Purchased Structured settlement is one of the products offered by finance houses. This can be said to be the same with factoring. Companies that purchase structured settlements will buy out your future payments in exchange for advancing you money now, minus their fee. An example will make it clearer. Suppose you won a lawsuit that entitles you to be compensated to the tune of Five Million Naira (N 5,000,000). The defendant then pleaded to be given the grace to make install-mental payment of One Million Naira over a period of five years. Within two months of your receiving the first installment, a pressing need came up that requires you to raise Four Million Naira.
What will you do? Go back to court? No, all you need do is look for any finance house that is willing to buy those future streams of income at a discounted price. That is what purchased structured settlement is all about. It’s possible to sell structured settlements, and people do this all the time. There are firms that buy structured settlements and you have the option to sell to them. This provides you with a large one lump sum payment rather than the installment payments you would be locked into with your structured settlement. The aim of this article is to bring to your notice those ingredients that constitute a purchased structured settlement.
I will list the main issues in bulleted form and then make an attempt to explain them. (Note however, that the content of this article is not and will not take the place of sound legal advice)
- Legal consideration
- Financial implication: Always consider the time value of money concept. What this simply means is that One Naira today is not the same as One Naira tomorrow. Another term commonly used in factoring transactions is “discounted present value,” which is defined as “the present value of future payments determined by discounting such payments to the present.
- Social/psychological implication
- Natural occurrence and Services offered by the company
LEGAL CONSIDERATION: Consult with your Lawyer so as to be guarded in the area of prevailing legal stance of structured settlement.
FINANCIAL IMPLICATION: Always consider the time value of money concept. What this simply means is that One Naira today is not the same as One Naira tomorrow. Another term commonly used in factoring transactions is “discounted present value,” which is defined as “the present value of future payments determined by discounting such payments to the present.
SOCIAL/PSYCHOLOGICAL IMPLICATION: Care should be taken not to fall into the temptation of spending the money realized from the sale of structured payment for another purpose. As simple as this may sound, statistics has shown that many people get carried away as soon as they get any disposable income in their hand. Be warned!
SERVICES OFFERED BY THE COMPANY: Many people get confused on the ‘what next’ after deciding to sell their structured settlement. Some finance company helps to make this process easy for you by matching you with the best possible financial institution to handle your settlement, and letting you decide how to proceed — putting the control where it should be, in your hands.
There are also several benefits to be gained from taking advantage of the expertise of a structured settlement broker. First, this individual is responsible for setting up the payout schedule of the settlement. Usually the payments are made monthly, but they may be more frequent if the broker deems it necessary. In addition, a structured settlement broker can also arrange for periodic increases or advances against the settlement in the event an unexpected expense incurs.
One of the most important functions of the structured settlement broker is to determine the medical costs that the injured party will be burdened with on an ongoing basis, such as expenses associated with physical therapy, a home nurse, medications, etc. Of course, these additional costs are calculated together with the regular cost of living to the injured party and his or her family. These projections are particularly key to constructing a successful structured settlement since they are needed to establish the amount of annuity payments to be made and must also incorporate the cost of living increases expected to occur over the lifetime of the recipient.
Structured settlement brokers belong to an elite class of professionals. In fact, there are only a few hundred qualified structured settlement brokers in the U.S. that are registered with the Department of Justice. The broker must be licensed or authorized to perform his or her duties on behalf of at least one insurance company, and must be insured by an Errors and Omissions policy or its equivalent. It should also be noted that an individual who has had a felony conviction or a license as an insurance agent or broker revoked is not eligible for consideration.