Most states have certain protections in place for those selling structured settlement payments to a third party. All state laws regarding such transfers differ slightly. In general, however, all state regulations require:
You can learn more about your state’s structured settlement protection act below:
Public Act 093-0502
HB3582 Enrolled LRB093 10522 JLS 10776 b
AN ACT concerning structured settlements.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Structured Settlement Protection Act.
Section 5. Definitions. For purposes of this Act:
“Annuity issuer” means an insurer that has issued a
contract to fund periodic payments under a structured
settlement.
“Dependents” include a payee’s spouse and minor children
and all other persons for whom the payee is legally obligated
to provide support, including maintenance.
“Discounted present value” means the present value of
future payments determined by discounting such payments to
the present using the most recently published Applicable
Federal Rate for determining the present value of an annuity,
as issued by the United States Internal Revenue Service.
“Gross advance amount” means the sum payable to the payee
or for the payee’s account as consideration for a transfer of
structured settlement payment rights before any reductions
for transfer expenses or other deductions to be made from
such consideration.
“Independent professional advice” means advice of an
attorney, certified public accountant, actuary, or other
licensed professional adviser.
“Interested parties” means, with respect to any
structured settlement, the payee, any beneficiary irrevocably
designated under the annuity contract to receive payments
following the payee’s death, the annuity issuer, the
structured settlement obligor, and any other party that has
continuing rights or obligations under such structured
settlement.
“Net advance amount” means the gross advance amount less
the aggregate amount of the actual and estimated transfer
expenses required to be disclosed under item (5) of Section
10 of this Act.
“Payee” means an individual who is receiving tax free
payments under a structured settlement and proposes to make a
transfer of payment rights thereunder.
“Periodic payments” includes both recurring payments and
scheduled future lump sum payments.
“Qualified assignment agreement” means an agreement
providing for a qualified assignment within the meaning of
Section 130 of the United States Internal Revenue Code,
United States Code Title 26, as amended from time to time.
“Responsible administrative authority” means, with
respect to a structured settlement, any government authority
vested by law with exclusive jurisdiction over the settled
claim resolved by such structured settlement.
“Settled claim” means the original tort claim or workers’
compensation claim resolved by a structured settlement.
“Structured settlement” means an arrangement for periodic
payment of damages for personal injuries or sickness
established by settlement or judgment in resolution of a tort
claim or for periodic payments in settlement of a workers’
compensation claim.
“Structured settlement agreement” means the agreement,
judgment, stipulation, or release embodying the terms of a
structured settlement.
“Structured settlement obligor” means, with respect to
any structured settlement, the party that has the continuing
obligation to make periodic payments to the payee under a
structured settlement agreement or a qualified assignment
agreement.
“Structured settlement payment rights” means rights to
receive periodic payments under a structured settlement,
whether from the structured settlement obligor or the annuity
issuer, when:
(1) the payee is domiciled in, or the domicile or
principal place of business of the structured settlement
obligor or the annuity issuer is located in, this State;
(2) the structured settlement agreement was
approved by a court or responsible administrative
authority in this State; or
(3) the structured settlement agreement is
expressly governed by the laws of this State.
“Terms of the structured settlement” include, with
respect to any structured settlement, the terms of the
structured settlement agreement, the annuity contract, any
qualified assignment agreement, and any order or other
approval of any court or responsible administrative authority
or other government authority that authorized or approved
such structured settlement.
“Transfer” means any sale, assignment, pledge,
hypothecation, or other alienation or encumbrance of
structured settlement payment rights made by a payee for
consideration; provided that the term “transfer” does not
include the creation or perfection of a security interest in
structured settlement payment rights under a blanket security
agreement entered into with an insured depository institution
in the absence of any action to redirect the structured
settlement payments to such insured depository institution or
an agent or successor in interest thereof or otherwise to
enforce such blanket security interest against the structured
settlement payment rights.
“Transfer agreement” means the agreement providing for a
transfer of structured settlement payment rights.
“Transfer expenses” means all expenses of a transfer that
are required under the transfer agreement to be paid by the
payee or deducted from the gross advance amount, including,
without limitation, court filing fees, attorneys fees, escrow
fees, lien recordation fees, judgment and lien search fees,
finders’ fees, commissions, and other payments to a broker or
other intermediary; “transfer expenses” do not include
preexisting obligations of the payee payable for the payee’s
account from the proceeds of a transfer.
“Transferee” means a party acquiring or proposing to
acquire structured settlement payment rights through a
transfer.
Section 10. Required disclosures to payee. Not less than
3 days prior to the date on which a payee signs a transfer
agreement, the transferee shall provide to the payee a
separate disclosure statement, in bold type no smaller than
14 points, setting forth all of the following:
(1) the amounts and due dates of the structured
settlement payments to be transferred;
(2) the aggregate amount of the payments;
(3) the discounted present value of the payments to
be transferred, which shall be identified as the
“calculation of current value of the transferred
structured settlement payments under federal standards
for valuing annuities”, and the amount of the Applicable
Federal Rate used in calculating the discounted present
value;
(4) the gross advance amount;
(5) an itemized listing of all applicable transfer
expenses, other than attorneys’ fees and related
disbursements payable in connection with the transferee’s
application for approval of the transfer, and the
transferee’s best estimate of the amount of any such fees
and disbursements;
(6) the net advance amount;
(7) the amount of any penalties or liquidated
damages payable by the payee in the event of any breach
of the transfer agreement by the payee; and
(8) a statement that the payee has the right to
cancel the transfer agreement, without penalty or further
obligation, not later than the third business day after
the date the agreement is signed by the payee.
Section 15. Approval of transfers of structured
settlement payment rights. No direct or indirect transfer of
structured settlement payment rights shall be effective and
no structured settlement obligor or annuity issuer shall be
required to make any payment directly or indirectly to any
transferee of structured settlement payment rights unless the
transfer has been approved in advance in a final court order
or order of a responsible administrative authority based on
express findings by such court or responsible administrative
authority that:
(1) the transfer is in the best interest of the
payee, taking into account the welfare and support of the
payee’s dependents;
(2) the payee has been advised in writing by the
transferee to seek independent professional advice
regarding the transfer and has either received such
advice or knowingly waived such advice in writing; and
(3) the transfer does not contravene any applicable
statute or the order of any court or other government
authority.
Section 20. Effects of transfer of structured settlement
payment rights. Following a transfer of structured settlement
payment rights under this Act:
(1) the structured settlement obligor and the
annuity issuer shall, as to all parties except the
transferee, be discharged and released from any and all
liability for the transferred payments;
(2) the transferee shall be liable to the
structured settlement obligor and the annuity issuer:
(A) if the transfer contravenes the terms of
the structured settlement, for any taxes incurred by
the parties as a consequence of the transfer; and
(B) for any other liabilities or costs,
including reasonable costs and attorneys’ fees,
arising from compliance by the parties with the
order of the court or responsible administrative
authority or arising as a consequence of the
transferee’s failure to comply with this Act;
(3) neither the annuity issuer nor the structured
settlement obligor may be required to divide any periodic
payment between the payee and any transferee or assignee
or between 2 or more transferees or assignees; and
(4) any further transfer of structured settlement
payment rights by the payee may be made only after
compliance with all of the requirements of this Act.
Section 25. Procedure for approval of transfers.
(a) No annuity issuer or structured settlement obligor
may make payments on a structured settlement to anyone other
than the payee or beneficiary of the payee without prior
approval of the circuit court or responsible administrative
authority. No payee or beneficiary of a payee of a
structured settlement may assign in any manner the structured
settlement payment rights without the prior approval of the
circuit court or responsible administrative authority.
(b) An application under this Act for approval of a
transfer of structured settlement payment rights shall be
made by the transferee and shall be brought in the circuit
court of the county in which an action was or could have been
maintained or before any responsible administrative authority
that approved the structured settlement agreement.
Section 30. General provisions; construction.
(a) The provisions of this Act may not be waived by any
payee.
(b) Any transfer agreement entered into on or after the
effective date of this Act by a payee who resides in this
State shall provide that disputes under the transfer
agreement, including any claim that the payee has breached
the agreement, shall be determined in and under the laws of
this State. No such transfer agreement shall authorize the
transferee or any other party to confess judgment or consent
to entry of judgment against the payee.
(c) No transfer of structured settlement payment rights
shall extend to any payments that are life-contingent unless,
prior to the date on which the payee signs the transfer
agreement, the transferee has established and has agreed to
maintain procedures reasonably satisfactory to the annuity
issuer and the structured settlement obligor for (1)
periodically confirming the payee’s survival, and (2) giving
the annuity issuer and the structured settlement obligor
prompt written notice in the event of the payee’s death.
(d) No payee who proposes to make a transfer of
structured settlement payment rights shall incur any penalty,
forfeit any application fee or other payment, or otherwise
incur any liability to the proposed transferee or any
assignee based on any failure of the transfer to satisfy the
conditions of this Act.
(e) Nothing contained in this Act shall be construed to
authorize any transfer of structured settlement payment
rights in contravention of any law or to imply that any
transfer under a transfer agreement entered into prior to the
effective date of this Act is valid or invalid.
(f) Compliance with the requirements set forth in
Section 10 of this Act and fulfillment of the conditions set
forth in Section 15 of this Act shall be solely the
responsibility of the transferee in any transfer of
structured settlement payment rights, and neither the
structured settlement obligor nor the annuity issuer shall
bear any responsibility for, or any liability arising from,
non-compliance with those requirements or failure to fulfill
those conditions.
Section 35. Applicability. This Act shall apply to any
transfer of structured settlement payment rights under a
transfer agreement entered into on or after the 30th day
after the effective date of this Act; provided, however, that
nothing contained herein shall imply that any transfer under
a transfer agreement reached prior to that date is either
effective or ineffective.
(215 ILCS 5/155.34 rep.)
Section 97. The Illinois Insurance Code is amended by
repealing Section 155.34.
Effective Date: 01/01/04