Busting the Myth: Understanding Your Structured Settlement
A structured settlement payout may be the key to your financial future, but don’t buy into the hype
For many, a structured settlement payout is the first step in the right financial direction. Structured settlements have become extremely common in the last three decades. In fact, American receive about four billion dollars a year in lawsuits payments and about 80% of these are done as structured settlements.
When it comes to selling your settlement for a structured settlement payout there are many myths, half-truths and marketing ploys that can make it challenging for you to make the best decision for you and your family.
Most well-known structured settlement purchasing companies are legal, if not entirely honest. This is where you have to be careful; in this industry a structured settlement ripoff may not be about doing something illegal, it may just involve stretching the truth or trying to make money without really consideringyour needs and best interests.
To help you make the best decisions, following are 12 myths, half-truths and other bits of misinformation common in the structured settlement world, and the truth about them.
It’s your money.
The tag line “It’s your money” has become the slogan of the largest structured settlement purchaser in the United States. But this advertising campaign is deceptive, it tries to give the viewer the impression that when their money is in a structured settlement it is not theirs and that taking the money in hand is better. The truth is that the structured settlement annuity belongs to the person who receives the payment – it is their future money, and it is behaving as their money, providing them with security into the future.
Simply wanting to have the cash in hand is no reason to get a structured settlement payout.
You can earn more if you invest on your own.
The truth here is that structured settlement annuities do result in small returns. But that’s alright. Their purpose is to provide stability not high interest. And truth be told, other investments are so volatile that any investor is just as likely to lose money as they are to earn it.According to US News and World Report, in 2008 Americans lost more than 2 trillion dollars that was invested in the stock market, with the S & P 500, a major stock index, losing nearly 20%. In addition, many investments that do earn money do so in a way where the earnings are subject to income taxes. Thus, you pay money on what you earn. Growth within a structured settlement is tax free and reliable.
The judge will tell you if selling is right or wrong.
Yes, the role of the judge is to help protect the seller, ensuring that the person has a valid reason to sell and is not being taken unfair advantage of. However, just because a judge approves your sale does not mean that it is the best thing for you to do. Judges have been known to approve sales that were at too high a rate or otherwise a bad choice. Do your research, make your own decisions, and just let the judge be the rubber stamp.
You can get your money immediately.
So you wonder, “Can I sell an annuity payment and get my money fast?” There are ways that you can help get your money fast when you sell your payments, and certainly the company buying your payments plays a big role in speed. But don’t believe that they can complete the entire sale in just days – the legal process takes a while and the fastest sale we have done was 18 days. Most sales take 30-60 days. However, some of the more caring settlement purchasers may provide you with a small amount of your money up front if you have a real financial emergency and they feel that you are certain to be approved. Strategic Capital offers such advances in certain situations, just ask your Strategic Capital customer service representative.
You must sell all your payments.
Some structured settlement purchasing companies will try to tell you that you can only sell all of your payments at one time, that it is all or nothing. Or, they may simply fail to suggest that you sell only part of your payments. A client recently told us that he contacted six structured settlement purchasing companies, asking their advice on his potential sale. Only two of the companies suggested that he sell only part of his payments; the others didn’t mention that he had this option in his initial contact with them.
In a recent interview with our company, attorney Matt Bracy, a lawyer specializing in structured settlements and sales, agreed with this advice, saying, “Sellers of structured settlement payments have an immediate need for cash. When they sell payments, they should match the amount they sell with that need, but no more. Structured settlements provide excellent long-term benefits and should be left intact as much as possible.”
If you sold payments once you cannot sell payments again.
This is absolutely false. If you got a structured settlement payout by selling just part of your payments in the past and a new financial need has arisen then you may sell more payments, assuming that you have more payments to be sold. There is no legal limit to the number of payments that you can sell or how many times you can sell some of your structure.
All factoring companies are the same.
Structured settlement buyout companies are often called “factoring” companies. And these companies are not created equal. Some are extremely pushy, calling and emailing repeatedly, doing whatever they can to buy your settlement. In fact, clients tell us that they submitted multiple online quotes to other factoring companies and that each one called them within one day, most within an hour – this responsiveness is great. However, we often hear that when the client does not return their calls the companies continue to call repeatedly, some (including Imperial Financing) calling as many as eight times in a single week. You will never have this type of hard-sell with Strategic Capital.
In addition, clients tell us that we are the only one of the structured settlement buyout companies that would answer any of their questions over email; the rest insisted on a phone call, presumably so they could push them to sell. When you choose a structured settlements factoring company choose one that is responsive but respectful and does not push you in a way that feels too salesman-like.
A structured settlement is an “account” that you can withdraw from.
A structured settlement is not like a checking or savings account; it is not something you can withdraw from anytime that you want. However, you can sell as many payments as you want, as many times as you want, as long as there are still payments remaining to sell.
When you sell a structured settlement you will get a dollar-for-dollar payout.
You will never sell your payments for their face value. There will always be a discount rate applied. That is, you will receive less money than what the payment is as the discount rate will consider future value of the money and allow for a profit margin for the company buying your payments.
Getting verbal confirmation of your quote is enough.
Sure, you will get a verbal quote first, which you will use to decide what company you will work with. But before you sign on the dotted line get the quote in writing – ensure that it is on your agreement.
Payments that you receive while awaiting court approval will not be deducted from the check that you receive.
It takes some time to get the sale of payments approved by the court and get you your money. If there is a delay or things take long enough that you receive a payment that you had agreed to sell this amount will be deducted from the lump sum check that you receive.
You can sell your pension.
If you wonder, “Can I sell my pension annuity” the answer is most likely “No.” Pensions cannot be sold, legally, as of 2013. Yes, you can find some companies who may buy your pension payments, but this is not a fully legal transaction, rather the payments are purchased “under the table”, as they say, without actually changing the name of the beneficiary. Truth be told, this is more likely to cause trouble for the person or company that buys your pension than for you, but it is still best to stay away from any company that would do such underhanded business.
Always get a second opinion!
Talk to at least two structured settlement purchasers, or at least verify the answers that you are given with online research. You can be more certain that information is accurate if you research it and find the same answer from at least two credible sources.
While myths and pushy people are out there, the truth is that there are also companies staffed by good, caring people, who will help you to make a good decision and get your finances in order. If you have a financial then need selling your structured settlement can be a great way to get the cash that you want. Just be sure that you have the facts before jumping into anything. Call Strategic Capital for the fact today.