If you have a structured settlement, receive payments from a structured settlement, or are about to receive a structured settlement, this page will be a valuable resource to understand the creation and purpose of a structured settlement. Most structured settlements are paid out over time via an annuity offering future payments. You should know that if you are receiving payments from a structured settlement, you have the right to turn those future annuity payments into cash now.
What is a Structured Settlement? Benefits of Structured Settlements? Parties to a Structured Settlement Why Structured Settlements came about Structured Settlement Processing |
These payments may be scheduled for any length of time -- even as long as the claimant's lifetime -- and are structured to meet the financial needs of the claimant. Payments can be in equal amounts or can vary. They may include future lump sums.
A structured settlement arrangement may be agreed to privately, as in a pre-trial settlement, or it may be required by a court order, as in a settlement or judgment involving a minor.
A structured settlement is a proven, effective solution for the needs of personal injury claimants. Claims professionals, plaintiff attorneys, judges and defense attorneys advocate the use of structured settlements because they can effectively meet a claimant's needs for security, and provide more benefits over time than a single, lump sum settlement because of applicable tax rates.
Historically, damages paid because of a personal injury lawsuit came in the form of a lump sum at the time of settlement or judgment. This kind of payment, especially in large catastrophic injury cases, places the claimant (or the family) in the position of managing a large sum of money, which is intended to provide for a lifetime of medical, and income needs.
Since most people are not experienced in handling large sums, there is always the danger that the money will be spent quickly or invested unwisely, leaving little or nothing to cover future needs of a seriously injured person. Indeed, anecdotal evidence suggests that many claimants who receive lump sum awards dissipate their assets and are left with unmet needs within a relatively short period of time.
Thus, structured settlements were developed to create a more stable financial basis for the claimant.
You can cash in your structured settlement payments.
How does it work?
The defendant agrees with the victim on a stream of periodic damage payments tailored to the victim's particular medical care and basic living and family needs. The defendant then assigns its periodic payment obligation to a life insurance company, which funds the victim's damage payments with an annuity. In some instances, the defendant retains the periodic payment liability and purchases as annuity to fund the payments to the victim.
Annuity contracts have been the preferred way of funding because of their pricing and flexibility for settlement design. An alternative is a trust fund, which invests only in United States Treasury obligations. These trusts add the safety of investment in obligations issued by the U.S. Government.
There are some important benefits to the claimant in structuring the settlement:
You can cash in your structured settlement payments.
You can cash in your structured settlement payments.
An annuity application is the request for an insurance company to provide a policy that guarantees the payment of the settlements declared amount to the Payee (plaintiff)
An annuity policy is the guaranteed “promise to pay” a declared amount to the Payee (plaintiff)
You can cash in your structured settlement payments.
You can cash in your structured settlement payments.
The security and guarantee of the Structured Settlement Annuity product is through first, the Life Insurance Company issuing the Periodic Payments. Second to the Settlement Obligor, which is the insurance company ultimately obligated to ensure the claimant receives their Periodic Payments. And last, in the event a Life Insurance Company becomes insolvent, the State Guaranty Fund kicks into play. The State Life and Health Guaranty Association provide the State Guaranty Fund.
You can cash in your structured settlement payments.
How many structured settlements are created yearly
Over $7 Billion in Settlements will be created in 2003
Amount will increase an estimated 15% yearly through 2019
200+ Deals a month completed by funding sourcesCustomers typically decide to sell their structured
settlement payments due to some financial hardship.
Usually the customer will go with the person they
feel most comfortable with, regardless of “price” .New Federal and State Laws Regulating a Sale
Due to new State and Federal Laws, the closing process now
takes anywhere from 3 to 6 months to complete. Do not
be “fooled” by companies that say it can be done quicker.
Only in rare cases can this timeframe be shortened to 2 months.
On the Federal Level, in order to avoid any tax liabilities, either
to the customer or the funding company purchasing the payment
stream, a court order is now required.
On the State Level, 36 states currently have passed new “Structured
Settlement Protection Acts” which regulate exactly how the court
Order process is completed.You can cash in your structured settlement payments.
The Closing Process
On paper, the closing process seems very simple. However,
in order to comply with each state law, certain time
frames must be met. The closing process flows as follows:
Initial submission of settlement documentation
Disclosure Statement
Closing documentation
Attorney Estoppel letter
Petition for Court Order filed
Court order is obtained
Insurance Company acknowledges assignmentSubmission Documentation
When submitting a file to a funding source, some initial
documentation is needed to begin the closing process.
You should obtain the following:
Application for sale
Annuity Policy
Check Stub
Settlement Agreement
Qualified Assignment
Payment stream to be purchased
Purchase Price you are paying to the customerDisclosure Statements
Based upon each state’s laws, the disclosure statement must
be provided to the customer anywhere between 3 to 14 days
prior to the customers receipt of the transfer agreement.
• The Disclosure Statement must show:
• Amounts and due dates of payments being assigned
• The current IRS Discounted Present Value of the payments
• The Gross Advance Amount and the Annual Discount Rate
• An Itemized listing of all commissions, fees and expenses
• The Net Amount to be received by the seller
• Several other minor disclosures required per stateTransfer Agreements
Once the customer has received the Disclosure Statement,
and the allotted time has expired, the transfer agreement
can be sent to the customer for signature. The documents
Sent to the customer are:
Transfer Agreement
Testamentary Agreement
Updated Application
Fee Agreement (In some cases with the Disclosure Statement)
Attorney Estoppel Letter
IRS form W-9Attorney Advice
Attorney advice in any type of financial transaction is
smart for a customer. However, not all states require the
customer to obtain said advice. Based upon the laws to
be used on your customers transaction, he can either:
• Waive legal representation in the Transfer Agreement
• Obtain legal advice and have their Attorney prepare
and sign an Estoppel LetterCourt Order Process
The court order process is generally the longest part of the
overall closing process. Steps taken during this process are:
• Attorney obtains complete file and reviews documentation
• Drafts of Petition and Order are reviewed by funding source
• Petition is filed (must allow 20 to 30 days notice to all
interested parties prior to actual court date)
• Court Date is set
• Judge hears arguments and approves the order
• Judge signs the order (can be immediately or at a later date)
• Court Order is provided to the funding sourceInsurance Company Acknowledgement
Depending on which funding company you use, the
Funding of proceeds to the customer can take place either
after the court order is received or after the Annuity Owner
and Issuer approve of the changes to the Annuity Policy.
If the funds are dispersed after the court order is obtained,
the dispersal is usually 5 to 7 business days after receipt
of the court order.
If the funds are dispersed after the Insurance Company
Acknowledges the assignment, the funding can be anywhere
from 30 to 45 days after receipt of the court order.
Individuals awarded future payments through litigation derived from personal injury misfortune have sold the right to receive these payments for years. The industry that grew up around this consumer need operated without regulation until January 2002 when the U.S. Congress stepped in and legitimized the process, demanding that the practice be approved by a judge following scrutiny of the transaction.
You can cash in your structured settlement payments.
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A Structured Settlement is a term that generally refers to a deferred payment obligation resulting from the settlement of a personal injury lawsuit. Typically these payments are paid over several years or even decades.
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Every day, thousands of people receive insurance settlements and lottery prizes that are paid over time. Prosperity Partners, Inc. has forged a leadership role in helping these cash flow recipients increase the value of their payments, improve their quality of life and create wealth by turning payments over time into a lump-sum payout today.
Prosperity Partners, Inc. offers flexible and individually tailored plans to meet our client’s specific financial goals. Our focus on outstanding customer service has made us a leader in the Structured Settlement and Lottery Award refinance industry. Current low interest rate environment enables us to offer better rates to our clients than ever before.
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TO COMPLETE THE PROCESS OF YOUR STRUCTURED SETTLEMENT YOU WILL NEED THE FOLLOWING:
**AUTHORIZATION Signed, Dated, and notarized.
SETTLEMENT AGREEMENT and RELEASE documents from your settled case releasing
the defendants and everyone involved also stating what was agreed upon. Please
make sure you have signed copies. If you do not have this you may call your
attorney who handled your case, or the courthouse where you settled the case.
ORDER APPROVING MINORS CLAIM and DISMISSAL TO THE ORDER OF MINORS CLAIM. (if applicable) These are documents that gave court approval for you to enter into a Settlement. If you do not have this you may call your attorney who handled your case, or the courthouse where you settled the case. (these documents are only applicable if your case settled when you were a minor).
**ANNUITY CONTRACT AND BENEFITS LETTER/Policy or Contract Number Annuity contract is the policy that your Insurance Company issued to you when you settled your case. Benefits letter is a typed letter on your Insurance Company’s letterhead listing the scheduled payments. If you do not have this you may contact the Insurance Company making payments to you, and ask for copies to be sent to you. In most cases you will have to write a letter requesting the paperwork.
QUALIFIED ASSIGNMENT (if applicable) a qualified assignment occurs when the defendant’s insurance company assigns all of their liabilities and obligations to make the Periodic Payments to another insurance company.
** APPLICATION To be completed in detail and signed.
RECENT CHECK STUB OR RECENT BANK STATEMENT only needed if you are receiving monthly payments. If you have the payments wired into your bank account, please send your most recent bank statement indicating the wired funds.
**CLEAR PHOTO ID please make sure the photo is clear. Sometimes it is difficult to copy a picture clearly. If this is a problem you may send us an old picture along with your copied ID.
SECOND ID this may be a copy of your social security card, birth certificate, marriage license, passport or all of the above mentioned.
INCOME TAX RETURN WE ONLY NEED THE FIRST PAGE.
DIVORCE DECREE OR SEPARATION PAPERS & Property disbursement schedule (if applicable)
BANKRUPTCY DOCUMENTS AND DISCHARGE (if applicable)
This information is for you to use as a reference so that you have a step-by-step outline explaining to you how your transaction will occur. Your cooperation in all steps will insure that your transaction is completed in a timely manner so that you can receive your money as quickly as possible.
The first step is to return your application completed, include a clear copy of your photo ID, your most recent annuity check stub (if applicable), a copy of your Annuity Contract, signed copy of your Settlement Agreement, Qualified Assignment, (if applicable) and if you were a minor when your Settlement occurs, a copy of the Order for the Minors Claim, (if applicable). If you are missing any of the documentation, send us everything you have and we will help you to obtain the missing documentation.
After we have received and reviewed your documentation, we begin our internal process. The amount of information you have provided to us will determine how long you can anticipate receiving closing documents. Normally it will be within 2 to 5 business days after we receive the initial documentation back from you.
Once the file review has been completed, we will create and issue to you the closing documents. The closing documents consist of a Disclosure Statement, which outlines the financial terms of the transaction and the Transfer Agreement, which outlines the legal terms of the transaction. Based on the State statue where we will be petitioning for the Court’s Approval, the Disclosure Statement and Transfer Agreement may be sent together or separate. If the Disclosure Statement is sent separate, the Transfer Agreement will be sent to you upon our receipt of the signed Disclosure Statement, but no sooner than ten (10) days after the Disclosure Statement was initially sent to you.
Once you receive the closing documents, review them completely. If you have any questions, give me a call and I will be glad to review those items on which you have questions. After this review, you will need to take the contract to a notary and sign the contract in front of the notary. The notary will need to notarize each of your signatures, where noted. Once completed, you will need to send the closing documents back to us.
After we receive the closing documents, we will review them. We then continue with our internal process. At which point, we will pull your credit and search records for UCC filings, judgments, liens and child support obligations against you. We may either pay or escrow funds to satisfy any lien filed against you or the periodic payment if necessary, and deduct the amount from the purchase price. If we are not satisfied with the results of our investigation, in our Sole and Absolute discretion we shall have the right to cancel your request.To continue the sale process we will copy the closing documents to the attorney representing the Transfer, with information on proceeding with the Court Order. Once the transfer has been approved and Ordered by the Court, an acknowledgement letter is sent to the insurance company. Upon our receipt of the acknowledgement letter, our final funding review is started. Provided that everything is complete, funding is set up and will take place within ten (10) business days after final approval has been received.
Products
Structured Settlement - This product is insurance annuity based
A structured settlement is an arraignment to satisfy a legal liability. It
provides periodic payments to a person holding a legal liability against
another over a negotiated period of time (e.g. as an injured claimant would
against the person at fault for the injury). Settlements are used increasingly
in the settlement of personal injury, wrongful death and product liability
claims, instead of lump sum settlements. As an alternative to the continuing
receive these long term payments, some of these individuals (referred to
as claimants) assign or transfer part or all of their of their settlement
payments to a structured settlement purchasing company for a discounted lump
sum payment.
The seller/customer was the plaintiff (claimant) who settled a claim either
in court or out of court with the defendant and their insurer. In most cases,
in order avoid protracted litigation and for consideration of releasing the
defendant and their insurer from future litigation, the parties involved
enter into a Release and Settlement Agreement, where the defendants insurer
agrees to provide future payment(s) to the claimant. To ensure the future
payment(s) is/are made, the defendants insurer through qualified assignment
(an amendment to the IRC §130(b)(1) and §104(a)(2), where the defendants
insurer is released from further obligation by providing a lump sum payment
to a third party insurer and transferring their obligation to that insurer.
Through qualified assignment the deferred payment stream to be provided to
the claimant is tax exempt.) is released from their obligation and a third
party insurer (obligor) assumes the obligation. The obligor purchases an
annuity contract from an insurance company to provide and guarantee the payment
to the claimant.
The guarantee of this product is through first, the life insurance company
issuing the payments, second the obligor, the insurance company obligated
to ensure the claimant receives their settlement payments and last the states
guarantee fund.
Assignment of Structured Settlement payment rights (Non Assignable Redirection)
The claimant and funding company enter into a sale and assignment agreement and other related documents, where in consideration for a lump sum payment, the claimant agrees to assignment their rights to receive payment under the release and settlement agreement and the annuity contract to the funding company. The funding company secures their assignment of payment rights by filing UCC1 under article 9 of the Uniform Commercial Code. The funding company also has the claimant redirect annuity payment to an address or bank account controlled by the funding company.You can cash in your structured settlement payments.
Court Ordered Structured Settlement payment right transfers
The claimant and funding company enter into a transfer agreement and other related documents. Where in consideration for a lump sum payment, the claimant agrees to assign their payment rights under the release and settlement agreement and annuity contract to the funding company. In order to comply with certain state statutes, a courts approval is required to effectuate the transfer agreement. All interested parties are put on notice and are given the chance to oppose the transfer. An Order is entered and a notice of transfer is sent to both the insurer and the obligor. The transfer of payment rights is secured by an Order of the court and by the filing of UCC1 under article 9 of the Uniform Commercial Code.Non-Court Order Structured Settlement Payment Right Transfers
The claimant and funding company enter into a transfer agreement and other related documents. Where in consideration for a lump sum payment, the claimant agrees to assign their payment rights under the release and settlement agreement and annuity contract to the funding company. By complying with certain state statutes the insurance issuer and obligor agree to assign/transfer payment rights to the funding company. The transferred payments are secured by the insurers acknowledgement of the assignment/transfer and by the filing of UCC1 under article 9 of the Uniform Commercial Code.Catastrophe Fund Settlements
The seller/customer was the plaintiff (claimant) who settled a claim in court with the state and their insurer. For consideration of releasing the state and their insurer from future litigation, the parties involved enter into a Release and Settlement Agreement, where the state’s insurer agrees to provide a future payment to the claimant. The payment is from an insurance company to provide and guarantee the payment to the claimant.The guarantee of this product is through first the life insurance company issuing the payments, second the obligor, the insurance company obligated to ensure the claimant receives their settlement payments and last the states guarantee fund.
You can cash in your structured settlement payments.
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