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April 02, 2010

Structured Settlement Factoring Illiteracy and Lance Winslow

It's financial literacy month and time to bring back an old pantomime villain.

Car wash guy, erstwhile wannabe structured settlement expert and confessed key word manipulator Lance Winslow IV has resurfaced after 4 years with an article on structured settlement factoring that appears at 101settlement.com.

After doing a half decent job of explaining what factoring is in general, Lance Winslow presents an unrealistic explanation of the impact that factoring has on a structured settlement annuitant's long term financial security.

He states:

"Let us say you have a structured settlement and you cash out of the deal using the same type of company? They will get the structured settlement money each month instead of you, but you will have all the money up front minus a 10-15% discount on the total money you would have received. You can then use this money for whatever you want. Such as investing, buying a house or buying new car, plasma TV and other things humans want to make them happy. You see?

Lance Winslow appears to confuse the discount rate (or effective discount rate) used to calculate the present value that a seller could receive from a sale of structured settlement payment rights, with the   percentage difference between the gross amount of the future benefits before the sale and the present value received after the sale.

Let's say you have a structured settlement that pays you $2,200 per month over the next 20 years, with the next payment May 5, 2010. The total payout over 20 years is $528,000 income tax free.

Opera_vikings_can_caning_md_clr You find the home of your dreams and don't have enough for the down payment so you consider selling your structured settlement payment rights to a factoring company. You are fascinated by a late night commercial featuring Vikings doing the "can can", so you contact Thor Settlement Funding which tells you that its effective discount rate is 14.9%.  This translates into an offer of $177,000 in cash, assuming a Court approves that the transfer of such payments is in your best interest.

$177,000 is approximately 1/3 of $528,000. Said another way, you forfeit approximately 2/3 of your future value by taking cash in 90 days or so. Sound good to you?

As I said 4 years ago, Lance Winslow may know suds but he ain't no stud when it comes to financial literacy on structured settlements.

Read our Lance Winslow archive

Financial Literacy Tip

Use a structured settlement factoring discount rate calculator to help you better understand the cost of money. The structured settlement factoring discount rate calculator puts cash strapped structured settlement annuitants in control.

Please note that certain structured settlements cannot be factored.

 

 

 

Posted at 11:10 AM in Discount Rate, Factoring Doscount Rate, Financial Literacy, Lance Winslow, Misinformation about Structured Settlement Factoring |

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Guide to Structured Settlements 2022

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    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in with other settlement planning solutions.
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    Which life insurance companies issue structured settlement annuities going into 2022? A list of current structured annuity issuers, the location of their home offices and their financial ratings from A.M. Best, Moodys, Fitch, Standard & Poors and/or other Tier1 NAIC ratings, with links to their websites and other useful information.
  • Treasury Funded Structured Settlements
    Treasury Funded Structured Settlements are a settlement option for the most conservative using the OTHER permissible qualified funding asset under IRC 130(d), United States Treasury Bonds in addition to, or instead of, structured settlement annuities. Treasury Funded Structured Settlements can also be used to fund installment sales, also known as structured sales and other non qualified structured settlements.
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    Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
  • Structured Settlement Payments | Types of Structured Settlements
    Ways You Can Structure Your Settlement Payments. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
  • Structured Attorney Fees for Tax Deferral for Contingency Fees
    Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as the an index linked structured settlement where payments are adjusted based on upside changes in the S&P 500 with no downside and a cap of 5%. Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team.
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  • Structured Settlement Quote Lock-Ins | What You Need To Know
    What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
  • What Are Structured Settlement Annuities?
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  • History of Structured Settlements
    Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
  • What Are Market Based Structured Settlements?
    Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that: 1. Can afford to take some market risk 2. Have discretionary settlement dollars. Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
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    iStructure is an innovative game changing fixed index structured settlement annuity for plaintiffs or attorneys. with an intermediate to long term horizon

Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
    Qualified Settlement Funds | What You Need to Know
  • Firmwide Qualified Settlement Funds Debunked
    Firmwide qualified settlement funds have been heavily promoted to trial lawyers, but have been debunked in a detailed analysis in a July 2022 legal opinion a tax partner at the law firm of Faegre Drinker Biddle & Reath, LLP. Trial lawyers and firms who have established Firmwide QSFs or coinsidering establishing a Firmwide QSF should read the analysis as part of their evaluation.

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  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
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  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
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