Important Cash for Structured Settlement Facts
What if any conditions should you set with the transfer of cash for structured settlement payment rights?
If you've got a structured settlement and you want to get money for it, take a moment to consider a couple of very important matters. For one thing, it's very expensive (to you) to sell your structured settlements for money, at least over the long term. Most people don't realize how much it's going to cost them and only focus on what they'll get with an immediate lump sum payout.
If you do decide to use a structured settlement brokerage company, you'll need to know a couple of things about the laws regarding this.
First of all, a structured settlement is the periodic payment of damages as arranged by a judgment or settlement to resolve a tort claim. Usually, these periodic payments are tailored and are set up so that they meet the needs of the victim in terms of medical and living expenses. This prevents the victim from having to depend upon taxpayer financed social medicine, welfare, etc.
There are laws that protect the consumer from unscrupulous brokerage companies. Many times, the settlement agreement contains a nonassignability clause which is basically unenforceable.
It's been estimated that more than 50,000 structured settlements go into the system every year. These settlements give premiums to annuity. What's important to remember is that these premiums are highly favored in terms of the tax treatment you get, whether you are the claimant or the insurer. In turn, this lowers insurers' costs.
The price terms usually unfair. Summary accounts show that some sales are completed with a 12 percent or 15.8 percent discount rate, but other sales have been completed with a rate as high as 55, 65, and 75 percent. In addition, since the discount rate is always calculated on the purchase price which includes brokerage and other expenses "agreed" to by the seller in the contract, the real discount rate and cost of the transaction to the seller is artificially depressed. Moreover, there is no requirement to disclose to the seller, in understandable terms, the total fees of the transaction. Given the unfairness of some of the transfer agreements, consumers need protection from factoring companies that take unfair advantage.
A handful of people argue that structured settlements provide crucial financial protection to seriously injured victims, including: protection against premature dissipation of benefits for injured victims; periodic payments tailored to the living and medical needs of the victim and his/her family; and avoiding the shift of responsibility for the victim's care to the taxpayer-financed social safety net. They argue that there has been a dramatic growth in the number of factoring companies that are purchasing the future structured payments for a sharply discounted lump sum payment, "taking the structure out of structured settlements. This is a transaction that the injured victim enters into with a 3rd party, completely outside of the structured settlement and without knowledge of the other parties.
Because of this need, a secondary market has arisen whereby companies purchase a portion or all of the individual settlement for one lump sum payment. That lump sum is the result of the discounted present value of the payments the company is purchasing, using discounted rates that average currently between 16 and 18%. These discounted rates take into account the cost of capital, the company's profit, and any inherent risk involved in undertaking the settlement.
All of the careful planning and long term financial security for the injured person and his/her family are unraveled by the company offering quick cash at a deep discount for future structured settlement payments. After almost giving away their only assured source of future financial support, many injured victims will face the prospect of public assistance to cover their future medical expenses and basic living expenses.
If you've got a structured settlement and you want to get money for it, take a moment to consider a couple of very important matters. For one thing, it's very expensive (to you) to sell your structured settlements for money, at least over the long term. Most people don't realize how much it's going to cost them and only focus on what they'll get with an immediate lump sum payout.
If you do decide to use a structured settlement brokerage company, you'll need to know a couple of things about the laws regarding this.
First of all, a structured settlement is the periodic payment of damages as arranged by a judgment or settlement to resolve a tort claim. Usually, these periodic payments are tailored and are set up so that they meet the needs of the victim in terms of medical and living expenses. This prevents the victim from having to depend upon taxpayer financed social medicine, welfare, etc.
There are laws that protect the consumer from unscrupulous brokerage companies. Many times, the settlement agreement contains a nonassignability clause which is basically unenforceable.
It's been estimated that more than 50,000 structured settlements go into the system every year. These settlements give premiums to annuity. What's important to remember is that these premiums are highly favored in terms of the tax treatment you get, whether you are the claimant or the insurer. In turn, this lowers insurers' costs.
The price terms usually unfair. Summary accounts show that some sales are completed with a 12 percent or 15.8 percent discount rate, but other sales have been completed with a rate as high as 55, 65, and 75 percent. In addition, since the discount rate is always calculated on the purchase price which includes brokerage and other expenses "agreed" to by the seller in the contract, the real discount rate and cost of the transaction to the seller is artificially depressed. Moreover, there is no requirement to disclose to the seller, in understandable terms, the total fees of the transaction. Given the unfairness of some of the transfer agreements, consumers need protection from factoring companies that take unfair advantage.
A handful of people argue that structured settlements provide crucial financial protection to seriously injured victims, including: protection against premature dissipation of benefits for injured victims; periodic payments tailored to the living and medical needs of the victim and his/her family; and avoiding the shift of responsibility for the victim's care to the taxpayer-financed social safety net. They argue that there has been a dramatic growth in the number of factoring companies that are purchasing the future structured payments for a sharply discounted lump sum payment, "taking the structure out of structured settlements. This is a transaction that the injured victim enters into with a 3rd party, completely outside of the structured settlement and without knowledge of the other parties.
Because of this need, a secondary market has arisen whereby companies purchase a portion or all of the individual settlement for one lump sum payment. That lump sum is the result of the discounted present value of the payments the company is purchasing, using discounted rates that average currently between 16 and 18%. These discounted rates take into account the cost of capital, the company's profit, and any inherent risk involved in undertaking the settlement.
All of the careful planning and long term financial security for the injured person and his/her family are unraveled by the company offering quick cash at a deep discount for future structured settlement payments. After almost giving away their only assured source of future financial support, many injured victims will face the prospect of public assistance to cover their future medical expenses and basic living expenses.
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1 Comments:
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Thank you,
Eldon
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