The one thing Novation Settlement Solutions says that makes sense

Receiving your money in an annuity or structured settlement is a relief when it comes to knowing you have income for the long term. Guaranteed income for life is an attractive deal

Novation Funding Claimed  "Advantage of Lump Sum Payments" #1 Makes no sense

"You can sell your annuity for a lump sum.

When you choose between the lump sum and settlement arrangements, you may consider the amount you may pay in lump sum taxes. Tax-free settlement payments are stable for a longer period of time. Once you choose, you cannot change your contract, but you can sell those structured settlement payments after the fact in order to get cash you need sooner than your payment schedule allows".

Comments

  1. Is the assertion that " you can sell your annuity for a lump sum" is an advantage of lump sum payments, really an "advantage",  or is  Novation Settlement Solutions simply trying to bamboozle you with a little circular reasoning  (the premise provides no independent ground or evidence for the conclusion).
  2. Provided the payment of a lump sum is damages on account of personal physical injury or physical sickness, and not punitive damages or represent reimbursement of medical expenses previously deducted, the lump sum payment at settlement is income tax-free.  The tax consequences do not change for a lump sum received from a transfer of structured settlement payment rights as long as the transfer complies with federal and state structured settlement protection laws.

Novation Funding Claimed "Advantage of Lump Sum Payments" #2

"You can use your cash now.

If you chose the annuity settlement and later have expenses that exceed what you can afford, you can reverse your decision by selling your payment stream in exchange for cash. Returning the money to your hands enables you to use it in whatever way you need it most".

Comments

If you have expenses "that exceed what you can afford" then selling structured settlement paymnets is like attempting a covering up of a  wide gaping wound with a Band-Aid.  You need to arrest the root cause of your bleeding finances.  For example if you don't have  a budget you need to create one, or work with someone who can help you create a budget that you can stick with..

Selling your structured settlement is not "reversing your decision"  Novation is not "returning your money to your hands".  In the case of Cedric Martez Thomas, a naive young adult NASP member Novation Funding took more than $1 million as a profit in an October 2015 deal in Okeechobee Florida...nowhere near giving Cedric Martez Thomas a return of his money.  Mark Twain wouldn't have been pleased.

Think of selling your structured settlement like giving up your steady paying job. 

Novation Funding Claimed "Advantage of Lump Sum Payments" #3

You have investment control.

"A structured settlement annuity is purchased and controlled by an insurance company, not by the plaintiff. This enables the payments to remain tax-free, but at the cost of the plaintiff not having investment control over their funds"

Comment

More circular reasoning from Novation Funding.  If you want the tax break you, then the rules promulgated in the Internal Revenue Code and various rulings must be satisfied.

"For some, the low-risk investments the insurance company is making for their settlement funds are not sufficient. Selling the structured settlement payments to receive a lump sum puts the cash in your control. While you will have to pay interest on investment earnings from a lump sum, you have the power to determine what investments to make and can increase your returns".

Comment

I've found the the majority of people today are attracted to structured settlements because they want safety, security and guarantees.  If you sell your structured settlement with the idea of investing the money you have to (1)account for  the significant loss of value [Cedric Martez Thomas sold $6,600,000 to Novation for $1,037,000-when he could have received almost $1,500,000 more from other settlement purchasers, or received the $1,037,000 and still had part of his payments]; (2) you would earn have to first back the substantial amount that you lost before you begin to make money.

Novation Funding Claimed  "Advantage of Lump Sum Payments" #4

"It will not lose value due to inflation.

One of the dangers of investing in an annuity or receiving a structured settlement is the fluctuating economy. Delayed payments will lose value due to inflation, meaning the dollar amount of your future income will be worth less when you receive it than it is today. If your payment stream is a fixed amount, you can choose to sell your future payments to receive a lump sum you can use without having to worry about inflation or other economic fluctuations".

Comment

Novation Settlement Solutions serves up a tasty dish of bollocks bolognaise here.  Even cash can lose value due to inflation as well.  For example, if you have $50 in your pocket and today you can buy 25 gallons of  gas at $2 per gallon and then there is a spike in oil prices that results in gas going up to $5 per gallon, that means you can only buy 10 gallons of gas.   So you have a steady "job" with your structured settlement that pays you $4,000 per month, enough for you to pay all your bills and fill your tank up  whether the price is $2 per gallon or $4 per gallon.  What Novation Settlement Solutions suggests is to cut your "salary"  or even give up your salary and make things financially tighter in the long term if you cannot replace the salary. Inflation ebbs and flows.  InflationData.com puts the February inflation rate at 1.02%.

Novation Settlement Solutions readily admits

Novation is not a financial advisor and/or consultant and strongly recommends that you speak to a lawyer and/or accountant before making any significant financial decisions.  

So why pay attention to the advice Novation Settlement Solutions is dispensing?