News and Tips on structured settlement transfers.

Factoring Education

16
Mar 11

What Happens to a Structured Settlement if I Die?

It’s not a pleasant thought, but if you have a structured settlement, you may have wondered what would become of those payments if you should head to the Great Beyond.

The short answer is, it depends on how your settlement was designed.

If your settlement is set up so that it pays only while you, the annuitant, is still alive, then there will be nothing for your beneficiaries if you should make an early exit. Not surprisingly, this would be the structure of choice for defendants in a personal injury lawsuit, because it ends their liability if the annuitant dies. However, as you might expect, plaintiffs usually want more flexibility than this.

Another option for a structured settlement is to have the payment stream be fixed over a certain period of time or a certain number of payments. This may be called a “guaranteed period” or “period certain” because, even if the annuitant should die, the payments continue until the specified period comes to an end. If the annuitant is no longer alive, the remaining payments go to his/her beneficiary, or his/her estate if no beneficiary has been specified.

Yet another possibility is to structure the settlement to pay a “joint and survivor benefit.” In this case, the payments go to the annuitant, but, in the event s/he dies, the remaining payments go to a specified “survivor.” This would usually be someone like a spouse or child. Like the guaranteed period, it ensures that the structured settlement will be paid in full, even if the annuitant does not live that long.

Finally, your structured settlement may contain a “commutation rider” which provides for a designated beneficiary to receive a discounted lump sum payment in lieu of the remaining payments if you should die. Typically, the commutation rider will call for the beneficiary(ies) to get 90% of the remaining settlement if the annuitant dies; this is more than the beneficiary would likely get if s/he sold the payment stream to a structured settlement buyer.

So, should you sell your structured settlement now in order to make more money for your beneficiaries? Well, hopefully you and your lawyer had a long conversation about your anticipated needs before you even agreed to the settlement. But, even so, selling it is a major decision. If you should die, remaining payments made to your beneficiaries are generally tax-free. It’s difficult to discipline yourself from spending the entire lump sum if you sell, and any interest you earn on the investment of the funds is taxable – not tax-free, like your structured settlement.

Hopefully, you will enjoy a nice long life with your structured settlement payments. But take a look at your settlement agreement so that you understand what will happen if you’re no longer around.

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.

13
Mar 11

Structured Settlements and Kids

Unfortunately, bad things don’t just always happen to adults. When a child suffers a terrible injury and a lawsuit follows, the end result might be a structured settlement.

When the plaintiff in a personal injury lawsuit is a child, the court usually will put part of the settlement into a blocked bank account designed to pay current and future expenses. This bank account will remain restricted until the child reaches the age of majority (usually 18). Lawyers’ fees and other expenses will also be paid from the settlement. If Medicaid was used to pay some of the child’s medical expenses, they may also have a claim to part of the settlement (check with your lawyer about this). The remainder is placed into a structured settlement. Since a minor child cannot legally enter into a contract, the process of making the settlement binding is called confirmation, court approval, guardianship, or minor’s compromise proceeding.

Just like for adults, a structured settlement is typically a lump sum that is placed in an annuity that will invest the money then make a stream of payments to the annuitant (in this case, the child) over time. The idea of the structured settlement is to ensure that the child has a stream of income to meet his needs for months or years. This might be a lifetime if the child is permanently and totally disabled. Parents and attorneys for the child should review any proposed structured settlement carefully to determine if the amount of the settlement will be sufficient for the child.

But what if circumstances change and you need cash sooner than the annuity will provide it? It is possible to sell a child’s structured settlement, but it’s more difficult than selling one that an adult controls.

Structured settlements for minor children will often have a no-sale provision designed to prohibit its sale in a factoring transaction. Even with a no-sale provision, however, a court can approve a structured settlement sale if it can be demonstrated that there is a great an immediate need for the cash, and that the child’s needs are better met by selling the settlement than waiting for the next payment. You can expect, however, that the court will scrutinize a claim like this very carefully.

Once your child reaches adulthood and gains control of his settlement and that restricted bank account, the temptation to spend it all now will be immense, and it’s tough to expect an 18-year-old to have the maturity to know that he’ll need the money later. At this point, the best gift you can give your child is solid financial advice, maybe even the services of a financial planner, to help protect him when you aren’t around.

8
Mar 11

Structured Settlement Sales – Understanding the Process

How does the sale of your structured settlement work? Here’s a quick summary of what you can expect.

First, find a buyer. You can use www.quotemeaprice.com to get competing buyers to bid on your settlement. You don’t have to sell your entire settlement; you can sell a portion or just a few of the payments you have coming to you.

Check out the bids you get, paying attention to all the details. You want the best lump sum, but watch out for any extra fees. Do “due diligence” by checking out the reputations of the prospective buyers. You can do this by going to the Better Business Bureau’s website and looking at what kinds of complaints, if any, have been submitted against the buyers. If you see lots of complaints alleging that the companies changed the original deal, snuck in lots of fees, or didn’t pay the lump sum as promised, these should be red flags. Also, beware any buyer who claims to be able to complete your structured settlement transaction in less than 45-60 days; all states have a legal process that must be followed, and it will take at least that long from start to finish.

Once you’ve picked a buyer, pay close attention to all of the contracts and paperwork you receive. Look for any changes to the original offer, and check the fine print for additional fees. If you don’t understand something, ask. If the buyer doesn’t sufficiently answer your question, tells you not to worry about it, or starts pressuring you to sign, you should walk away.

Most states require structured settlement sellers to get legal and/or financial advice. Make sure you find a lawyer who is independent – don’t take the buyer’s recommended experts or accept referrals from them – and who has handled structured settlement transactions before. Specifically, the lawyer should evaluate whether the sale is in your best interest, and should make sure the buyer isn’t trying to pass on fees to you that state law says he has to pay.

The sale of your structured settlement will have to be approved by a judge, and you may even have to appear in court for this. If the judge believes that the sale is not in your best interest, s/he can refuse to approve it, and you’ll have to start over again if you still want to sell.

Finally, you’ll have a “cooling off” period after the sale is approved before it is finalized. This is your last chance to re-think the whole thing, and decide once and for all whether you truly want to sell.

7
Mar 11

Who Would Buy a Structured Settlement?

Sure, you know why you want to sell your structured settlement – an emergency need for cash fast that can’t be settled any other way. You may not like the idea of having to wait for your money, and at times like this, it can be pretty inconvenient. So, why would a company want to buy your settlement from you?

Stability. A typical structured settlement is backed up by an annuity, usually administered by an insurance company. If your settlement was related to a personal injury lawsuit, the defendant placed a lump sum with the insurance company, who then put the funds into an annuity contract where they money would be invested in conservative holdings so as to generate a stable stream of interest. That interest income, plus the initial sum, pays out to you over months or years. Barring financial disaster for the insurance company and your annuity contract being unprotected, the company who buys your settlement is virtually guaranteed that the stream of payments he is buying will come through as planned.

Rate of Return. If you’ve been shopping your structured settlement on www.quotemeaprice.com already, then you’ve found that buyers are offering you lump sums that are less than the total amount of your payment. This difference is being caused by the discount rate. It is essentially a reverse interest t percentage that the buyer uses to scale back the payment stream to an amount he is willing to pay you. The discount rate is intended to cover the buyer’s costs, such as legal fees and administrative overhead, but it also contains his rate of return – his built-in profit. After all, structured settlement buyers are not in business to provide funds to you, they are looking to make money. If this seems unfair to you, remember that you are in need of quick cash and the buyer is essentially providing a service. Also, just as if you were borrowing money from a bank that would charge you interest, there is a charge for getting your money ahead of schedule.

Here’s the good news for you: a site like www.quotemeaprice.com allows you to get several offers from competing buyers, and lets you choose the one that best suits your needs. Of course, you don’t have to accept any offer, and you don’t have to sell your settlement if you don’t want to. That’s why you should always weigh the decision to sell heavily, and get objective advice.

5
Mar 11

Getting the Best Deal for Your Structured Settlement

OK. So you have a pressing financial emergency. You’ve considered all your options, and you realize that cashing out your structured settlement is the best way to get the money you need. So now what? You want to make sure you get the best possible deal. Here’s how.

Shop Around. Choose a site like www.QuoteMeAPrice.com where you can advertise the details of your structured settlement, and let buyers fight to give you the best deal. Let them really duke it out, and don’t jump at the very first offer. Sometimes, buyers will float a low offer just to see how quickly you’ll bite. Resist the temptation to accept the first deal you see.

Check Them Out. Not all buyers are created equal. You want a structured settlement factoring company that is going to treat you honestly, will stick with the deal they offer you, and won’t try to play games with you. Once you’ve gotten a list of prospective buyers from your bids at QuoteMeAPrice, check them all out on the Better Business Bureau. Virtually every buyer will have some complaints, but you should look at the nature and the amount of complaints. Are there lots of accusations of hidden fees? Changing the deal mid-stream? If so, maybe you should avoid that buyer.

The opposite extreme – no information available at all – can also be a warning sign. This could mean that the company is brand new to the structured settlement factoring business. While that isn’t a danger sign per se, you don’t have any history to consider, and no clients to ask. Proceed at your own risk.

Consider the Warning Signs. So, you’ve gotten bids. You created a short list. You did your due diligence. And now, you’ve chosen your buyer. But your vigilance shouldn’t end there. Read the deal carefully. Read all documents carefully, and ask questions about anything you don’t understand. If any part of the written documentation doesn’t agree with the deal you were offered, insist that the contract be changed. Also, take a hard look for any fees that you will be paying. Are these fees permitted under the laws that govern structured settlement factoring transactions in your state? Even if they are, every fee takes money out of your pocket – try negotiating them first before you sign.

Selling your structured settlement is a huge decision with a big impact on your personal finances. You owe it to yourself to get your best deal.

4
Mar 11

How Structured Settlements Work

The commercials are tempting, featuring funny people in silly situations promising to get you cash now. You wonder why you got this structured settlement in the first place. Why bother?

Structured settlements originated in Canada in the 1970s and grew quickly in popularity. Why? There are a few reasons.

First, defendants in a personal injury lawsuit realized they could invest an amount of cash smaller than the actual amount of the settlement, and, through careful and conservative vesting, actually meet the settlement obligation they agreed to in court. The defendants were free of their settlement obligation without the hassles of administering and paying the funds on a regular basis.

Second, plaintiffs and their attorneys realized that the structured settlement was a great way to ensure a steady stream of income to an injured person. Because the defendant was no longer involved, and administration of the payment stream had been turned over to an objective third party (an insurance company), the risk of default was lessened significantly.

If you are an annuitant – that is, a person receiving the structured settlement – this whole process may seem unfair to you. After all, you were awarded a certain amount in a lawsuit, why can’t you have it all now? Why do you have to wait? What if you have other things to spend it on?

In truth, the structured settlement guards against all that. Were you to receive a huge cash settlement up front, it would be difficult to resist the temptation to blow the whole wad at once. Even if you are the paragon of restraint, chances are some family member or friend or some other “emergency” would present itself, demanding the cash. A structured settlement protects you from all that.

If you were disabled, and are unable to work, either temporarily or permanently, a structured settlement is designed to ensure that you have cash when you need it and in the amount that you need. The payment schedule prevents you from spending it frivolously. The structured settlement, in effect, protects you from yourself.

Of course, you can sell it. You can sell all or part of your settlement for cash in about 60 days or so, depending on your state. Just know that you will not get the full amount of your settlement – not even close. Buyers will cut down the full amount in order to cover their costs and make a profit – and it’s your price to pay for wanting cash quick. It’s an option, but if you can wait, you probably should.

3
Mar 11

Three Reasons to Keep Your Structured Settlement

Those ads sure are tempting, especially late at night when you’re tired and prone to worry about all of the needs you have. Selling may seem like the right idea, but here are some good reasons to stick with what you have

A Structured Settlement is Stable Income. One of the reasons structured settlements are so popular for settling personal injury lawsuits – and so popular with buyers looking to invest – is that there is virtually no risk of not receiving your payments. Insurance companies invest the lawsuit proceeds in conservative investments designed to earn interest so they can pay your settlement as promised. The structured settlement buyer is risking little more than his time and some attorney fees to draft and structure the sale. Meanwhile you risk plenty if you let that settlement go. How will you support yourself, especially if your injuries have left you unable to work? How will you meet your expenses without the annuity?

The Sale Won’t Go as Planned. Yes, the ads say you’ll get cash “now” or “fast,” but these are relative terms. If you truly need your cash that fast, a structured settlement sale won’t help. All states have laws governing structured settlement factoring transactions, and all of them take a minimum of 45-60 days to complete the entire transaction. Some states can take months. And there’s always a chance your deal will hit a roadblock: misfiled paperwork, miscommunications, slow mail, etc. Any of these can stretch out the approval process. And remember that, even if all goes smoothly, a judge can nix the deal if s/he doesn’t think it’s in your best interest.

You Can’t Make up the Difference. Your friends and family may tell you that you can certainly earn a better return than what the insurance company is putting toward your annuity. They may be telling you that the insurance company isn’t an investment company, and doesn’t know what it’s doing. You can beat that, they say. Truth is, the folks that insurance companies have investing the funds usually are experts who deal in investments every single day. You may see higher interest rates, but they are more risky and there’s a chance you could lose everything while chasing a few percentage points. And don’t forget that, when you sell, the buyer pays you far less than you would have received over time. They do this by discounting your annuity. This discount rate covers the buyer’s costs and guarantees his profits. If the discount rate is in the double digits, can you truly overcome that deficit with your investments? Unless you’re the next Warren Buffett, it’s not likely.

2
Mar 11

So You Want to Buy Structured Settlements

You’re tired of the low rates and returns available on traditional investments. You’re looking for a better place to put your money that’s not too risky. And then you learned about structured settlements, and thought about buying them. If so, consider a few things.

Got Cash? You’re going to need cash to pay off the holders of structured settlements. If you just happen to have lots of cash on hand, great – just remember that once you’ve paid the annuitant, you won’t be earning interest on the funds. If you don’t have cash on hand, how will you get access to it? What sort of interest rate will the lender charge you? Can you fit that interest into the discount rate?

Discount Rate. This is the figure at the heart of every structured settlement factoring transaction. The discount rate is “reverse interest” that you charge the structured settlement holder in order to cash them out. So, you will be paying them quite a bit less than they would have received over time. The discount rate is intended to cover your costs, as well as your profits. But don’t be tempted to make that rate too high, even if you think the buyer will accept your offer – a judge will have to approve the sale, and may not consider it reasonable.

Legal Help. The structured settlement factoring process is regulated by specific laws that vary from state to state. Unless you’re a lawyer, and very comfortable with the structured settlement process, you’ll probably want to hire one to help you draft your contracts and guide you.

Getting Noticed. There are lots of structured settlement factoring companies around, but a few big names dominate the market by their ability to advertise widely and through volume. You will need a way to get yourself noticed. A site like QuoteMeAPrice is a way to offer a deal to prospective sellers, and perhaps offering a better deal than the big guns is one way to get noticed. Still, the big players have history on their side. So, don’t expect instant success.

The Risks. Most structured settlements are administered by insurance companies, so there is little risk that a stream of payments you have assumed won’t get paid. But there are plenty of possible roadblocks that can prevent you from sealing the deal. The seller may change his mind and move to another buyer if he gets an offer for more money or faster turnaround. As noted earlier, a judge can nix the whole thing. And every state offers a “cooling off” period in which the buyer can walk away from the deal, in which case all your work and sunk costs will be lost. So, you want to buy structured settlements?

28
Feb 11

Why You Shouldn’t Sell Your Structured Settlement

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.

27
Feb 11

Reasons Why You Should Sell Your Structured Settlement

The point of a structured settlement is to provide you a source of future income to take care of you, so if you’re thinking of cashing it out, you really should weigh the decision heavily. When you think of why you want to sell, if your reasons don’t match the ones listed below, you should consider alternatives.

A True Financial Emergency. This should be a genuine, virtually life-or-death financial emergency that can’t be resolved any way else. Life-or-death medical care is an emergency. Buying a new wardrobe or going on a vacation is not, no matter how tattered your current trousseau, or how stressed out you are. Fixing a broken down car might be an emergency, but can you fund the repairs some other way? If there’s another way to solve the problem, cashing out your structured settlement is NOT your best option.

A Problem Settled for Good. So, you have some expenses you want to pay, perhaps some high-interest credit cards. The interest savings on the plastic might make cashing out your structured settlement worth your while, but will the proceeds from your settlement pay them off completely? Even if so, do you have some other way to meet your living expenses so that you won’t max out your credit cards again? If your answer to those questions was “no,” selling your structured settlement is NOT an option. Instead, you need credit counseling and help with your budget so that you can stop living beyond your means.

A Guaranteed Investment. Your structured settlement is being invested by pros, usually employed by the insurance company administering your settlement payments. You may have heard people tell you that you can do a better job and get a better return. Sorry, but they’re wrong. Unless you’re an investment expert, you probably can’t. And if you’re looking at a “guaranteed” investment that will pay a higher interest rate, there should be alarm bells going off in your head. In today’s low-interest environment, high-return investments are likely quite risky. Even if the percentage you’ll earn is better than what the insurance company is using, remember that when you sell your structured settlement it will be heavily discounted. Your fabulous new investment will have to overcome that discount rate, which will likely be in the double digits.

Your structured settlement was meant to protect you, not to be a cash register. Your reason to sell needs to be incredible for the sale to be worth it. Be brutally honest with yourself about why you want to sell.

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News and Tips on structured settlement transfers.

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