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.
Like what Matt Bracy has to say? Read their opinion on our other Structured Settlement Roundtable topics.
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.
Like what Joseph J Dehner has to say? Read their opinion on our other Structured Settlement Roundtable topics.
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.
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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.
Like what Eugene Ahtirski has to say? Read their opinion on our other Structured Settlement Roundtable topics.
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.
Like what Terry Taylor has to say? Read their opinion on our other Structured Settlement Roundtable topics.