Written by Pat Farber's Structured Settlements Alert
September, 2010
Tempting The Most Vulnerable
The ads are everywhere--online, on radio and on TV. They offer quick cash for structured settlement annuities--court-ordered payment structures that are designed to provide a steady, reliable and tax-free stream of income to injured parties. The ads are particularly tempting during these hard economic times.
Thankfully, because of a bill passed last year, SB510, that revised the structured settlement approval laws, a settlement annuity can only be sold after the courts determine whether injured parties know exactly what they are giving up if they sell their annuity to a "factoring" company for a lump sum.
In part, SB510 gives explicit guidelines to the courts to better determine whether an annuity sale is in the best interest of the injured party. The court reviews the injured party's current and future financial needs, makes sure the party has received independent legal and financial advice concerning the buyout and looks to see if the "discount rate" proposed by the factoring company is in keeping with current market rates. The courts now also require that injured parties be clearly shown the value of the structured settlement versus the value of the often much-discounted lump sum buyout.
A court review of a buyout often gives injured parties a reality check. After stripping away all the hype and promises of a buyout, a structured annuity usually provides the best tax-advantaged financial option for the injured party.
The new court oversight rules level the playing field and enable injured parties to get all the facts before deciding whether to sell their annuities.
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Patrick C. Farber Structured Settlements Broker http://www.patrickfarber.com With more than 30 years experience, Pat has placed over $1.75 billion in annuity premiums and U.S. Government notes. He specializes in settlements involving medical malpractice, physical injury, non-physical injury, product liability, workers' compensation, mass torts, punitive damages, employment, construction defect cases and attorney fees in court hearings, arbitrations and settlement conferences--all at no cost to clients. E-mail Pat personally at pat@patrickfarber.com or call 800-734-3910.
Independent Professional Advice Requirements
The SSTA provides that independent professional advice means “advice of an attorney, certified public accountant, actuary, or other licensed professional adviser” “concerning the legal, tax, or financial implications of a structured settlement or a transfer of structured settlement payment rights.” (Ins. Code, § 10134, subd. (f).) The language suggests that the independent professional is required to provide advice on the legal, tax or financial implications of a structured settlement or a transfer of structured settlement rights; however, the SSTA does not unambiguously require that one independent professional must provide all three types of advice. Moreover, with respect to legal advice, nonattorneys must be wary of the prohibition on not practicing law. The SSTA also does not detail specifically what constitutes adequate advice on the legal, tax, or financial implications of the factoring transaction. It is apparently left to the superior court to determine whether adequate independent professional advice has been provided to the payee. The discretionary nature of this determination cautions against a finding of attorney incompetence based upon a failure to provide the required advice because certain superior court judges may believe some advice is required while other superior court judges may believe that that same advice is not required by the SSTA.
321 Henderson Receivables Origination LLC v. Sioteco, 173 Cal. App. 4th 1059, 1079 (Cal. App. 5th Dist. 2009)
Cal.Ins.Code § 10134(f) Defines Independent Professional Advice
Cal.Ins.Code § 10134 sub (f) defines "independent professional advice" as follows:
(f) “Independent professional advice” means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser meeting all of the following requirements:(1) The adviser is engaged by a claimant or payee to render advice concerning the legal, tax, or financial implications of a structured settlement or a transfer of structured settlement payment rights.(2) The adviser's compensation for rendering independent professional advice is not affected by occurrence or lack of occurrence of a settlement or transfer.(3) A particular adviser is not referred to the payee by the transferee or its agent, except that the transferee may refer the payee to a lawyer referral service or agency operated by a state or local bar association.
Video Interview About Selling Structured Settlements
Matt Bracy and Jan Schlichtmann Discuss Selling Structured Settlements, 1 of 3
Matt Bracy and Jan Schlichtmann Discuss Selling Structured Settlements, 2 of 3
Matt Bracy and Jan Schlichtmann Discuss Selling Structured Settlements, 3 of 3
Matt Bracy and Jan Schlichtmann Discuss Selling Structured Settlements, 2 of 3
Matt Bracy and Jan Schlichtmann Discuss Selling Structured Settlements, 3 of 3
Companies buying structured settlements
The following is a list of companies currently marketing their business of purchasing structured settlements. Attorney Brian Pedigo does not support, recommend, encourage, or discourage use of any of the following, but merely provides them for your benefit if you, the seller of a structured settlement, want to shop around for the best rates currently available:
*Note that while it's true that there's "no more waiting" for periodic payments after selling your structured settlement, the unspoken truth is that in exchange for no more waiting, you will receive less than the full value of "your money." You will typically receive less than half of what is really "your money" (the present cash value) in order to get the instant gratification of a lump sum payment.
Again, none of the links provided above have been recommended, but are provided as a directory-reference only. Be careful out there.
- Peachtree Settlement Funding
- J.G. Wentworth
- No More Waiting*
- Structured Asset Funding
- Novation Capital, LLC
- Woodbridge Investments
- Patriot Settlement
- Andres Financial Group, LLC
- Imperial Structured Settlements
- Strategic Capital Corporation
- QuoteMeaPrice.com
- Settlement Quotes, LLC
- Settlement Capital Corporation
*Note that while it's true that there's "no more waiting" for periodic payments after selling your structured settlement, the unspoken truth is that in exchange for no more waiting, you will receive less than the full value of "your money." You will typically receive less than half of what is really "your money" (the present cash value) in order to get the instant gratification of a lump sum payment.
Again, none of the links provided above have been recommended, but are provided as a directory-reference only. Be careful out there.
California Insurance Code Section 10139.5(d) to (f)
The last parts of Section 10139.5 deal with the costs involved in the transfer, and who has to pay those costs. Section (d) to (f) read:
What this means is that the company buying your structured settlement has to pay all of the court fees involved in the transfer. Section (e) is probably the most important thing to pay attention to, as it states that the company buying your structured settlement must pay (your accountant, attorney, etc.) for your independent professional advice regarding the transfer. It doesn't matter what the conclusion of the professional is; in other words, it doesn't matter if the independent professional advice is "it's fair", or "it's unfair" -- the company trying to buy your structured settlement is the one to pay the independent attorney - not you (the seller). However, this amount can not exceed $1,500.
If you are about to make a financially life-changing decision, it is wise to get the opinion of a detached, independent, and professional opinion.
(d) All court costs and filing fees shall be paid by the transferee.
(e) No later than the time of filing the petition for court approval, the transferee shall advise the payee of the payee's right to seek independent counsel and financial advice in connection with the transferee's petition for court approval of the transfer agreement, and shall further advise the payee that if the payee retains counsel, a licensed certified public accountant, or a licensed actuary in connection with a petition for an order approving the transfer agreement, that the transferee shall pay the fees of the payee's counsel, accountant, or actuary, regardless of whether the transfer agreement is approved, and regardless of whether the attorney, accountant, or actuary files any document or appears at the hearing on the application for transfer, in an aggregate amount not to exceed one thousand five hundred dollars ($1,500). The transferee's accountant, counsel, or actuary may not advise the payee.
(f) The court shall retain continuing jurisdiction to interpret and monitor the implementation of the transfer agreement as justice requires.
What this means is that the company buying your structured settlement has to pay all of the court fees involved in the transfer. Section (e) is probably the most important thing to pay attention to, as it states that the company buying your structured settlement must pay (your accountant, attorney, etc.) for your independent professional advice regarding the transfer. It doesn't matter what the conclusion of the professional is; in other words, it doesn't matter if the independent professional advice is "it's fair", or "it's unfair" -- the company trying to buy your structured settlement is the one to pay the independent attorney - not you (the seller). However, this amount can not exceed $1,500.
If you are about to make a financially life-changing decision, it is wise to get the opinion of a detached, independent, and professional opinion.
California Insurance Code Section 10139.5(c)
California Insurance Code Section 10139.5(c) is about what the company buying your structured settlement has to do. You probably won't care about these things, but your attorney should be aware of these rules. It reads:
(c)(1) An application under this article for approval of a transfer of structured settlement payment rights shall be made by the transferee and brought in the county in which the payee resides.
(2) Not less than 20 days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the application for its authorization, and shall include the following with that notice:
(A) A copy of the transferee's application.
(B) A copy of the transfer agreement.
(C) A listing of each of the payee's dependents, together with each dependent's age.
(D) A copy of the disclosure required in subdivision (b) of Section 10136.
(E) A copy of the annuity contract.
(F) A copy of any qualified assignment agreement.
(G) A copy of the underlying structured settlement agreement.
(H) Notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee's application, either in person or by counsel, by submitting written comments to the court or by participating in the hearing.
(I) Notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed, which may not be less than 15 days after service of the transferee's notice, in order to be considered by the court.
