|
|
 |
Cash For Structured Settlements
February 19th, 2007
A number of years ago you were injured in a serious accident. You pursued legal action to recover damages and resolve the matter by agreeing to a structured settlement that provided for paying you a lot of money. The only problem is that the money is tied up in an annuity and still not payable to you for another 5 or 10 years. Unexpected needs have come up and you sure could use the money. What do you do?
A structured settlement is often times a good way to compensate an injured party. It is a way to assure that funds are available at a later point in time to cover future needs. The process is not too risky from a financial standpoint since future payments are usually guaranteed by an insurance company issuing an annuity contract. Nevertheless, unexpected needs come up along the way that put people in such a bind that they need to do something to try to cash out their annuity payments rather than have to wait until the payments come due.
The way to resolve this dilemma has been for holders of structured settlement payment rights to assign their rights to someone who is willing to cash them out. Such arrangements typically involve steep discounts, which are unavoidable for several reasons. First, the time value of money means that a sum of cash that is payable in the future is always going to be worth less today than on its due date. Second, buying future payment rights is a risky and expensive process, which means that no one is going to buy the rights unless there is a discount to offset the risk of doing so.
As an assurance that things are handled on the up and up, most states now have laws that require court approval of structured settlement transfers. Such laws generally provide for strict guidelines that must be followed with respect to the terms and conditions of the proposed transfer, and that notice is given to all interested parties. A petition must then be filed with the appropriate court and a hearing held to approve the petition.
Prior to the hearing, any interested party can object to the proposed transfer. This may include an insurance company that has a payment obligation on the underlying structured settlement. It may also include the Office of the Attorney General or another government agency that may have jurisdiction over the matter. Lots of paperwork is involved so the process can be expensive, and it can also take a lot of time (usually 60-90 days, or more).
At the hearing, the court will consider all the evidence before it, including statements or testimony from you if you are selling structure settlement payment rights. The court may ask you questions to make sure you understand the nature of what you are doing, and to make sure you realize that you are taking a steep cash discount for the payment you are receiving right now rather than waiting until later. Before approving the petition, the court also has to find that the transfer is in the best interests of you and your beneficiaries.
In many cases, a court petition is uncontested. Prior to the hearing, the insurance company and the company buying your annuity payment rights will have reached a stipulation on acceptable language on a proposed order to be submitted to the court. State agencies rarely object unless they find problems with the paperwork. Thus, most petitions are approved.
However, a court may still decide not to approve a petition if the judge concludes that the proposed transfer is not in the best interests of you or your dependents. Thus, it is important to be as prepared as possible, which includes your being present in court and making a good impression on the judge. Even then, there is the rare instance of a judge who will refuse to grant the petition simply because he or she is philosophically opposed to the process or fails to understand it.
|
|
|
