News and Tips on structured settlement transfers.


Why So Many Hoops?

If you hoped to sell your structured settlement for quick cash, you may have become disappointed when you learned how many steps were involved in the process.  Collecting offers, reading contracts, getting financial and legal counseling, a cooling-off period, a court appearance.  While it may be frustrating, these procedures exist for a reason:  to protect you.

Structured settlements have been used in the United States for about 40 years.  They allow a defendant to settle a claim with a plaintiff without an enormous cash outlay up front.  Meanwhile, the plaintiff gets regular payments to help support themselves, and preferential tax treatment.

However, by 2002, Congress and the IRS realized that many structured settlement recipients were selling their annuities for lump sums.  Since there was no financial advice or court oversight, these annuitants often sold for small lump sums, then spent the full amount, defeating the financial security purpose of most annuities.  There was no safety net; just sign a contract, and all was done.  As a result, it was believed many annuitants were being taken advantage of.  There were also questions regarding the tax treatment for these sales.

In response to these concerns, IRC 5891 was born.  This new regulation required structured settlement sales to be approved by a state court in accordance with a “qualified state statute.”  If they weren’t, they were subject to a severe excise tax penalty.  In response to this new regulation, most states have passed something called the Structured Settlement Protection Act (or a similar name).  Now, most sales of structured settlements require the seller to get financial and/or legal counseling.  A cooling-off period is required, where the seller can change his mind and back out of the transaction.  And, in most states, the seller must appear in court.  Sellers should be prepared to answer questions about why they’re selling their settlements, and to explain how they plan to use the proceeds.  Courts also look at the details of the transaction, and can reject it if they believe it is not in the best interest of the seller. 

While this may seem frustrating, the point is to protect you from companies looking to turn a quick profit by preying on your need for fast cash.  Remember that annuities are designed to provide you financial security over time, so selling one should be a major financial decision.    You should always protect yourself by seeking out the best offer, and making sure that this is the best solution for you.  If selling your settlement won’t meet your immediate cash needs, or if you have no other income to take its place, you should reconsider selling.

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.

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