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Minggu, 05 Juli 2009

MIAMI - JANUARY 17: An Allstate insurance com...Image by Getty Images via Daylife
If you currently receive payments from a structured settlement, you might be wondering if you can exchange your monthly payments for a lump sum of cash. Although structured settlements were created to protect plaintiffs and injured parties from financial hardship, circumstances often change, and the periodic payments that seemed adequate at the time of the settlement may no longer be enough money to make ends meet. Many US states now allow beneficiaries of structured settlements to sell either a portion or all of their future payments. Before you go rushing off to sell your payments to the first bidder, you should take some time to familiarize yourself with the sale process and compare several different structured settlement buyers.

While it may be tempting to save money and sell your structured settlement on your own, considering the importance of the decision and the long term effects it will have on your finances, you would be wise to consult an attorney who is well-versed in the laws governing the sale of structured settlement annuity payments. In many states, the law requires a person wishing to sell a structured settlement to have legal representation.

An attorney will provide you objective advice about selling your settlement and protect you from any unanticipated situations that may arise. One common obstacle to completing the transaction is the insurance company that underwrote the annuity. Insurance companies are concerned that the sale of structured settlements will expose them to additional tax liability. Your attorney will work on your behalf to obtain the cooperation of the insurance company.

In 2002, federal law concerning the sale of structured settlements was changed. As a result, sellers must now obtain court approval before the transaction is initiated. The function of the court is not only to protect the seller from unscrupulous buyers, but also to shield the insurance company from undesired tax liability. The court will consider the needs of the seller both short and long term, and decide if selling the future annuity payments is in the seller's best interests. An attorney will prepare the necessary documentation that must be filed and work to gain court approval. If you decide not to retain legal counsel, most structured settlement buyers will be eager to help you to gain court approval and expedite the sale.

When selling a structured settlement, your lump sum will be quite a bit less than the future value of the annuity, because the cash amount is based on the present day value, not the interest that the annuity would have earned in the future. The structured settlement buyer will also charge a fee for their services. In the end you will probably receive less than 50 percent of the amount of the future payments. You should definitely compare quotes from several buyers of structured settlements to insure that you get the largest possible lump sum.

If you have elected to sell your structured settlement payments, you probably have some financial need which calls for money quickly; unfortunately, factoring in the time required to gain court approval, it could take up to 90 days, assuming you don't run into any roadblocks from the insurance company. Be wary of any structured settlement buyer that promises you cash in less than 60 days. Their questionable claims of fast money should be regarded with suspicion, and should cause you to look elsewhere for a more reputable buyer.
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How To Sell Your Structured Settlement Payments

LA CANADA, CA - DECEMBER 11: A customer uses ...Image by Getty Images via Daylife
When you win a lawsuit for a large sum of money, the amount paid to you is called a settlement. This could be an out-of-court settlement, where the money is offered to you to drop the lawsuit or it could be a settlement awarded to you by the courts.

Large settlements such as wrongful death and injury suits could also result in large payouts. Usually these large settlements will not be paid out all at once. Most times the amount of the settlement is paid over a few years in small monthly payments.

Due to the fact that a large settlement is not paid out to you in one check, it is very advisable not to make any plans for your winnings from your lawsuit in advance. The size of your installment check could be too small to be able to cover the amount owing.

There are many companies that will offer you help in a situation like this. They will offer you a large amount in cash in return for the right to your monthly structured settlement installment. You get a large sum of money so that you can put your big plans in action. It is like taking a loan, without having to pay it off, because the monthly check from the settlement is paying your loan off for you.

The money that you were awarded is rightfully yours. The payment where the structured settlement is being paid is now a debt that is owed you and is really being returned to you interest free. Remember not to consider it as additional income but money that is already yours.

When a company purchases your settlement offer, you get a lump sum check. This money is yours to do as you please. Investing the money to receive income from the interest earned might be an option to consider. This process is more convenient than waiting for your monthly installments.

Another option is a payment plan from the company who has purchased your settlement offer in case you don't want one large check. There are a lot of options for to choose from. You can receive a large amount of money at once, put an amount down on an existing loan or mortgage or receive larger payments in a shorter time span.

There are Customer Service Departments available to provide assistance to you through each step of the process. Information on all of the options available will be presented to you at the time of your initial consultation. The terms of your settlement will most likely determine the options that you choose. All structured settlements are unique and this personalized service would benefit you immensely.
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Structured Settlements from Lawsuits: A Brief Overview

NEW YORK - SEPTEMBER 19: A man walks across t...Image by Getty Images via Daylife
Let us have a look about structured settlement how it helps us in our daily life. You can invest your money in structured settlements or you can also offer the same to buyers of structured settlements as a kind of compensation for the damage suffered by an individual. If you would like then you can put up for sale a portion or the entire settlement in turn for a huge amount of money. On the other hand, you can also be used the settlement for the purpose of repeated payments.
Most of the time people sell such an investment when they face physical condition related or lawful emergencies. As a consequence, buyers ought to think of these entire issues prior to opting for a structured settlement. In case of a person who is suffering from injury, the settlement provided to him should be sufficient to pay for the medical expenditures and the everyday requirements of the relations of the injured person. Generally, the state of affairs should never happen where the victim would have to sell a portion or the entire settlement to cover these expenditures.

Prior to purchasing this investment, buyers should speak to structured settlement brokers as well as legal representatives. I think so, it is the main job of the agent to deal in these settlements and as such, the proposal of a broker will be ready to lend a hand. Buyers of structured settlements have to imagine cautiously on the subject of the various offers existing in the market. So, they can get a lot of information regarding such offers from the agent. The broker can give buyers guidance regarding the different deals offered and he will also tell them the contract, which will be great for any situation. Since the brokers assist in the sale of structured settlement, they are in the position to ask for maximum gain for buyers.

If buyers intend to purchase the settlement as a sort of investment for periodical payments then they should look out for the most excellent offer. If they purchase the settlement with the assistance of a broker then buyers of structured settlements will be able to cover all the essential expenditures.

This type of investment will suit the minors the best, as the buyers of structured settlements will be able to take delivery of a huge sum of money when they reach the age of approval. Therefore, the minors ought to purchase this type of settlement.
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Benefits of Structured Settlements

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Structured settlements represent a stream of payments, often extending twenty years into the future. If you sell this stream, you cannot expect the buyer to pay you the total of these future payments. In fact, you will get much less, depending on the amounts and years involved. Let us look at how the buyer computes the amount to pay you.

Money Has A Time Value

If you have 10000 dollars in hand now, you could invest it in different ways. If you are a small businessperson, you could use it to improve your publicity efforts and expand your production capacity. These might result in the 10000 dollars doubling in a year's time.

Or, if you are a stock investor, you could trade in stocks and probably make the 10000 dollars grow into at least 12000 dollars by the end of the year.

More modestly, you could invest in an interest-paying security and earn a 5% interest paid every quarter. That could make the 10000 dollars into 10510 by end of the year.

Another possibility is to invest the money in a training program that provides you with a vocational skill in high demand. You could thus enhance your earning potential and thus earn a return on that investment.

What all the above examples indicate is that money in hand now could earn returns and accumulate into a larger sum by a future date. This is called time value of money.

Future Payments Are Discounted

Considering the time value of money, sums received on future dates are discounted to compute their "present value", i.e., value now. This is typically done using prevailing interest rate in the market. For example, we found that 10000 dollars invested at 5% interest, paid quarterly, become 10510 dollars at the end of one year.

Hence, the present value of 10510 dollars received one year from now is only 10000 dollars. Present value is always based on a rate of interest, and the "interest compounding" method used. Interest compounding means the frequency with which interest is computed and added to the principal. In our example above, the compounding was done every quarter. Next quarter's interest would be computed on this interest-added principal amount.

The future payments you receive under a structured settlement are discounted in a similar fashion. Each of the payments would be discounted based on when it is received. Consequently, the amount you receive now, based the present values of all the different payments, would be much less than their total.

Use the Cash Well

It is possible that you are cashing out your structured settlement to meet unavoidable necessities, like paying off a debt or meeting medical expenses. In such a case, you have no option but to use the cash to meet these.

However, if the cash out is for other purposes, try to invest it in a way that earns you a good return. For example, you could invest it in a home, in a suburb where property prices are going up. Or take up a vocational course that would enhance your employability.

If you already have a decent income from other sources, you might even consider taking a vacation to recharge yourself.

Try to earn a return that would be higher than the interest you paid for cashing out. (The discounting of structured payments to present value is actually a kind of interest payment.)

Select A Buyer Carefully

The buyer of your structured payments should have certain qualifications.

Firstly, the person (or firm) must be experienced in the field. Cashing out structured settlements involves several legal formalities. Unless the buyer is experienced enough to handle all the formalities correctly, you might find yourself in trouble. If a legally binding assignment is not created, the original payer might refuse to pay your buyer.

Secondly, select a buyer who deals up front with you, explaining what to expect. Otherwise, you might come to have undue expectations and get into unnecessary conflict with the buyer.

Finally, select a firm that believes in ethical practices. Unethical firms might tell you one thing and do something else. They might also not give you a fair deal.
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Cash for Structured Settlements

FUERTH, GERMANY - OCTOBER 20: General view of...Image by Getty Images via Daylife
Structured Settlement Factors
Samuel Towers

What Do Factors Do?

The term 'factors' might be a little confusing to the layperson. Typically, the word is used in the sense of causative factors that lead to some result. In the financial world, however, factors are like bankers, a class of financiers. Factors buy future payments from present recipients and pay them a discounted sum as the price of the payments. They then collect the payments direct from the payers in due time. This works because the original recipient is legally able to assign the right to receive payment to the factor.

Traditionally, factors bought 'accounts receivable' from business entities that sold on credit. The business might have to give credit to increase sales volumes. However, the business could do with immediate cash for its operations. In such a situation, the accounts receivable were assigned to a factoring company that paid a discounted sum as immediate payment.

With the increasing demand from structured settlement recipients for immediate cash, a new class of factors, known as structured settlement factors, have appeared in the market. These factors buy future payments under such settlements and pay the recipients a sum based on the 'present value' of those payments.

What Do Discounting and Present Value Mean?

The terms 'discounting' and 'present value' relate to the 'time value' of money. Money in hand today has more value than the same amount received at a future date. If you have 1000 dollars in hand now, and invest it in a security that pays 6% interest every quarter, your 1000 dollars would become 1061.36 dollars at the end of one year. It is assumed that you don't take out the interest, instead allowing it to be added to the principal at the end of the quarter. Next quarter's interest would then be computed on this interest-added principal.

The above case is an example of compound interest. Compound interest could make even small sums into big sums over the course of many years. Discounting is always done at a particular rate of interest. The discounted value of a future payment is what we call present value. In the above example, if you receive 1061.36 dollars at the end of one year, its present value would be 1000 dollars. There are formulae, and readymade tables, to compute present values of sums received at any future date. The structured settlement factor discounts each of the future payments that you are selling, and total them up to arrive at the present value of the payments. They would pay you a sum based on this present value.

Can You Just Go to A Factor and Sell Your Structured Settlement?

Unfortunately, the process of accelerating your cash receipts by selling future payments is not a simple one. Structured settlements are considered socially more desirable because people tend to dissipate large sums in wasteful ways. Hence, laws have made it a complicated process to accelerate the payments.

Typically, you would need permission from a court to assign your future payments to a third party. Before giving such permission, the court would look at all relevant aspects and determine whether the sale is in your best interests. The court process takes a little time.

There would also be a lot of negotiations between you and the structured settlement factor. You seek the help of your attorney for the negotiation. In some states, it is mandatory to involve an attorney. These too take some time. Assuming everything goes well, you could get your money in about four to six weeks.

Chances of court approval and quick conclusion are brightened if you deal with an experienced structured settlement factor, who deals with you ethically and up front.



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Structured Settlement Factors

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