News and Tips on structured settlement transfers.

Structured Settlements

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.

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.

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.

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.

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.

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.

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News and Tips on structured settlement transfers.

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