Structured Settlement Roundtable

Expert Roundtable Participants

The best lawyers in the industry offer sound advice to our clients.

Patrick Hindert

Managing Director of S2KM Limited

This Harvard Law Graduate is the Managing Director of S2KM Ltd. and The Settlement Services Group. As a leader in the structured settlement industry for more than three decades, Hindert frequently speaks at several national conferences on the subject. He also authors a structured settlement blog and co-authors a legal treatise relied upon by structured settlement professionals far and wide.

Matt Bracy

Attorney at Nesbitt, Vassar & McCown, LLP

This Dallas attorney began his illustrious career in the structured settlement factoring field more than 15 years ago. He has served in leadership positions for the National Association of Settlement Purchasers, and played a pivotal role in implementing and modifying legislation in this legal area on both the federal and state level.

Joseph J

Dehner Frost Brown Todd LLC

Dehner began his lengthy legal career more than 40 years ago. He was in on the ground floor of the structured settlement industry, and has provided legal counsel to individuals in all imaginable structured settlement roles over the past three decades. Dehner co-authors the legal treatise “Structured Settlements and Periodic Payment Judgments” with Daniel Hindert, and another Roundtable expert, Patrick Hindert.

Earl Nesbitt

Partner at Nesbitt, Vassar & McCown, LLP

Nesbitt began working in the structured settlement litigation field more than two decades ago, and his firm has represented funding companies since 2001. He has served on the Board of and in leadership roles for the National Association of Settlement Purchasers, where his contributions have influenced legislation in the field throughout the United States. His impressive career has touched upon all facets of this industry.

Eugene Ahtirski

The Law Offices of Eugene A. Ahtirski

Ahtirski earned two Bachelor degrees and a law degree. He has been an active participant in the structured settlement industry since its inception. His California law firm is a leader in structured settlement transfers, and Ahtirski has personally assisted with more than 8,000 future payment stream transfers. He was also influential in the interpretation and modification of California’s Structured Settlement Protection Act.

Terry Taylor

Plaintiff Structures

This Texas attorney is a strong advocate for private individuals who seek to sell their structured settlement payment rights. In 2000, he was elected to the National Structured Settlement Trade Association Board as the first settlement broker who represented only plaintiffs, and eventually served as president. Taylor also performed as a dedicated lobbyist for the passage of the Victims of the Terrorism Compensation Act of 2001.

Stuctured Settlements Roundtable

Interviewer

David Meyerowitz

President and CEO of Strategic Capital Corporation

Welcome, gentlemen, and thank you for your participation. On behalf of Strategic Capital, we are looking forward to your comments and advice on this intriguing subject. So, let's dive right in with a question uppermost on the minds of most consumers considering the sale of structured settlement payments.

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What are the pitfalls that people should be careful of when they sell structured settlement payments?

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What are good reasons for people to sell and what are bad reasons, and can you provide any real life examples of each type that you have heard about?

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What should people know about the process that they might not realize when they start?

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Although price is always important, what else should potential sellers pay attention to?

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What resources (blogs, books, websites) would you recommend to someone who is new to the structured settlement-factoring arena?

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What other information would you like to add?

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Who else should I interview?

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Please tell me about your background?

Request your free qoute now!

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What are the pitfalls that people should be careful of when they sell structured settlement payments?

Patrick Hindert lawyer in industry

Patrick Hindert

The first pitfall occurs if individuals “over-structure” when they settle their personal injury claims. An appropriate settlement plan should include an analysis that justifies periodic payments and anticipate changing circumstances and liquidity needs.

A second pitfall occurs if settlement documents include anti-assignment clauses, which do not specifically reference and permit transfers pursuant to IRC 5891 and state structured settlement protection statutes.

A third pitfall occurs if individuals settling personal injury claims with periodic payments do not understand:

  • their periodic payment contractual rights; and
  • the role and requirements of state protection statutes.

A fourth pitfall occurs when individuals sell structured settlement payment rights without first discussing alternatives with financial advisors.

A fifth pitfall occurs when individuals sell structured settlement payment rights without soliciting and comparing multiple offers and inquiring about commutation options.

A sixth pitfall occurs when individuals compare multiple offers without assistance from advisors who are knowledgeable about transfers and can help negotiate favorable terms including but not limited to price. These terms include the amount and allocation of expenses.

Matt Bracy lawyer in industry

Matt Bracy

One thing that potential sellers of structured settlement payments should carefully consider is whether they depend on the payments being assigned. No one should sell payments that they need in order to make ends meet, or if they are needed for medical treatment or care.

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.

Finally, very careful planning and consideration should be given to how they will use the money. Every structured settlement seller should develop a detailed plan for the proceeds. This will help when the court considers the sale, and will also help focus the seller on making the best use of his or her resources. When the plan is done, this essential question should be asked: “Will I be better off selling these payments and using the lump sum of money I get in this way than I would be otherwise?” If so, then the sale is a good idea and the process of thinking this through will be useful in court.

Joseph J Dehner lawyer in industry

Joseph J Dehner

Two things really –
Not taking enough time to think before concluding they must have money now versus waiting for the periodic, regular payments that a structured settlement provides; and

failing to consider carefully the meaning of present value and discount rates.

Earl Nesbitt

Structured settlement/annuity payments are a valuable financial asset of the payee. In every Secondary Market transaction a payee transfers and assigns the right to receive future structured settlement/annuity payments in return for a present, lump sum cash payment from the transferee/assignee (the funding company). Thus, the payee is always getting less money (up front) than they would receive in the future if they waited and received the payments directly from the obligor/issuer as they come due. The purchase price is determined by calculating the discounted present value of the future stream of payments to be transferred/assigned by applying a discount rate.

Many factors go into determining the purchase price that the payee will receive and the discount rate that will be applied to determine the purchase price, but in all cases the payee will be giving up future money to receive a current lump sum payment. So, the payee should make sure they really, truly need to liquidate these payments, either to:

  • achieve a desired goal (i.e. buy a house, start a business, continue one’s education, purchase a car, pay off debt, etc.)
  • or to preserve an asset or address an immediate need (i.e. necessary medical procedure, lost job and need to maintain some income
  • or pay bills to avoid losing assets, saving a house from foreclosure, get caught up on house payments/car payments, avoid bankruptcy, etc.).

The payee should avoid selling more payments than they need to address their need or achieve their objective. If you need $ 30,000 to get caught up on bills, house payments, car payments, and tie one over while the search for another job continues, then do not let anyone talk you into selling payments to raise $ 80,000.00. Building in some excess as a fudge factor, say raising $ 35,000.00, might make sense, but try to limit how much of one’s future payments one liquidates.

Additionally, it is important for payees to feel comfortable with the funding company. Don’t let anyone pressure you into a transaction. Read the documents that they send you. Sometimes, the company offering the most money for a particular transaction is still not the payee’s best option. There are funding companies, unfortunately, that include provisions in the transaction documents (i.e. rights of first refusal, onerous arbitration provisions requiring arbitration in far away places and impose arbitration fees on the payee, etc., security interests in all of one’s payments, etc.) that should be considered carefully and which might not be beneficial to the payee. I would always recommend doing business with a funding company that is a member of NASP.

Also, review carefully stipulations provided by issuers/obligors. There are indemnity provisions in there that could be problematic in the future. Don’t ever advance money to a funding company or a broker who claims that they will help you get your deal approved. The payee should never have to pay or advance funds to try and get these deals approved, EXCEPT if the payee chooses to consult with a financial advisor or lawyer regarding the transaction. Make sure that the person that you have consulted understands the transaction. Also, remember that your financial advisor/lawyer may not like the transaction and may advise you against it, BUT they work for you and their job is to support your decision, explain the transaction to you, and make sure that you are making an informed decision, NOT to substitute their judgment and view of the transaction for the payees.

Be wary of companies and brokers who claim that they can get your deal approved in another state. Always be open and honest with the court. These transactions are perfectly legal and the assets being liquidated belong to the payee. Courts may not like them all the time because the payees give up money in the future, but payees should be clear and direct with the Court that they have thought this through and that at this time this transaction makes sense for them. Payees who are unable to work and depend entirely on their structured settlement payments for their monthly income and necessities should think long and hard about these transactions and should endeavor to retain sufficient income and funds to insure that they will not be left destitute.

Eugene Ahtirski

The 3 most common mistakes and/or pitfalls that sellers of structured settlement payment streams often make is first, that a sale of a payment stream is a fast and simple procedure. In truth, every transfer of a future payment stream is actually a sophisticated financial transaction that also requires court approval, and sometimes requires independent professional advice. Second, that all purchasers are the same; when the truth is that the ethics, customer service and business practices between purchasers are vastly different. Most important, that the interest/discount rate charged on a payment stream is standard across the industry (much like a home loan). But again, the quite the opposite is often true.

Terry Taylor

Fast talking sales people in call centers and companies that call far to frequently trying to pressure the seller into signing a contract are way up there. However, the biggest pitfalls are in the purchase agreement itself. Most people do not really understand what the discount rate means and whether they are getting a reasonable amount for their future payments. Most people who need to sell their structured settlement are in dire need of the money and do not pay attention to the language of the document.

Some of the dangerous language often directs the entire structured settlement payments be paid to the purchasing company and then they will send the portion of the payment they did not purchase to the seller. At the very least that delays the payments, but if the purchasing company goes into bankruptcy the repercussions could be disastrous.

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What are good reasons for people to sell and what are bad reasons, and can you provide any real life examples of each type that you have heard about?

Patrick Hindert lawyer in industry

Patrick Hindert

Most “good” and “bad” reasons for individuals to sell structured settlement payment rights result from bad settlement planning. Bad settlement planning includes: “Over-structuring” without adequate liquidity or diversification

  • Failure to plan for future contingencies and/or uncertainties
  • Failure to justify that tax-exempt periodic payments are in the recipients’ “best interest” or at least meet a product suitability standard
  • Significant mismatching of periodic payment amounts and payout patterns with anticipated needs
  • Inappropriately locking minors into future periodic payments following their age of majority
  • Failure of specific annuity-financed periodic payments to meet Medicaid qualification requirements.
    Other “bad” reasons could result from “buyers’ remorse” and/or poorly considered or self-serving post-settlement advice.

“Good” reasons to sell could result from dramatic, “unanticipated” changes in circumstances without better available financial alternatives. For example, financial deterioration of periodic payment obligors assuming willing structured settlement payment right purchasers exist.

Matt Bracy lawyer in industry

Matt Bracy

Each decision to sell structured settlement payments is unique to the individual. Long ago I learned not to rush to label reasons as “good” or “bad” in the abstract. Ultimately, reasons for selling payments are as varied and complicated as people themselves. For example, you could say it is a “bad” reason to sell payments so you can take a vacation. What if the seller is dying, and this is an effort to spend good time with his family? Imagine a seller’s reason to sell is that she just doesn’t want to get the checks on a monthly basis anymore. At first blush that may seem like a financially irresponsible position. What if you learned that each month she gets the checks, she is reminded of the injury that she suffered, and it has a detrimental impact on her psychological wellbeing? The converse can also be true. What if a seller wants to sell payments in order to pay off debt? That is a common reason for selling, and generally a pretty good one. But what if the payments he is selling would leave him with no way to support himself on a monthly basis, even after elimination of the debt?

To some, these may seem like farfetched and made-up examples, but they are actually based on real people. The state structured settlement protection acts – state laws that regulate how structured settlement payments can be sold – include a very general provision that the court must find the transfer to be in the seller’s “best interest.” There is no real definitive guidance for what that means. This was left intentionally vague, so that the judge could consider all the issues and the seller’s total situation in making the decision to approve or deny the transfer.

Joseph J Dehner

Let’s start with bad reasons, they include:

  • Helping relatives
  • Wanting to start a business
  • Paying off credit card debt
  • Living beyond one’s lifetime means

There can be “good” reasons – such as:

  • Unanticipated real-life needs where government benefits are not available (medical needs not met by insurance or Medicare or other programs)
  • Investment into advancing job-readiness skills
  • Similar capital-building programs that truly substitute for the regular payments that will be surrendered at a cost

Earl Nesbitt

There are many good reasons for a person to sell. I know of one gentleman who liquidated his payments to participate and pay for a Navajo Indian ceremony. He was a Navajo Indian and the ceremony was important to him and his heritage. There was a cost involved. Typically, most people choose to liquidate their future structured settlement payments because they find that they have a need for immediate cash to address a personal or family need, often that was unanticipated (i.e. loss of a job, resulting in falling behind in bills or house payments; a medical illness) or because they want to achieve a personal, family, or financial objective (i.e. educational needs for one’s self or family members; moving to a new area for a job opportunity; business/job opportunity; desire to purchase a home or automobile; etc.).

Judges are less likely to view a transaction favorably if the payee/annuitant is young (less than 25 years old). The typical thought process is that younger people are more likely to make unwise financial decisions. Selling structured settlement/annuity payments to “invest” in the stock market, or other passive ventures, or to put money in savings is almost always viewed by courts as unwise. The reason for this is that the payee is giving up future tax-free income/structured settlement payments (discounted to present value at a discount rate of 12 or 15%) to “invest” in assets or a venture where the return will be taxable. Economically and financially that is not a good bet.

Investing in a business in which the payee is going to be actively working and owning is another thing altogether. Courts are more willing to allow competent, mature, intelligent payees/annuitants to take a risk in a business venture if they have experience in the business and/or if they have the ability to replace the income they are giving up in the future by working if their business venture does not succeed as anticipated. (Again, this depends on the Judge.) For instance, a payee/annuitant and her husband owned two truck rigs, but worked as an independent contractor for a large trucking company. They had to wait to get jobs from the large trucking company and the large trucking company gave first preference on their jobs to their own trucks and employee/drivers. The payee/annuitant had a CDL and the payee/annuitant’s husband had been driving trucks for 25 years. They owned the rigs outright, but needed to get registration, licenses, fuel, working capital, tires for one of the rigs, etc. They would be giving up monthly income for a couple of months while they were getting started and awaiting payment from their customers, but the business was there, they were experienced, and the potential income was 3 or 4 times what they were currently making. It was a risk, but a reasonable risk, and the Judge allowed them to complete the transfer.
Judges are less likely to approve a transfer if the payee has completed multiple transactions in the past. The “serial seller” if you will, is viewed by courts as not being able to manage their money well and a possible spendthrift.

Selling to take a vacation is likely not going to be a good reason. That could change if the payee is suffering from a terminal illness and payments 5, 10, or 15 year in the future will have no value to them.

Eugene Ahtirski

Good reasons include paying off major debt (credit card or otherwise). And because a sale of a structured settlement is a permanent solution that does not require a seller to re-pay a “loan”, a sale allows a seller to end what could be a never ending revolving credit card debt cycle. For example, if one only continues to make minimum monthly payments against a credit card that debt will never be paid off but instead continue to rise indefinitely due to the compounding nature of interest rates.
Other good reasons include the down payment on the purchase of a home, and often to provide a solution to an immediate financial crisis, such as a loss of a job where a person has no savings and is unable to pay day to day living expenses and possible eviction, etc. until a new job is found.
Bad reasons are the “lure” of what appears to be “easy money” with no specific immediate and/or long term financial goals for the funds to be received from the sale.

Terry Taylor

I am not sure there is a good reason. Any time one of my clients has had to sell a portion of their structured settlement they have been in a bad situation and in need of help. I still believe that if the structured settlement is designed well to take care of the claimant, it should only be sold as a last resort.

However, I do believe there are times when selling a structured settlement is the best option in a bad situation. I have helped my clients in several instances to make sure that the payment they receive for their structure are reasonable and the contract language is not restrictive. Those have included health reasons, saving a home from foreclosure and even to attend college. The bad reasons are because you saw an advertisement on TV, need a new toy or for spending money. I consider all of these bad reasons to sell a structured settlement.

I don’t agree with many people in the structured settlement industry and attorneys, who will not help a past client sell their structured settlement. These people are my clients and when circumstances change and they are in need of money, I feel it is incumbent on me to make sure they are not taken advantage of by a factoring company. I still feel better about this when the sale is not for a frivolous reason.

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What should people know about the process that they might not realize when they start?

Patrick Hindert

Structured settlement recipients should know:
They do not own the annuities that fund their periodic payments even though they are typically named as annuitants and may even possess the annuity contracts as common law secured creditors. What they own instead are structured settlement payment rights.

“Anti-assignment’ clauses in settlement documents are enforceable and, if enforced, could prevent structured settlement recipients from selling their payment rights.

Selling structured settlement payment rights is subject to state protection statutes and requires advanced approval from a state judge or responsible administrative authority.
When evaluating proposed sales, these state judges or responsible administrative authorities are required to apply a “best interest” test that takes into account the welfare and support of the sellers’ dependents.
Many state judges require proposed sellers to appear in court and answer questions to determine whether proposed sales meet this “best interest” test.
Most state structured settlement protection statutes require a finding that sellers either have received independent professional advice or have knowingly waived the right to receive it. At least eleven statutes require findings that sellers have in fact received independent professional advice and waivers are not permitted.
One criterion to consider when selecting a purchaser is whether that purchaser belongs to the National Association of Settlement Purchasers (NASP), a professional association that promotes best practices among its members and provides industry education about the transfer process.

Matt Bracy

There are 3 things I think sellers should keep in mind:

This is a longer process than they might imagine. From start to final funding, the process can last up to 90 days, or more, depending on where you live (how busy the courts are, etc.). Most factoring companies will be willing to advance some of the purchase price to you, but the majority of the sales price will not come until the matter is finally approved. A court must approve all transfers. In most cases, that means the seller will need to appear in court, in order to answer questions about the transfer.Related to the above, sellers should keep in mind that when they go to court, they must be ready to tell the judge exactly why the transfer should be approved. They must be their own best advocate and be ready to show how the transfer is in their best interest.

Joseph J Dehner

< The true value of money received over time as compared with a lump sum today. There was a radio station in Cincinnati that held a “$1 million contest” – the winner got $1 a year for a million years. Even with this some people thought this was a lot of money. I wonder if the winner tried to cash in the stream of payments.

Another sleeper here is the set of post-closing problems that can arise – disappointed contingent beneficiaries, for example. People should get disinterested advice from some knowledgeable person, but that’s really not what happens very often.

Earl Nesbitt

Unfortunately, the nature of the State Structured Settlement Payment Transfer Statutes requires court approval of any “transfer” of one’s structured settlement payment rights. What that means is that the payee/annuitant, who owns this valuable intangible property right, must secure approval of a Judge in order to liquidate future structured settlement payments. Because “transfer” is a broad term, which includes any sale, assignment or pledge/security interest for consideration (meaning that anyone who wanted to use their future structured settlement payments as collateral for a loan from their bank or credit union would also need to secure court approval of such transaction), that in most circumstances where a payee/annuitant was seeking any sort of liquidity relative to their future structured settlement/annuity payments, via a secured loan or a sale/assignment, they are going to have to go to court and secure approval of the transaction from a Judge.

Many payees/annuitants are surprised to learn that they must secure court approval in order to liquidate their future payment rights. So, these transfer laws, which were meant to protect payees/annuitants from being taken advantage of and insure that they were making informed, considered decisions regarding their financial assets do, in fact, restrict the payees/annuitants’ rights to manage their financial affairs and dispose of their assets in the manner that they (the payees/annuitants) feel is best for them.

So, the first thing payees/annuitants need to understand when they start off on this process is that, ultimately, they will not have control over this decision. The Judge will. Many Judges will often defer to the wishes and desires of the payees/annuitants, even if the Judge does not think the transaction is a great deal. A few, unfortunately, take the position that these transactions should rarely, if ever, be approved. Unfortunately, Judges do not all apply the law the same way and Judges do not all subscribe to the theory that competent, adult payees should be permitted, in most cases, to manage their own financial affairs how they seem fit and make their own decisions about their financial assets. So, payees/annuitants should be prepared to have to persuade a Judge that they (the payee/annuitant) fully and completely understands the transaction, desire to complete it, and that the transaction is in their best interest. Being confident and adamant, but respectful of the Court, is important for payees.

Different courts will be able to hear these matters on different schedules. In some jurisdictions, the case will be heard quickly, within 30 days after the court case is filed. In other jurisdictions, it may take longer (60-90) days and in a few jurisdictions, even longer than that.

Once the payee/annuitant reaches an agreement with the funding company (buyer), the funding company will send you a disclosure statement that sets for the primary financial terms of the transaction – i.e. schedule and total of future payments being transferred/assigned; detail of any expenses that will be assessed the payee; the purchase price that the payee/annuitant will receive, etc. Then, depending on the applicable State law, the payee will have 3, 10, or perhaps 14 days to think about it (a “waiting period”) before they can legally sign a contract. A payee/annuitant should be very suspicious of a company or sales person who suggests that they “back-date” documents. Strict compliance with the statutory waiting period is required.

Once the transaction documents are executed, the funding company will retain counsel in your State who will file a transfer proceeding in court and secure a hearing date. You will likely be contacted by counsel prior to the hearing. The payee/annuitant certainly has the option of retaining their own counsel or consulting with a financial advisor, but that is not required in most States. (Some States do require the payee/annuitant to be represented or receive advice from a financial advisor or lawyer.) I would recommend that the payee/annuitant request from the funding company early in the process a copy of the transfer statute in that state and review it carefully. The lawyer for the funding company is NOT the lawyer for the payee/annuitant. Their objective is the same, to secure court approval of the transaction, but they are not representing, advising, or acting on behalf of the payee/annuitant.

Some Judges are predisposed to be hostile to these transactions. There are some reasons for that, which are too complicated and involved to discuss here, but the payee should understand that they are important in the process of securing court approval of the transaction. The payee should understand that what they are doing is perfectly legal and permissible by the law. They should not be embarrassed about the transaction or having to go to court. Payees should be very clear and understand the transaction documents so that if the Judge asks, they can intelligently describe to the Judge the payments that they are transferring/assigning and the amount that they are receiving in return. Payees should demonstrate complete confidence that they want to proceed with the transaction and that they understand the transaction and the fact that they are receiving less money today than if they wait until the payments come due in the future, but that they desire to complete the transaction and they have thought it through, considered other alternatives (i.e. borrowing money), and that they want the court to approve the transaction. Be confident and certain.

Eugene Ahtirski

That the sale of a each structured settlement payment is unique and should be tailored to meet a person’s specific needs. Further that there is no “one size fits all formula”. And the best advice to give any potential seller of payment stream is to become as educated as possible about the process and the nature of the transaction and to obtain proper representation to assist in the sale. This advice is mirrored in all States’ structured settlement protection acts which either strongly recommend and/or mandate that a seller obtain the services of an expert, to wit, an independent professional advisor, to assist in a sale a payment stream.

Terry Taylor

That selling a structured settlement is a significant financial transaction and should be entered into with the same gravitas as the original law suit that led to their structured settlement. I have not had a single client who I have helped sell their structured settlement who wanted to set down and talk about the language in the purchase agreement. Their question has been where do I sign and when will I get my money.

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Although price is always important, what else should potential sellers pay attention to?

Patrick Hindert

The questions and answers set forth above.

Matt Bracy

Sellers should consider how much they are giving up on a monthly basis, and whether they can live with that amount. Sometimes, a better deal for the seller is actually to sell payments that come due farther in the future. However, such farther-off payments are not worth as much today, so it might look like it is not as good a deal as selling payments due sooner. In this example, the pricing and discount rate are deceptive. A higher discount rate, but selling payments not needed for monthly expenses (a lump sum due several years in the future, for example), may well be the best decision.

Sellers should also take care to deal with reputable factoring companies that will be knowledgeable about the process and help them choose the best options for them.

Joseph J Dehner

The actual impact of giving up payments over time. They were agreed to for a reason in the first place. What really changed, other than the never-ending feeling of most people in America that they are in over their heads, and a little money now will ease their pain. Just wait for tomorrow.

Earl Nesbitt

The payee/annuitant should feel comfortable with the company and people they are doing business with. If the company/sales person is using high-pressure tactics to get the payee/annuitant to commit to a transaction, that should be a red flag. Be wary of the sales person trying to encourage you to sell more payments than is necessary to achieve your objective or address your need. I would recommend perhaps doing a little more than you need, but don’t go too far. (For instance, if the payee thinks that they need to raise $ 25,000, perhaps they should consider raising $ 30,000, but don’t let the company persuade you to do a transaction for $ 65,000.)

A company that actively tries to discourage you from consulting an attorney or financial advisor regarding the transaction is also a red flag. Many payees/annuitants prefer not to incur the expense of consulting an attorney or financial advisor, but the court will likely feel more comfortable with the transaction if the payee has consulted with an attorney/financial advisor. However, the court will feel more comfortable with the transaction even if the payee does not consult with a financial advisor/payee if they know that the payee considered doing so, did not feel it necessary, did not want to incur that expense, and fully understands the transaction.

Make sure that the transaction documents do not include a security interest or right of first refusal in payments that the payee is not being assigned. For instance, say a payee is receiving $ 2,000.00 per month for life with 30 years (through 2025) guaranteed. The payee decides to transfer/assign 120 partial monthly payments of $ 500.00 each from January 2013 through December 2022, and will retain $ 1,500 per month during that time period and will remain entitled to receive all payments after December of 2022. Some companies will include a security interest and/or right of first refusal in all of the payee’s future payments. That is not proper and can create a lien/claim/encumbrance on the payee’s non-assigned payments, restricting their future flexibility relative to those payments. (This may also be included in the disclosure statement. If it is, ask that these provisions be removed and do not sign a contract with those included.) *Companies that give you 2 or 3 potential transaction options would be preferable to me. That way, you have some options to consider.

Eugene Ahtirski

A. Customer service, the buyer’s attentiveness to a person’s individual needs, the estimated timing from signing of the contracts to the funding of the purchase agreement.
B. A relationship based on complete honesty and full disclosure from both parties to the transaction. All direct questions asked by a seller should be answered with specific details, and every seller must be prepared to be completely honest and forthcoming with a potential buyer and disclose as much detail as possible in the initial application process including but not limited to any and all prior transactions (attempted, denied, withdrawn, completed), any possible existing liens, past due taxes, child support, alimony, bankruptcies, foreclosures, etc…Otherwise issues at time of court approval and/or funding will arise causing either a potential significant delay and/or denial of the proposed sale.
C. That the tax free status of the original payment stream will continue to flow through to the funds received from the sale and the seller will not be subject to income taxes on the amounts received from the sale.

Terry Taylor

What does the sells agreement say about who the annuity company will make the payments to and if that is the purchaser, when will he send it to you. Does the document say that the only company they can sell future portions of their settlement to is the purchasing company. Does the purchaser pay the legal cost or does it come out of the amount they said they would pay the seller for the structured payments. I can’t emphasize how important the language in the document is and how much potential damage to the seller that language can cause.

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What resources (blogs, books, websites) would you recommend to someone who is new to the structured settlement-factoring arena?

Patrick Hindert

Recommended resources:

  • Educational Conference – sponsored by National Association of Settlement Purchasers
  • Book – “Structured Settlements and Periodic Payment Judgments” – written by Hindert, Dehner and Hindert and published by Law Journal Press.
  • Blog – “Beyond Structured Settlements”
  • Wiki – The “Structured Settlement Wiki”,

Matt Bracy

http://factoringchannel.squarespace.com blog, with many articles I have written and video interviews I have done, is a good resource. The NASP website, https://nasp-usa.com, also is a good source of information.

Joseph J Dehner

With due humility, read Chapter 16 of Structured Settlements and Periodic Payment Judgments. Check in on s2km’s great blog for the latest details.

Earl Nesbitt

www.nasp-usa.com – from here you can connect to the website of a number of different originators, all of whom are NASP members

Eugene Ahtirski

Terry Taylor

I would recommend looking to John Darer’s site for information.

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What other information would you like to add?

Patrick Hindert

None that I can identify.

Matt Bracy

The one message I would like to leave is not really for people seeking to sell their payments. They already know it. It is to remember that sometimes a stream of structured settlement payments is the only asset people have. When life circumstances change and a lump sum of money can make a huge difference, then they can sell part of these payments. It is their property, and their right. They deserve to be treated with respect if and when they chose to sell payments.

Joseph J Dehner

There is a role for factoring. Ultimately, a structured settlement recipient has free will and should be able to sell certain (not all) structured settlement rights. Some are not actually saleable. For those that are, an informed individual who understands the true trade-off and the steep discount rate that applies to “cash now” has the right to do so, with some protection afforded by courts in 47 states that have adopted protection acts.
One relatively new development is the rise of offshore sellers of factored structured settlement rights. They may create greater competitiveness in the factoring field, which over time may generate a lesser discount from the true value of periodic payments than the factoring companies generally have been willing to grant.

Earl Nesbitt

Payees and their personal injury lawyers should consider the liquidity options they have relative to structured settlement payments when they first sign up a structured settlement in settling a case. Make sure that the underlying settlement documents allow a payee to transfer and assign their future structured settlement payments to a third party in a court – approved transaction completed in accordance with an applicable State Transfer Statute. Do not sign an underlying settlement agreement that deprives the payee of the right or option to liquidate future structured settlement payment rights.

Eugene Ahtirski

That often the sale of a person’s payment stream may be the only financial option available to a person with less than good credit and/or collateral to pledge against a loan.
That recipients of structured settlement payment rights have no ownership interest in the underlying annuity and cannot use a future payment stream for a loan.
That the sale of a structured settlement is a significant financial decision with long term consequences, and the decision to sell a structured settlement should be evaluated with the same effort, care and due diligence that a person would use when making the decision to purchase and/or finance a car or home.

Terry Taylor

While I still find the tactics used by many of the factoring companies, I have learned that there are companies out there that are concerned more with the person selling their structured settlement than the profit they can make from the sale. I was fortunate enough to find one of those companies in Strategic Capital. When I first started referring business to them I was shocked to find that they actually talked on of my referrals out of selling his structure before filing bankruptcy, when I could not convince him to do that.

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Who else should I interview?

Patrick Hindert

  • Joseph Dehner
  • Daniel Hindert
  • Anthony Prieto
  • Michael Upchurch
  • Charles Schell
  • Edward Stone
  • Stephen Harris

Joseph J Dehner

I’d get a balanced view of a range of people, including:
(a) Factoring company reps
(b) Casualty companies that refuse to participate in factoring and actively oppose them
(c) A couple of the judges who have denied transfer petitions, and a few who granted them
(d) Some individuals who sold their S2 rights a few years ago – what happened? Are they happy now? The names of the latter are readily available from case decisions where transfers were granted.

Earl Nesbitt

Matt Bracy, Pat Hindert, perhaps a Judge that hears these matters.

Eugene Ahtirski

Possibly individuals from the financial institution industry such as bankers to explain why a person cannot use a structured settlement as collateral against a loan since a recipient of structured settlement payment rights has no ownership interest in the underlying annuity…

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Please tell me about your background?

Patrick Hindert

Patrick Hindert is the Managing Director of S2KM Limited. He is a member of the Ohio State Bar Association and graduated from Harvard College and the University of Michigan Law School. Hindert has been a leader within the structured settlement industry since 1977. He previously served as President of Benefit Designs, Inc. (1977-98) and the National Structured Settlement Trade Association (NSSTA) (1990-91) as well as Executive Director of the Society of Settlement Planners (SSP) (2003).

Hindert authors S2KM’s blog “Beyond Structured Settlements” as well as S2KM’s public wikis. With Daniel Hindert and Joseph Dehner, Hindert also authors the legal text “Structured Settlements and Periodic Payment Judgments”. This book, which is published by Law Journal Press and updated semi-annually, includes Chapter 16 titled “Transfers of Structured Settlement Payment Rights.” Hindert frequently appears as a featured speaker about structured settlement issues at many national conferences including the Annual Meeting of the National Association of Settlement Purchasers.

Matt Bracy

I am an attorney practicing in Dallas at the law firm Nesbitt, Vassar & McCown, LLP. Prior to joining the firm in 2012, I was General Counsel of a factoring company for 11 years. I was on the board of directors of the National Association of Settlement Purchasers (NASP), and served as president of NASP from 2010 – 2012.

I started in the structured settlement factoring business in the late 1990s as national legislative counsel and director of government relations for a company with a large portfolio of structured settlement contracts. In that role, I worked first-hand on developing the state and federal legislation that is in place today. I have personally worked the halls of Congress and several states to either implement structured settlement transfer legislation or modify existing legislation.

I am a frequent commentator on structured settlement factoring issues on the Legal Broadcast Network. I have a Bachelor of Arts degree in Political Science from the University of California, Irvine (1988) and a Juris Doctorate from the University of Houston (1992).

Joseph J Dehner

I’ve practiced law for 40 years. After clerking for a 6th Circuit Court of Appeals Judge for 2 years in the early 70’s, I began practice as a litigator and over the years became more of a business attorney at what is now an AmLaw 200 firm – Frost Brown Todd LLC, based in Cincinnati, Ohio.

My background in structured settlements goes back to the origins of the industry. With two co-authors, we produced Structured Settlements and Periodic Payment Judgments in 1986, which has been used by the National Structured Settlement Trade Association for its training programs for many years and has been updated every 6 months for almost 30 years. I’ve represented about every type of participant in structured settlements you can imagine over the years and have served as the US Government’s witness in the criminal trial of James Gibson, convicted of the largest structured settlement scam in US history.

Earl Nesbitt

I am an attorney. In 1992, while a 3rd year litigation associate at Jackson Walker, a partner dropped a file on my desk and said “what do you know about structured settlements?” I responded “nothing.” I handled that litigation matter for Settlement Capital Corporation and from there became Settlement Capital’s regular outside counsel and represented a few other funding companies in the business.

In 1997, I became Executive Vice President and General Counsel for Settlement Capital Corporation. I worked there for 4 years. During that time I was on the Board of Directors, as Settlement Capital’s representative, of the National Association of Settlement Purchasers (NASP). In fact, I was at the meeting in San Diego when NASP was created and organized.

In 2001, I resigned from Settlement Capital and the NASP Board and went into private practice and started, along with David Vassar, our own law firm. Our first client was Settlement Capital Corporation. Our firm came to represent many other funding companies. In 2002, I was asked to become General Counsel for NASP. In 2005, I added the title of Executive Director of NASP.

During my time on the Board of NASP and later as General Counsel/Executive Director of NASP, I have represented the trade association in all legal and legislative matters and generally direct the affairs of the trade association. I have appeared, as counsel on behalf of NASP, in courts around the country, filing amicus briefs, managing counsel who represented the trade association, and in all legal matters. I have appeared and testified, on behalf of NASP, in numerous State Legislatures around the country and/or represented NASP in discussions and negotiations with State Legislators, State regulators, and Legislative Committee staffers, and other interested parties in a number of States, including Texas, New Mexico, Arizona, California, Colorado, Oregon, Montana, Wyoming, South Dakota, North Dakota, Nebraska, Arkansas, Minnesota, Michigan, Illinois, Indiana, Ohio, Kentucky, West Virginia, Tennessee, Mississippi, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, New York, Pennsylvania, Connecticut, Rhode Island, and Vermont. I have met with United States Congressman, United States Senators, members of their staff, representatives/members of the Joint Committee on Taxation, representatives of the DOJ and Department of the Treasury, and staffers and members of the House Ways and Means Committee, House Judiciary Committee, Senate Judiciary Committee, and Senate Finance Committee relating to legislation impacting structured settlements and Secondary Market. I have managed Federal and State lobbyists all around the country. I have prepared and given seminars and CLE presentations to lawyer and Judicial groups in Texas, Arizona, Rhode Island, Vermont, and Minnesota and made presentations to the ABA Business Law Section and the NAIC.

I have personally represented funding companies in over 500 structured settlement transfer transactions since 2001 and members of my Firm, at my direction, have represented funding companies 1600 transactions over the past 13 years. I have also represented institutional and individual investors in reviewing, analyzing, and acquiring thousands of structured settlement Secondary Market transactions. I have negotiated structured settlements in settling litigation matters and advised plaintiffs and plaintiff’s lawyers in analyzing structured settlement proposals from insurance companies, structured settlement brokers, and defendants in personal injury lawsuit settlements. I have also advised a few structured settlement payees/annuitants who were considering liquidating their structured settlement payments. In other words, I have experience pretty much in every aspect of the structured settlement industry.

Eugene Ahtirski

Education: I completed my undergraduate education at the University of Southern California and graduated with honors in 1986 earning 2 separate Bachelor degrees. The first in Communications with journalism as a minor and the second in Political science with economics as a minor. Next, I attended law school at Southwestern School of Law and concurrently clerked for the California Department of Corporations. and while in Law School. I Graduated from Southwestern in 1989 and became licensed to practice law in the State of California in 1989. In 1990, I was admitted to practice law before the United States Court of Federal Claims; a Court of special jurisdiction created to adjudicate actions filed directly against the U.S. Government.
Factoring Industry Experience: Since the inception of the Secondary Market Industry of Annuity Factoring (the “Industry”) in the early 1990’s, I have been actively involved in all segments of the industry. From representing the interests purchasers, sellers, investors, as well as underwriting compliance, I have personally been involved in over 8,000 transfers of future payment streams. I have also acted as a legislative liaison to the Office of Attorney General for the State of California in addressing both the interpretation and proposed revisions to the California Structured Settlement Protection Act as codified in Sections 10134 et seq. of the California Insurance Code.

Terry Taylor

I graduated from Lamar University in 1969 with a business administration degree with an emphasis on economics. In 1976 I formed South East Texas Pension and Profit Sharing Associated, a pension actuarial consulting firm. Over the next thirteen year, I grew that firm into one that administered over one thousand client ERISA plans. It was there that I first encountered structured settlements, when my attorney clients began to ask me to certify the present value of structured settlements so they would know how much to charge their clients. Those were the days when the defense would refuse to tell the plaintiffs how much the structure cost, “because it would be constructive receipt and no longer be tax free”. Not exactly an accurate claim.
In 1991 I co-founded The James Street Group, the first structured settlement firm that worked exclusively with the plaintiff bar. It was there that I first encountered factoring companies who were purchasing structures settlements. James and I received a call from the Executive Director of the National Structured Settlement Trade Association (NSSTA) about a bill in the Texas Legislature that was scheduled to be voted out of committee that day. The bills provisions would be very damaging to the people selling structured settlements. We were able to get that bill tabled in committee and ultimately never reaching a vote in committee. That led to a series of hearings in the Texas Senate that culminated in the adoption of the Structured Settlement Protection Act in 2001.
That began my fight against the factoring of structured settlements in meetings with many state legislators. I was adamantly opposed to any sale of a structured settlement. In 1999, I formed Plaintiff Structures and was elected to the Board of Directors for NSSTA (2000) and in (2002 – 2003), I became the president of NSSTA. In 2001, as President elect of NSSTA, I was instrumental in getting the support of the Association of Trial Lawyers American (ATLA) for passage of a Federal factoring law. I spent a significant amount of time lobbying congress and particularly the offices of Sen. Chuck Grassley and Sen. Max Baucus working towards passage of Victims of Terrorism Compensation Act of 2001. This includes language regulating a structured settlement annuitant’s ability to transfer rights to receive future annuity payments.

David Meyerowitz

We would like to thank our panel of experts for your time and valuable insight on the structured settlement industry. We appreciate your many contributions to this complex field. And we wish you continued success.