by John Darer CLU ChFC MSSC RSP CLTC
Structured settlement factoring transactions require a qualified order to comply with IRC 5891 and avoid a 40% excise tax on the purchaser. In order for a transfer of structured settlement payment rights to go through, a judge must determine that a structured settlement transfer is the best interest of the seller and the seller's dependents.
What if a judge took her decision on the papers, having never met or examined the annuitant, is it possible that as a result that something was overlooked? What if forum shopping was done unbeknowst to the judge and the investor and the deal is later unwound?
I submit to you that the answer is yes and that a qualfied order is not a qualified order if the best interest test or other conditions have not been satisfied. An order can be rescinded if the right facts present themself.
I witnessed such a case, and we have put the word out that we are looking for others. The current system in Florida and other states where there is no mandatory requirement for an in person hearing with the seller is flawed. But for legal intervention an annuitant might have forever lost his sole source of income.
When there is a rescission who pays? What is the cost to the investor?