Transferring the Payment Rights of a Structured Settlement

by ETF Base on June 21, 2013

Plaintiffs in the case involving an illness, workers’ compensation or physical injury are often required to accept a structured settlement for compensation of their claim. While it is often the desire of the plaintiff to receive a lump sum of cash instead, many times the judge in the case sees more benefit in providing a monthly or annual payment to help the injured party. Because of the judge’s decision, the plaintiff will receive a payment on a routine schedule that could last for up to 25 years or more.

Because of that, most structured settlements are fully regulated both locally and by the federal government. As a result, the entire process can vary greatly from one location to another. It is always important to locate every bit of information on structured settlement transfers in the specific state where it was assigned by the court. Not every state requires a signoff from the court or judge to transfer the rights from one party to another. However, most of them do.

Due to the ways that laws are written at the state and federal level, sometimes if not handled properly, the plaintiff can become subject to a large federal excise tax of 40% or more. The easiest way to circumvent this problem is to hire a qualified and competent attorney to review every option available.

Transferring the Rights to Payment

Numerous companies provide structured settlement quotes in their effort to purchase annuities for sale. Once the offer is accepted, the company typically requires a notarized verifiable signature that will reside in their file before starting the paperwork process. Typically, this requires nothing more than a notarized signature sent to them for their legal records.

Upon receiving a notarized signature, they will send all the documentations required to transfer the rights of the structured settlement. Before the Protection Act of 1997 was enacted, many individuals that sold the full amount of their structured settlement usually received one-tenth of its value or less. However, the enacted protection act now necessitates the need to provide partial disclosure, and sometimes counseling, before the judge will approve the transfer of payment rights.

As part of the process, the structured settlement purchasing company will verify that the plaintiff in the case is the only beneficiary of that specific annuity. They will also verify that there is no other transfer of a portion of the annuity to a third party. Typically, any lien that is currently recorded against the plaintiff will need to be satisfied before there is an agreement to transfer the annuity rights.

The court will also want to see the plaintiff’s tax return to determine their financial status, to ensure that the conveyance of payment rights is an appropriate move for all parties involved.

The entire process of transferring the rights of a structured settlement can take significant amounts of time. It requires the necessity to pull together all verifiable information, along with making sure that all periods of minimal notice have been met with the court. Typically, the entire transfer process requires about 90 days or less, with a check assigned as soon as the judge signs off.

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