PREMIUM LEGAL RESOURCES
ASK A LAWYER
Structured Settlement Payment Rights Sales: A Guide
Finding the money you need, at the time you need it, can often be a challenge. For many who do not have liquid investments, such as stocks and bonds, other options could exist. One source of money could lie in a structured settlement. It is possible to sell structured settlement payment rights, but a few things should be considered in making a decision.
What's a Structured Settlement?
A structured settlement is a financial vehicle, including periodic payments, that a claimant accepts to resolve a personal injury tort claim. The process of cashing out a structured settlement is known as a structured settlement factoring transaction. People’s reasons for selling structured settlement payment rights vary but can include medical expenses for oneself or a loved one, the need for improved living quarters or transportation, education, or the pay off debt. An annuitant has a choice whether they would like to sell all or part of their structured settlement, this includes splitting the number of payments being sold or the amount of each payment being sold.
Structured Settlement Sales Legalities
In 2002 Congress enacted IRC 5891, requiring that all structured settlement factoring transactions be approved by a state court. These transactions are governed by state statutes. Today all transfers are completed through a court order process. Most state statutes contain similar provisions including pre-contract provisions between the buyer and seller of the payment rights, notice to certain interested parties including the insurance company and lien holders, the recommendation to seek independent professional advice, and court approval that the transaction is in the best interest of the seller and dependents of the seller.
Settlement Quotes, LLC provides structured settlement recipients with a marketplace to sell structured settlement payment rights.
Structured Settlement Sales Economics
Structured settlement factoring transactions are priced using a discount rate to calculate the present value of the payment stream. A discount rate is similar to an interest rate of a credit card but reversed in the sense that time is calculated into the transaction to acquire the present value. Discount rates can range from 8-18% depending upon many factors including the payment stream, funding company, and court costs.
It is important for annuitants to shop their structured settlement payments to multiple companies in order to receive the best price for their future payments. A common practice in the structured settlement factoring industry is for companies to low-ball and adjust the quote if the annuitant has received a better offer. Other worst practices in the industry include “interest drag” which is the practice of prolonging the court process in order to increase profit through the per diem rate. It is also a good idea to check the Better Business Bureau record of the company you are doing business with to make sure the company has less than 5 complaints. This will ensure that you are working with a reputable company.
This article is brought to you by The 'Lectric Law Library and
Settlement Quotes, LLC.
Settlement Quotes provides structured settlement recipients a marketplace,
industry news, and tools to help in the process of selling structured settlement payment rights.
More info can be found at www.structuredsettlement-quotes.com
or by emailing [email protected]