Selling your structured settlement? What You Need To Know. Read this before you go any further!
Despite the best laid plans, life situations might change and what made sense when a structured settlement was created may no longer be ideal today. While it may not make sense for everyone, some people choose to sell structured settlement payment rights for cash, to pay for a variety of expenses like urgent medical care, education and home renovations. Any number of payment rights can be purchased, in any combination and size. But it's not like an ATM, you can't just get cash today. In accordance with Federal law and state structured settlement protection acts, it is necessary to apply for and obtain court approval of the sale of structured settlement payment rights. The transaction must be in your best interest and the best interest of any applicable dependents.This transaction is defined under the Internal Revenue Code, [see IRC 5891(c)(3)(A)] as a "structured settlement factoring transaction" even though some settlement purchasing companies mischaracterized it as a "structured settlement transaction" and unfortunately contributed to some consumer confusion.
If you have reached this web site because you think you want to sell, transfer or factor some or all of your structured settlement payments, please note that our firm's primary business is creating structured settlements, as part of an overall settlement planning process, not dismantling them. The structured settlements that we create are part of a well thought out planning process which includes the participation of plaintiffs and their attorneys.
I. Some of our principles with respect to structured settlement factoring
(1) Should someone contact us with questions concerning a possible sale of structured settlement payment rights to address a liquidity need, we will do our best to understand their situation and examine alternative options. Please note that If the original case was resolved in Bronx County New York, and we participated in the placement of the structured annuity, having signed a Structure Broker's Affidavit, under the Bronx County New York Court rules designed to protect profoundly injured people, neither we (nor any other placing broker) could speak with you on the subject unless authorized to do so by the Court.
(2) Setting aside Bronx cases (or any other jurisdiction with similar rules), if, in the end, a structured settlement factoring transaction is the only viable option for the selling structured annuitant (and sometimes it really is), at the selling structured settlement annuitant's request we may:
(5) IMPORTANT TIP! Make sure that you get in writing that your factoring company has the financing lined up to cover your deal. Many such companies include walk away clauses in their agreements allowing them to leave you high and dry, or with seriously delayed payments, if they can't get financing. This provided a huge problem to selling structured settlement annuitants in 2009. Some factoring companies or brokers draw annuitants in with a low rate to ward off competitors and if the market turns, walk away leaving you to go somewhere else and perhaps with a much less attractive deal. In the meantime your financial condition may have worsened considerably.
IV You also must understand the transaction. It's critical to your long term financial security.
A structured settlement factoring transaction involves several elements which can really add up:
(1) The discount rate which is the rate that the factoring company applies to your future benefit payments to come up with what those payments are worth in today's dollars Always ask for the "effective discount rate". This is the rate that takes into account all of the costs identified here in this section. It is the only way to really appreciate the cost of what you are contemplating doing and compare it. When credit is tight discount rates get pushed upward, meaning even less cash from the "cash now" pushers.
(2) The profit margin for the investor which can vary by company and transaction.
(3) The commission to be paid to the factoring company or the referrer of the business to the factoring company.
(4) Legal and Court costs to achieve a "qualified order".
V Beware Bogus Advertising
There are some established factoring companies who do responsible advertising and those that do not. Then there are individuals who factor on a part-time basis, or make money posting bogus "opinions" and "stories" which seem to relate a real life experience that prove to be little more than dubious endorsements to draw you in to the main event, which is getting you to part with long term financial security through a factoring company.
Some factoring companies falsely imply that you can simply call them up and get "cash now", "all of your cash now", "fast cash now" "immediate cash now" , "full value"and the like. The reality is that it could take months and you will NEVER get "full value" or "all of your money" if you go down that road. Note that some offer a nominal stipend that is then reflected as an offset against the funding amount when the transaction is finalized.
Plaintiff/annuitants should know that some of the issuers of structured settlement annuities will actually commute your annuity internally if presented with a "qualified order", so consider approaching the structured settlement annuity company as part of your research. While one tax attorney has opined that commutations might be a perilous way to go for the qualified assignee of the annuity issuer, you just may find that the commuting company''s "effective discount rate" is less than the one embodied by a third party factoring company. At the very least you should be able to use this as negotiating leverage.
Finally, if you must go down the path of selling your structured settlement payment rights, write a note to yourself, setting forth your reasons for selling, so that in the future you can be reminded why your younger self took steps that affected your financial future. It may come in useful some day.
Please contact us if you have any questions. We're here to help you better understand your options.
4structures.com, LLC, The Structured Settlements and Settlement Planning Company 43 Harbor Drive, #309 Stamford, CT 06902 USA
Structured settlement, settlement planning, Sudden Money®/financial transitionist and insurance related services provided by 4structures.com LLC. Fiduciary services, including the custody and administration of trusts provided via service partners.
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