Would you rather receive more money or less money for something you own? The answer is easy, you would always prefer to get more..

But there are exceptions to most rules – including this one. Life changes or pressing financial needs may cause people to sell all or part of their right to receive payments from a structured settlement for less money than the future payments add up to.

A structured settlement is one in which an individual receives cash payments over time in the form of an annuity. This payments commonly result from a successful lawsuit for medical malpractice, wrongful death, or some other kind of personal injury.

When you opt to receive all of your settlement money at once, there are many financial advantages. Some people choose to invest in a business opportunity, or perhaps enroll in a school to earn a degree. The cash can come in handy in paying medical bills that would otherwise pile up without the ability to settle related debts. If the total amount is enough it may even be possible to buy a home.

However, it’s important to remember that selling your future payments to satisfy a specific need now does mean getting less money than you would otherwise receive over time.

For that reason it’s a good idea to shop around by getting quotes from multiple buyers of structured settlements; this will make it possible for you to find the most substantial offer in order to receive the most cash to settle any debts or financial needs you have. It is also helpful to understand that factors such as your credit card debt do not affect what you can receive from a structured settlement buyer for your future annuity payments.

While exploring the various options that are available, it is also important to understand how structured settlement buyers determine the amount you will receive. For example, a settlement can be in the form of monthly installments due over 10 years, but when you sell the future payments for a lump sum they are worth less in today’s dollars. The due dates for payments, the discount rate, or other factors such as financial liens affect the ultimate present value of the settlement.

Selling a structured settlement in full is not always the best option, but for urgent financial needs selling your future payments can be the best option.  You should always consider alternative sources for raising a lump sum such as a bank loan or home equity loan.

CBC Settlement Funding

When you approach structured settlement companies about selling your settlement, your annuity payments or other type of payments, you will encounter some new terms. These phrases may sound like a foreign language to you, which is not surprising since many legal and financial terms have their roots in Latin and medieval French.

Don’t worry: the professionals at CBC Settlement Funding will take every opportunity to clarify these terms for you and make certain you understand everything about the process of selling structured settlements or other payments. To help you get started, here is a glossary of terms you are likely to hear.

Annuitant: The person named in an annuity contract, who is the recipient of annuity payments.

Annuity Issuer: Usually, this is the insurer making payments, specifically a life insurance company.

Appearance: In “legalese,” this is a form filed with a court clerk to serve notice that a lawyer (or another attorney, including yourself) is representing you.

Assignee: Refers to the person or entity who is “assigned” payments (or other legal obligations or liabilities). When you sell a structured settlement to a structured settlement buyer or factoring company, that company becomes the “assignee.”

Attachment: A lien on an asset held by a third-party creditor.

Beneficiary: The person who receives structured settlement payments in the event of the annuitant’s  death.

Best’s Rating: A.M. Best & Company rates insurance companies on their ability to pay out policyholder claims in much the same way that credit reporting bureaus rate consumers. A Best’s rating consists of a letter, which is the rating itself, and a Roman numeral to indicate the size of the company.  So, the highest rating – A++XV or “superior” – suggests a very large insurer that can be depended upon to meet all its obligations.

Bonds: Debt instruments issued by a government or corporate entity for a period exceeding twelve months. The bondholders are repaid over time, with interest. This is how some annuities are financed.

“Cash Now Pusher:” an unethical company or individual who offers “instant cash” to tort litigants. Avoid these people at all costs. An honest and reliable structured settlement buyer will let you know up front that the process cannot be completed immediately and may take up to two months.

Certified Structured Settlement Consultant: Someone with this title is credentialed by the state and has successfully completed 80 hours of training and a rigorous comprehensive examination.

Claim: In law, the relief sought by a plaintiff in a civil suit. In insurance, the form submitted following a loss or injury.

Consideration: The benefit that is negotiated between two parties when entering into a contract. In a structured settlement, this includes the promise to pay the purchase price to the annuitant who is selling structured payments.

Contract: A legal agreement that can be enforced by the court.

Discounted Value: As it relates to structured settlements, a “discounted value” is what factoring companies use to make an offer to a client. What this means is that you will get less than the full value of your annuity payments or structured settlement; the difference is the factoring company’s fee for services rendered. This may also be referred to as an “effective discount rate.”

Factoring: This is the process by which structured settlements or other future payment obligations are transferred to a third party for a Discounted Value.

Guaranteed Benefit: Payments made regardless of whether or not the beneficiary survives the term (see “period certain” below). If the primary beneficiary dies before the end of the period, payments go to a designated heir, the beneficiary’s estate, or Assignee.

Internal Revenue Code: The body of federal laws governing taxes in the U.S.

Irrevocable Trust: A trust in which the creator has surrendered all rights to make changes or amendments. An irrevocable trust is used to protect assets against claims from creditors or other parties.

Judgment (or Court Order): The ruling of the court. As it relates to structured settlements, the decision a judge makes to either approve or deny your request to transfer your structured settlement payments.

Lien: A legal claim against an asset in order to insure the payment of an obligation. This may also be called an “encumbrance.”

Life Contingent Payments: An annuity that continues to pay for as long as the beneficiary is alive. It may also be for a “period certain” (see below).  For example, “30 years certain and life annuity” means that annuity payments are guaranteed for no less than 30 years – but will continue should the beneficiary live beyond that time. On the other hand, if the beneficiary dies before the 30 years are up, the payments cease.

Lifetime Payments: Annuity payments that are guaranteed until the death of the beneficiary.

Lump Sum Annuity: An annuity that makes a single lump sum payment or increasingly larger payments (“balloon payments”) in the future.

Non-qualified Structured Settlement: These are periodic payments that are not part of a personal injury settlement, such as punitive damages.

Obligor:  The party owing money to another as the result of a judgment or court settlement.

Period Certain: A pre-determined period of time during which structured payments are to be made, regardless of whether or not the beneficiary dies during that period.

Policy Limit: The most an insurer is obligated to pay for a specific claim. This limit is specified in the declarations sheet.

Present Value: Also known as “net present value, this refers to the value of a future structured income stream in today’s dollars. It is used in determining the discount rate of a structured settlement or annuity.

Qualified Assignment: This is when the original party making payments to a lawsuit claimant or beneficiary transfers, or “assigns” those payment obligations to another party under regulations set forth in the Internal Revenue Code.

Risk: This refers to the possibility that an asset or investment will not perform to expectations. Factoring companies such as CBC assume a certain amount of risk when they purchase the right to receive structured settlement payments.

Settlement Agreement: The legal contract between parties to litigation specifying how much and under what conditions the defendant must provide relief to the plaintiff.

Settlement Annuity: This provides for structured payments over time for a successful plaintiff in a lawsuit.

Time Value of Money: The value of money earning interest over a period of time. For example, if you were to invest $10,000 today at an annual 5% interest, it would be worth $10,500 in 12 months.  Therefore, your $10,000 has a future value of $10,500 and a present value of $10,000. This is taken into consideration in structured settlement transactions, as it permits the factoring company to determine the present value of an income stream.

CBC Settlement Funding

Here is a fact: very few people have any idea of how best to handle sudden, large sums of money.

We’ve all have heard stories of how some lottery winners find that instead of their dreams coming true after they cash in a winning ticket, they instead wind up broke and in debt because they didn’t know how to deal with their new-found wealth.

That doesn’t have to happen to you. If you do come into a windfall of cash, you might consider setting up a structured settlement or an annuity. One of the advantages of a structured settlement or annuity payments is the built-in protections it offers to help you use your money wisely. By distributing regular payments in relatively small installments over a period of time, it prevents the recipient from running through the money due to a lack of financial experience.

Ideally, you should have definite goals and solid objectives in place before you consider selling structured settlements or annuity payments for a lump sum payout. Usually, these goals include:

• Paying off debt
• Purchasing a home
• Starting a business
• Taking advantage of an investment opportunity
• Setting up a trust fund for family members
• Financing a college education

Even if you do have a clear plan for your lump sum payment, it’s still a good idea to enlist some professional guidance. A certified public accountant (one who is not a personal friend or relative) is your best first choice. If you can find one who is also a licensed to practice law, so much the better.  Someone with dual credentials like that may not come cheap – but his or her services can be well worth it.  Consider it an investment in your financial future.

CBC Settlement Funding

The basic definition of an annuity describes a financial instrument or arrangement that provides regular, periodic payments. In the U.S., an annuity contract is often used to create a guaranteed income stream over a fixed period of time. Annuity payments may be made until a certain date or they may extend until the death of the person named in the contract.

Annuity contracts are defined by federal law in the tax code but are regulated at the state level. In most cases, annuities are issued by insurance companies, either as a life insurance product or as part of a large settlement for an injury claim. While there are numerous types of annuities, most annuities in the U.S. today fall into one of two broad categories.

An annuity with a period certain is one in which annuity payments are received by the annuitant for a certain number of years, (i.e., a “certain period”). Most large insurance settlements, as well as lottery winnings, are funded for a period certain.

A life annuity is an insurance product in which a preset periodic payout amount is paid out until the death of the annuitant. Typically, the annuitant purchases the annuity and pays into it while still working; upon retirement, the annuity then provides a steady stream of periodic payments to the annuitant. These payments are structured to last for the rest of the annuitant’s life. A life annuity may also have a guaranteed period of payments to provide a minimum return to the recipient.

Today, most people receiving structured settlement annuity payments enjoy tax-free income due to favorable monetary and tax policy on the part of the federal government.  However, some may be eligible to pursue a strategy of selling their annuities to a factoring company in order to get an annuity cash out to help with changing financial needs.  A structured settlement firm may be able to assist in such circumstances.

CBC Settlement Funding

You’ve made up your mind to sell some or all of the payments from your structured settlement. Maybe you need the cash to help cover a home purchase or to pay off medical bills. Or perhaps there’s an investment opportunity you wish to pursue. Whatever the reason – you need money now.

Before you sign on the dotted line, you should understand that by selling structured settlement payments for a lump sum payout, you will receive less than the total amount of your payment stream.

Of course, the amount of money you receive for your payments from a structured settlement buyer depends on several factors.  One of the most important is the “discount rate.”  The discount rate is essentially a fee applied by structured settlement buyers to your future payments to help them cover the cost of their services and maintain a profit. This is why, when you sell your structured settlement, the settlement lump sum you receive is less than the total payments you would have gotten over time.

The discount rate is calculated using a formula by which the present value of your future payments is determined. It’s a complex bit of math because it takes into consideration the time value of money.  As everyone is painfully aware, the value of a dollar today is worth more than a dollar tomorrow. This factor must be considered when determining the discount rate for a structured settlement transaction.

Today, consumers can expect to pay discount rates of between 8 and 20 percent; the average is around 14 percent.

That’s quite a spread – and one reason that it is smart to do some comparison shopping to solicit competing quotes from several structured settlement buyers. As a consumer, you have the right under state and federal statutes to full disclosure of the discount rate that will be applied to your transaction as well as any other fees that may be charged and the purpose of such fees.

CBC Settlement Funding