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The federal structured settlement law as laid out in IRC 5891 makes the purchase of structure settlement payments legal and thus gives all U.S. citizens the right to sell their structured settlement payments, provided that the court approves such a sale. However, if you sell a structured settlement payment without receiving judicial approval the buyer can be subject to a 40% tax penalty on the payments that you sold. Thus, it pays, literally, to do things legally. Read on for more details about these laws.
Court approval of the purchase of structured settlement payments is required throughout the United States. However, in most states the person selling has to appear in court; in others they do not (Florida, Illinois, and Virginia do not require you to attend the hearing). Structured settlement laws by state vary.
Other state rules can impact your structured settlement transfer. For example, some states require that you receive independent professional advice (IPA), that is that a financial advisor looks at your situation and provides advice to you. As of the beginning of 2014, the states that require IPA were: Alaska, Delaware, Louisiana, Maine, Maryland, Minnesota, Missouri, North Carolina, and Ohio.
Other states require that you notify the beneficiaries of your policy. That is, the person who is to inherit your structured settlement annuity if you were to die must be informed that you are selling payments. In all states non-revocable beneficiaries need be notified; in fact, in most states only non-revocable beneficiaries need be notified. However, in the following states, as of early 2014, all beneficiaries must be notified: Alaska, Delaware, Georgia, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, and North Carolina. Most of the time the factoring company buying your payments will do this notification for you.
The Strategic Capital website provides you with tons of information about selling structured settlements. There are many websites and articles dedicated to the topic as well. But laws change, guidelines change, and times change. In addition, laws can vary from state to state. So always double check the information that you receive, especially as relates to the legality of selling your settlement. Call Strategic Capital to verify that what you read applies to you, your state, your situation, and the present time.
As said the Strategic Capital website says repeatedly, every situation is different, and your chance of approval is unique. However, our research has revealed that the most difficult states to get approval to purchase structured settlement payments in are New York and California; this is due, for the most part, to how busy their courts are. Missouri, New York, and Texas tend to be denied most often, but this is at least partially due to the sheer volume of sales in these states. New Hampshire and Wisconsin do not have their own structured settlement protection act, so it may be challenging to sell in these states. However, you can still sell a settlement if you live in these states as long as the insurance company who owns your annuity is located in a different state – you can get court approval in that state. Some have suggested that claims are most likely to be approved in Florida, Illinois, and Virginia, but these are just generalizations and should not deter you from attempting a sale in any state.
Getting approved for a structured settlement transfer depends upon a variety of things including your reasons for needing the money, the rate your company is offering, the personal views of the judge and more. Each situation is unique, but when you call Strategic Capital we can walk you through the specifics of your state and your situation.