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 the North Dakota structured settlement protection act below:
CHAPTER 32-03.4
STRUCTURED SETTLEMENT TRANSFERS
32-03.4-01. Definitions. For purposes of this chapter:
1. “Annuity issuer” means an insurer that has issued a contract to fund periodic
payments under a structured settlement.
2. “Dependent” includes a payee’s spouse and minor children and all other persons for
whom the payee is legally obligated to provide support, including alimony or support.
3. “Discounted present value” means the present value of future payments determined
by discounting those 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.
4. “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.
5. “Independent professional advice” means advice of an attorney, certified public
accountant, actuary, or other licensed professional adviser:
a. Who is engaged by a claimant or payee to render advice concerning the legal,
tax, and financial implications of a structured settlement or a transfer of
structured settlement payment rights;
b. Who is not in any manner affiliated with or compensated by the defendant in
the settlement or the transferee of the transfer; and
c. Whose compensation for rendering the advice is not affected by whether a
settlement or transfer occurs or does not occur.
6. “Interested party” 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 the structured
settlement.
7. “Net advance amount” means the gross advance amount less the aggregate amount
of the actual and estimated transfer expenses required to be disclosed under
subsection 5 of section 32-03.4-02.
8. “Payee” means an individual who is receiving tax-free payments under a structured
settlement and proposes to make a transfer of payment rights under the structured
settlement.
9. “Periodic payments” includes both recurring payments and scheduled future lump
sum payments.
10. “Qualified assignment agreement” means an agreement providing for a qualified
assignment within the meaning of section 130 of the Internal Revenue Code
[26 U.S.C. 130], as amended.
11. “Settled claim” means the original tort claim or workers’ compensation claim
resolved by a structured settlement.
12. “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.
13. “Structured settlement agreement” means the agreement, judgment, stipulation, or
release embodying the terms of a structured settlement.
14. “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.
15. “Structured settlement payment rights” means rights to receive periodic payments
under a structured settlement, whether from the structured settlement obligor or the
annuity issuer, if at least one of the following applies:
a. 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;
b. The structured settlement agreement was approved by a court in this state; or
c. The structured settlement agreement is expressly governed by the laws of this
state.
16. “Terms of the structured settlement” includes, 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
other governmental authority that authorized or approved such structured
settlement.
17. “Transfer” means any sale, assignment, pledge, hypothecation, or other alienation or
encumbrance of structured settlement payment rights made by a payee for
consideration. The term does not include the creation or perfection of a security
interest in structured settlement payment rights under a blanket security agreement
entered with an insured depository institution, in the absence of any action to redirect
the structured settlement payments to the insured depository institution, or an agent
or successor in interest thereof, or otherwise to enforce the blanket security interest
against the structured settlement payment rights.
18. “Transfer agreement” means the agreement that provides for a transfer of structured
settlement payment rights.
19. “Transfer expenses” means all expenses of a transfer which are required under the
transfer agreement to be paid by the payee or deducted from the gross advance
amount, including court filing fees, attorney’s fees, escrow fees, lien recordation
fees, judgment and lien search fees, finder’s fees, commissions, and other
payments to a broker or other intermediary. The term does not include preexisting
obligations of the payee payable for the payee’s account from the proceeds of a
transfer.
20. “Transferee” means a party acquiring or proposing to acquire structured settlement
payment rights through a transfer.
32-03.4-02. Required disclosures to payee. At least three days before the date on
which a payee signs a transfer agreement, the transferee shall provide to the payee a separate
disclosure statement, in bold and in at least fourteen-point type, setting forth:
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 must 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 list of all applicable transfer expenses, other than attorney’s 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, no later than the third business day after the date the
agreement is signed by the payee.
32-03.4-03. Approval of transfers of structured settlement payment rights. A direct
or indirect transfer of structured settlement payment rights is not effective and a structured
settlement obligor or annuity issuer may not 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 based on the following express findings by the court:
1. The transfer is in the best interest of the payee, taking into account the welfare and
support of the payee’s dependents and whether the transaction, including the
discount rate used to determine the gross advance amount and the fees and
expenses used to determine the net advance amount, are fair and reasonable. If the
court makes the findings as outlined in this subsection, there is not a requirement for
the court to find that an applicant is suffering from a hardship to approve the transfer
of structured settlement payments under this subsection;
2. The payee has been advised in writing by the transferee to seek independent
professional advice regarding the transfer and has either received that advice or
knowingly waived the advice in writing; and
3. The transfer does not contravene any applicable statute or the order of any court or
other governmental authority.
32-03.4-04. Effects of transfer of structured settlement payment rights. Following a
transfer of structured settlement payment rights under this chapter:
1. The structured settlement obligor and the annuity issuer are discharged and
released from all liability for the transferred payments as to all parties except the
transferee;
2. The transferee is 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 those parties as a consequence of the transfer; and
b. For any other liabilities or costs, including reasonable costs and attorney’s fees,
arising from compliance by those parties with the order of the court or arising as
a consequence of the transferee’s failure to comply with this chapter;
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 two 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 chapter.
32-03.4-05. Procedure for approval of transfers.
1. An application for approval of a transfer of structured settlement payment rights
under this chapter must be made by the transferee and may be brought in the
county in which the payee resides, in the county in which the structured settlement
obligor or the annuity issuer maintains its principal place of business, or in any court
that approved the structured settlement agreement.
2. At least twenty days before the scheduled hearing on any application for approval of
a transfer of structured settlement payment rights under section 32-03.4-03, 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. The notice must include:
a. A copy of the transferee’s application;
b. A copy of the transfer agreement;
c. A copy of the disclosure statement required under section 32-03.4-02;
d. A list of each of the payee’s dependents and each dependent’s age;
e. 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;
f. Notification of the time and place of the hearing; and
g. Notification of the manner in which and the time by which written responses to
the application must be filed in order to be considered by the court, which may
be not less than fifteen days after service of the transferee’s notice.
32-03.4-06. No waiver by payee. The requirements of this chapter may not be waived
by any payee.
32-03.4-07. Disputes decided under state law. Any transfer agreement entered on or
after the effective date of this chapter by a payee who resides in this state must provide that
disputes under the transfer agreement, including any claim that the payee has breached the
agreement, must be determined in and under the laws of this state. Such a transfer agreement
may not authorize the transferee or any other party to confess judgment or consent to entry of
judgment against the payee.
32-03.4-08. Life-contingent payments not to be transferred – Exception. A transfer
of structured settlement payment rights may not extend to any payments that are life-contingent
unless, before 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 periodically confirming the payee’s survival and giving
the annuity issuer and the structured settlement obligor prompt written notice in the event of the
payee’s death.
32-03.4-09. No payee liability for failure to comply with chapter. A payee who
proposes to make a transfer of structured settlement payment rights may not 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
chapter.
32-03.4-10. Effect of chapter on existing laws and transfer agreements. This
chapter does not authorize any transfer of structured settlement payment rights in contravention
of any law nor does this chapter imply that any transfer under a transfer agreement entered
before August 1, 2009, is valid or invalid.
32-03.4-11. Transferee solely responsible for certain requirements. In any transfer
of structured settlement payment rights, compliance with the requirements of section 32-03.4-02
and fulfillment of the conditions of section 32-03.4-03 are the sole responsibility of the transferee.
Neither the structured settlement obligor nor the annuity issuer bears any responsibility for, or
any liability arising from, noncompliance with those requirements or failure to fulfill those
conditions.
32-03.4-12. Penalty. Any transferee that willfully violates this chapter is guilty of an
infraction. A second or subsequent violation of this chapter is a class B misdemeanor.
32-03.4-13. Applicability of chapter. This chapter applies to any transfer of structured
settlement payment rights under a transfer agreement entered after July 31, 2009. This chapter
does not imply that any transfer under a transfer agreement reached before August 1, 2009, is
either effective or ineffective.