News and Tips on structured settlement transfers.

With all the ads featuring happy people singing about getting cash now, you could easily come to believe that the process of selling your structured settlement is easy and worry-free.

You need to protect yourself, however, because people who have gone through the process have complained of potential pitfalls.

Going Back on the Deal.  A typical complaint that is levied against structured settlement buyers is that the buyer changed the amount of the offer through the purchase process.  Many buyers will float a low offer first, just to see if you’ll bite.  Don’t jump at the first offer, and you might just get something better later on.  Buyers will sometimes back out of a deal altogether, presumably if they’ve found something they think is a better investment, or if they’ve run the numbers and decided their offer to you was too high.  If the company does go ahead with the deal, always read all documents and agreements carefully to make sure the buyer doesn’t change the amount of the lump sum payment he originally offered.  If the buyer starts playing tricks with the numbers, walk away from the deal.

Promises Not Kept.  Don’t be lured in by the happy promises made by structured settlement buyers in their ads.  Many buyers will promise to give you the best deal, but the only way to know for sure is to shop around.  A site like www.quotemeaprice.com makes this easy, so that you can post the details of your settlement and let buyers compete for your business.  Also beware any company that promises a settlement in fewer than 45-60 days.  No matter what state you are in, and no matter how easy the process, a structured settlement sale will always take at least that much time.  Remember that there are agreements to sign, a court process to follow, and legally-mandated “cooling off” periods.  It will take time.

Where’s My Money?  Unfortunately, some companies enter into agreements to buy a structured settlement, but come up short on cash and don’t pay the seller.  A reputable company will release the seller from this agreement, but some companies have actually refused to do this – so the seller not only was out of his structured settlement, he was never paid for it.  Sneaky Fees.  You shouldn’t have to pay court fees or processing fees to sell your structured settlement, so beware any company that tries to pass these on to you.  Again, read all contracts and documents carefully, and have an idea of the fees prohibited by your state’s structured settlement statute.

The best way to make sure your prospective structured settlement buyer won’t pull any of these dirty tricks is to check them out at the Better Business Bureau.  You can see what other sellers have to say about these companies.  If you find that some of them have pulled dirty tricks, think carefully about using them.

Those late-night ads are so tempting.  Who wouldn’t want to trade in a stream of payments that you’ll have to wait years to get for a big wad of cash now?  Well, not so fast.  Here’s a list of reasons why you shouldn’t sell.

Reliable Income.  One reason why structured settlements are such a popular way to settle personal injury lawsuits is because they provide a steady stream of income to the plaintiff.  If an injury has left you unable to work, either temporarily or permanently, you are going to need that income to cover your living and medical expenses.  Insurance companies administer structured settlements, and they do so by investing the lawsuit proceeds into conservative, safe investments intended to provide the income you will need over time.  This reliability is also what makes structured settlements so desirable to factoring companies, who know they can buy your stream of payments and there is virtually no risk that the payments won’t eventually come in.  Can you truly afford to trade in that stream of income?  How will you support yourself, especially if you can’t work?  How will you cover your medical bills?  As annoying as it might seem that you have to “wait” months or even years for your settlement, the idea is meant to protect you.  A structured settlement is in your best interest.

Discount Rate.  If you’ve already looked into the structured settlement process, or even sought offers for the stream of payments you want to sell, you were probably shocked to see how small the offers were.  This is the discount rate in action.  Structured settlement factoring companies – the folks buying your settlement – are in business to make a profit.  They use a discount rate to roll back the total amount of your payments to an amount they’re willing to pay.  This discount rate covers their expenses and also ensures they’ll get a fat rate of return.  Discount rates are often in the double digits.  Would you pay that kind of interest on a debt?  If you wouldn’t, why would you accept that kind of a discount on your structured settlement?

Temptation.  You’re going to give up guaranteed future income for a lump sum of cash now.  What do you plan to do with that money?  Do you think you can invest it better than the pros at the insurance company?  (You probably can’t.)  Are you going to invest in a business?  (What if that business fails?)  Do you honestly believe that you can resist the temptation to spend a giant sum of money sitting in your bank account? (Most people don’t have that kind of discipline.)  Even if you do, as soon as those funds are in your hands, your family is sure to come up with “reasons” why they need some of it.  A structured settlement is built-in discipline, and you will be grateful for it in the long run.

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.

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.