If you live in California and need to raise cash by selling your future payment rights under a structured settlement, it will be necessary to file a petition with the court to have the transfer approved. The statutes under California law that governing such transfers is set forth at California Insurance Code Section 10134-10139.5.

California Insurance Code section 10139.5 provides for the following:

10139.5. (a) A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order based on express written findings by the court that:
(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.
(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived that advice in writing.
(3) The transferee has provided the payee with a disclosure form that complies with Section 10136 and the transfer agreement complies with Sections 10136 and 10138.
(4) The transfer does not contravene any applicable statute or the order of any court or other government authority.
(5) The payee reasonably understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.
(6) The payee reasonably understands and does not wish to exercise the payee's right to cancel the transfer agreement.
(b) Following a transfer of structured settlement payment rights under this article:
(1) The structured settlement obligor and the annuity issuer shall, as to all parties except the transferee, be discharged and released from any and all liability for the transferred payments.
(2) The transferee shall be liable to the structured settlement obligor and the annuity issuer if the transfer contravenes the terms of the structured settlement for the following:
(A) Any taxes incurred by those parties as a consequence of the transfer.
(B) Any other liabilities or costs, including reasonable costs and attorney's fees, arising from compliance by those parties with the order of the court or arising as a consequence of the transferee's failure to comply with this article.
(3) Neither the annuity issuer nor the structured settlement obligor may be required to divide any periodic payment between the payee and any transferee or assignee or between two, or more, transferees or assignees.
(4) Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of this article.
(c) (1) An application under this article for approval of a transfer of structured settlement payment rights shall be made by the transferee and brought in the county in which the payee resides.
(2) Not less than 20 days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the application for its authorization, and shall include the following with that notice:
(A) A copy of the transferee's application.
(B) A copy of the transfer agreement.
(C) A listing of each of the payee's dependents, together with each dependent's age.
(D) A copy of the disclosure required in subdivision (b) of Section 10136.
(E) A copy of the annuity contract.
(F) A copy of any qualified assignment agreement.
(G) A copy of the underlying structured settlement agreement.
(H) Notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee's application, either in person or by counsel, by submitting written comments to the court or by participating in the hearing.
(I) Notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed, which may not be less than 15 days after service of the transferee's notice, in order to be considered by the court.
(d) All court costs and filing fees shall be paid by the transferee.
(e) No later than the time of filing the petition for court approval, the transferee shall advise the payee of the payee's right to seek independent counsel and financial advice in connection with the transferee's petition for court approval of the transfer agreement, and shall further advise the payee that if the payee retains counsel, a licensed certified public accountant, or a licensed actuary in connection with a petition for an order approving the transfer agreement, that the transferee shall pay the fees of the payee's counsel, accountant, or actuary, regardless of whether the transfer agreement is approved, and regardless of whether the attorney, accountant, or actuary files any document or appears at the hearing on the application for transfer, in an aggregate amount not to exceed one thousand five hundred dollars ($1,500). The transferee's accountant, counsel, or actuary may not advise the payee.
(f) The court shall retain continuing jurisdiction to interpret and monitor the implementation of the transfer agreement as justice requires.

One of the reasons for enacting California legislation was to make structured settlement transfers subject to court approval in order to provide further assurance that adequate protection was afforded to annuitants and structured settlement beneficiaries. The law also followed earlier federal legislation that provided “. . . A principal reason for securing Court approval of structured settlement payment rights is to avoid the imposition of a 40% excise tax imposed by federal law. 26 U.S.C. §5891(a). The federal legislation notes that an excise tax will not be imposed when the transfer of structured settlement payment rights is approved by a “qualified order.” 26 U.S.C. §5891(b)(1). A “qualified order” means an order approving a transfer of structured settlement payment rights which “finds that the transfer does not contravene any Federal or State statute or the order of any court and is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.” 26 U.S.C. §5891(b)(2).

Typical to California, the Golden State adopted legislation that is more complex than laws adopted in other states. California, for example, requires that notice of any petition must be given to the Office of the Attorney General, and the Attorney General has the right to oppose any petition that is filed in the state. What usually happens, though, is that a representative from the Office of the Attorney General will review the paperwork on petitions that are filed and will ask the petitioner to make changes that they think are necessary in order to assure compliance with California law. If the changes are made and properly noticed prior to the hearing date, the attorney general will usually then not object.

Another issue to address with California courts is that there are 58 counties in the state and every county has its own superior court system. Each county also has its own set of local rules to comply with, and every judge also handles his or her courtroom a little bit differently. Furthermore, many judges have never even heard of a structured settlement transfer, all of which can make the approval process more difficult – even in situations where the petition is unopposed.

Given all the requirements summarized above, filing a petition in California and getting it approved by the court can be a long and complicated process. Once an agreement is reached between a funding company and a structured settlement beneficiary, it usually takes 60 to 90 days, or more, before a petition can be filed and approved by the court on a proposed structured settlement transfer.