It’s Liquidity – It’s NOT CASH NOW!

March 26, 2014 – There appears to be a misconception or two about why a secondary market for structured settlement payments exists and what that market can and cannot do.  The fact is that structured settlements are intended to compensate victims of personal injury cases and their family members.  Structured settlements are created via the use of a qualified funding asset, in the form of an annuity issued by a highly rated life insurance company, whereby the claimant (the legal plaintiff) in the case is named the payee under the annuity and owns the rights to receive a series of future payments.  These annuity payments must be paid according to the annuity contract and cannot be accelerated, hence the existence of a secondary market that provides liquidity where circumstances warrant. 

The secondary market does not, however, create the option for an individual to get cash in hand “now.”  The reality is that structured settlement payment rights can only be sold, or transferred, pursuant to the approval of a court and the issuance of a court order.  A judge ultimately must rule that the sale is in the payee’s best interest taking into account the welfare and support of their dependents, if any.  What the payee receives after the issuance of the court order is a lump sum equivalent to the discounted present value of the payments being transferred.  In general, the larger and sooner the annuity payments are due, the larger the lump sum.  What the payee does not receive, ever, is Cash NOW.

The process usually takes two to three months, and by almost any reasonable definition that is not the same thing as NOW.  CASH NOW carries the connotation that selling annuity payments for a lump sum is a relatively quick and simple process.  In short, the use of the word NOW lends undue weight to the idea that one may obtain immediate gratification, or the immediate cure to all financial ills, which simply is NOT true.

FACT:  Insurance companies own the annuities issuing structured settlement payments to payees and are therefore interested parties to a payment transfer.  They must be informed of the court hearing and of the opportunity, should they choose to do so, to object for any reason.  Even if the law allowed it, insurance companies issuing annuity payments would not allow for CASH NOW.

FACT:  All payments will be valued at a discount (meaning a lesser amount, dollar for dollar) since they are due in the future, not NOW.  The buying power of a dollar is known today, but the buying power of a dollar due in twenty years is subject to a myriad of economic factors and risks.

FACT:  Selling structured settlement payment rights for a lump sum takes at least 45 days and sometimes much longer.  The laws in place governing the process require that anyone contemplating a sale first receive a disclosure statement, then wait a designated time before signing a contract.  Those same laws, as indicated above, do not exclude the insurance company from the process.  The insurance company must receive legal, written notice of your desire to sell, which clearly communicates when and where the court hearing will be held.  Nowhere in the law or approval procedures does the word NOW appear.

Structured settlement payments have a value today as a guaranteed source of future income.  They are liquid and may be sold pursuant to the laws described above provided a judge deems the sale in the best interest of the payee.  What structured settlement payments do not have is an ATM-like feature allowing for their future value to be tapped to produce CASH NOW, in a flash, in a rush, in a pinch, or in any other way, other than by court approval.  That court approval takes time.  If, after careful consideration of all alternatives, a sale is the best course of action, then that’s where the secondary market comes into play.  What the secondary market cannot do is get you CASH NOW.

We are Annuity Transfers.  We have been buying structured settlement payments for over ten years in the secondary market.  We maintain an A+ rating with the Better Business Bureau.  We treat every situation uniquely because every situation is unique.  If you find yourself in a unique situation, and you may be considering a sale of structured settlement payments, then Annuity Transfers is here to help.  Call us toll free at 888-638-0900.  We look forward to talking to you.

March 26th, 2014

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