanwhile, the discount rate for you is essentially interest in reverse. When you borrow money, you have to pay back the amount you borrowed, plus interest, right? That interest rate compensates the lender for his expenses, the time that he has to wait to get his money back from you, and his inability to spend it or make money on it while you’re using it. So, the discount rate is essentially “interest” that you’re paying for the privilege of not having to wait for your money.

If this seems unfair, remember that you have the option of not selling your structured settlement. Do you have a legitimate emergency and no other way to pay for it? Or are you simply attracted to the siren song of quick cash? Structured settlement buyers can charge discount rates in the double digits because they know that getting cash now, either because you need it or just want it, is a powerful incentive. Before you sell, really give some thought to how important that cash is to you, and whether you really want to give up so much to get it now.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

20
Feb 11

The Structured Settlement Process – What You Should Know

If you have a structured settlement and are thinking about selling – or have already decided to do so – you need to understand the process that lies ahead of you.

Decide What’s for Sale. You don’t have to sell the full amount of your settlement. You can sell just a few of the payments that are coming to you. Don’t let anyone tell you that you must fork over your entire settlement.

Get Bids. Don’t just talk to one buyer, either. Get competing bids for your structured settlement. Sites like QuoteMeAPrice make it easy for you to post the details of your settlement, and then get competing bids from buyers. This ensures you have the best chance at getting a good deal.

Due Diligence. Once you have a number of competing bids, consider the source. A quick Internet search should produce at least a website for the company that’s made the bid, but that isn’t enough. Visit the Better Business Bureau to see if anyone has filed a complaint against your prospective buyer. If there are complaints, compare them to the number and type of complaints filed against other buyers. No matter how great the offer, if your prospective buyer is being trashed all over the place for last-minute changes on the deal, or deliberate heel-dragging, perhaps you should consider someone else.

Look Over the Documents. So now, you have chosen a buyer. Look carefully over any documents that are sent to you. Make sure the details in the documents match what you were offered online. Make sure you understand every word of the agreement, and what could happen if the deal falls through; structured settlement buyers often pull out of a deal after making an offer.

Get Advice. Your state will likely require you to get financial and/or legal advice for the transaction you’re about to undertake. Even if you don’t want to hear what they have to say, listen. They may have a better way for you to get the cash you need. Or, they may point out that you have no other means of support, and so selling your settlement is a bad idea. If these folks are on your side, you should listen.

Go To Court. A judge will have to approve your structured settlement factoring transaction. Be prepared to explain why you want the money and what you plan to do with it. Be prepared with a backup plan if the judge decides it’s not in your best interest and you need to try again.

Cool Off. The “cooling off” period is your last chance, by law, to let your second thoughts talk you out of the deal. Think hard about whether this is right for you.

19
Feb 11

Checking out Structured Settlement Buyers

You’ve decided to sell all or part of your structured settlement, and – good for you – you’ve used a site like QuoteMeAPrice to compare offers among buyers. But that’s not enough. You need to check the buyers who’ve made offers on your structured settlement to see who might be best for you.

The simplest way to check a structured settlement buyer is to do a quick Internet search for this company. Does the company have a website? Is there contact information listed? Is the website professional-looking, or does it appear to have been hastily thrown together? Is there information available about this company at all? If there’s nothing to be found, it may mean simply that the company is a start-up without much supporting framework. But it could also spell trouble.

An Internet search isn’t enough, though. It’s easy to create an official-looking website, and easy to trash another company online. So, your next stop should be the Better Business Bureau. You can check the prospective bidders for your structured settlement to see if there are any complaints against them. If there are complaints, how many? How serious are they? Most structured settlement buyers will have at least a few complaints filed against them, so the substance of the complaints, not the mere number, is what’s important.

What exactly are other people saying about this buyer? The most common complaints against structured settlement buyers are that the buyer did not come through with the offer that was initially made, and that the closing of the transaction took longer than promised.

To prevent getting a deal that differs from the original offer, get the contracts in writing and look them over thoroughly. Most states will require you to get legal advice, so have your lawyer look at the contract, too. Make sure they buyer isn’t getting any “wiggle room” to lower the lump sum price for your structured settlement at will.

Another complaint is that structured settlement companies took too long to complete the transaction. No matter what a buyer promises you, this process will always take 45-60 days, perhaps longer, depending on your state. Don’t believe a buyer who promises a faster turnaround. Also, beware that many buyers, after the process has already started, may change his mind and rescind his offer. This usually means the buyer has found a better deal elsewhere, and has decided not to negotiate further with you. If this happens, you’ll have to start over again, but this is probably a good thing.

18
Feb 11

Why Should I Keep My Structured Settlement?

The ads sound incredible. Sell your structured settlement now and get cash fast for whatever you need: paying bills, investing elsewhere, starting a business. But even though it may seem much less sexy to keep your settlement, there are some good reasons to do so.

Income. One reason why structured settlements are so frequently used to settle personal injury cases is because they provide for a steady stream of income to the plaintiff. You are guaranteed a fixed income for a period of months or years that you can use to meet everyday expenses. If your injury has left you unable to work temporarily or permanently, the settlement is, essentially, your income.

Guaranteed Return. Structured settlements are almost always based on annuities. The defendant put a lump sum of money into an annuity which is invested so that it earns a fixed rate of interest. This interest, when combined with the seed money, is able to pay out your settlement in identical payment over the course of months or years. Don’t fall into the trap of believing that you can somehow do a better job on investing this money. Insurance companies – who are usually responsible for administering annuities – have experts on staff with the training and time to devote themselves to investing the seed money. If an “investment advisor” or “financial advisor” is promising they have a lead on a “sure thing” that will get you a better rate of return, walk away.

Safety. One reason structured settlement buyers love these transactions is because of their relative safety. Since insurance companies usually manage the annuities that pay your structured settlement, there’s virtually no risk of default as long as the insurer stays in business. And, often, structured settlement funds are maintained in a protected fund, so payout is still assured no matter what happens.

The Whole Enchilada. Let’s say that your structured settlement pays you $50,000 per year for 10 years, for a total of $500,000. If you decided to sell that settlement, the amount you get will be less than $500,000 – a lot less. That’s because companies that buy structured settlements are in the business to make a profit, not to help you. To ensure they make their money, they have to pay you far less than what they’ll get from your settlement over time. If you have a truly urgent need, a real emergency that your structured settlement will solve, selling it could be an option worth pursuing. But if there is any other way for you to get by, selling is not a good deal.

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.

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.

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.

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News and Tips on structured settlement transfers.

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