What You Should Know Before Selling Your Future Structured Settlement Annuity Payments

Transcription

1 What You Should Know Before Selling Your Future Structured Settlement Annuity Payments

2 THINKING ABOUT SELLING YOUR STRUCTURED SETTLEMENT PAYMENTS? Consider This: Selling your structured settlement payments has huge financial consequences that should be given careful consideration. Make sure you receive good advice and have explored all options before making the decision to sell your structured settlement payments. Amicus Settlement Planners, LLC can help you better understand your structured settlement and evaluate the pros and cons of selling any part of your payments. What is a Structured Settlement? Typically, a structured settlement is a financial agreement that you agreed to in the resolution of a legal dispute rather than taking a one-time lump sum settlement. Generally, structured settlements offer a secure way of receiving a series of payments over time. Additionally, structured settlements offer certain tax benefits and a fixed rate of return. However, structured settlements are an illiquid asset; in other words, you cannot easily access the money or use the future payments as collateral.

3 THE LEGAL ENVIRONMENT OF THE FACTORING INDUSTRY Brief Overview In this context, factoring means the purchase of the right to receive future payments. In essence, a factoring company purchases your right to receive future payments in exchange for cash now. In the 1980 s, Congress added federal tax laws that addressed the taxation and assignability of certain future periodic payments. Partially as a result of these tax laws, the factoring industry emerged to provide liquidity by purchasing the right to receive the future payments for cash. However, the early factoring industry was not heavily regulated and abuses were rampant. Individuals who sold the rights to their payments often received a fraction of what their payments were worth. In 2002, a penalty tax was imposed on any factoring transaction that did not receive prior court approval based on the best interest of the seller and his or her dependents. At about the same time, nearly every state enacted a Structured Settlement Protection Act (SSPA) to regulate the purchase of future payments. These laws require disclosure of certain information, notice to interested parties, receipt of professional advice, and court supervision and approval.

4 IS IT IN YOUR BEST INTEREST? The Process You contact a factoring company for a free quote regarding the sale of your payments (or perhaps you are contacted randomly with an offer to purchase your payments). The factoring company will send you disclosure statements as required by the applicable SSPA. Next. You will receive contract documents that commit the proposed deal to writing. Most states require the factoring company to provide the disclosure statements to you either three days or ten days before you sign a contract to sell your payments. Once you sign and return the contract documents, the factoring company will file a petition with the court for approval of the proposed transfer. Most states require a court hearing as part of the approval process and that all interested parties be given at least days notice of the hearing. Even if the court approves the proposed transfer, the factoring company may still delay weeks or months to pay you while they wait for confirmation from the insurance company that the payments will go to them instead of you. Best Interest Most states require the court to determine whether the proposed transfer is in your best interest and the best interest of your dependents, if any. Generally, selling payments is not in your best interest because the buyer will give you much less than the true present value of those payments. In many cases, a sale of payments alleviates a current problem but creates much larger difficulties down the road.

5 ALTERNATIVE OPTIONS What Other Options Are Available? Traditional loans Lines of credit Student loans Credit counseling Address the underlying money habits that led to the situation Negotiating with creditors Bankruptcy While any or all of the options listed above may not be right for you, we can help you identify alternative options that may be available. INDEPENDENT PROFESSIONAL ADVICE Most states require factoring companies to advise you of your right to receive independent professional advice regarding the legal, tax, and financial implications of selling payments. Additionally, some states require that you receive independent professional advice. The purpose of this advice is to have a independent professional help you understand the ramifications of the proposed transfer. Amicus Settlement Planners, LLC offers faceto-face or over the phone meetings to discuss your structured settlement and any proposed transfer. After meeting with you, we can provide a letter memorializing our discussion and our advice to you.

6 AMICUS SETTLEMENT PLANNERS, LLC Amicus Settlement Planners, LLC, is a full-service structured settlement firm providing a wide range of settlement planning options. Amicus advisors are local, well credentialed professionals who invest the time necessary to learn about their clients and guide them toward their goals. TOMBS MAXWELL LLP Tombs Maxwell LLP is a specialty law firm that focuses primarily on areas of law that affect individuals and their families. With expertise in the financial aspects of legal settlements, Tombs Maxwell attorneys assist settling plaintiffs and their attorneys with issues such as special needs planning, settlement taxation, Medicare Secondary Payer compliance, formation and administration of qualified settlement funds, government benefit analysis and protection, settlement trusts, and estate planning. A LOCAL SOLUTION For information and assistance contact one of our team members listed below. We look forward to working with you. PRINCIPALS & OFFICE LOCATIONS Contacts: Joseph Tombs, JD, MS, MBA, CFP Greg Maxwell, JD, MS, CFP Larry Peterson, MS, CFP Nelson Gonzalez, MS Jesus Longoria, MS, CFP Dustin Cordell, BS-PFP Kent Hansen, JD, MS Matt Hayes, JD, MS Daniel Maxwell, JD Locations: Lubbock, TX Bountiful, UT Salt Lake City, UT Houston, TX El Paso, TX Laramie, WY Logan, UT Dallas, TX Bountiful, UT (888)