by Structured Settlement Watchdog
An affiliate of Client First Funding is trying to do a Brooklyn resident for an above market 10.26% discount rate, $205,000 for $499,486 in aggregate payments. Case is worth $90-95K more. It's not only that, the petition for structured settlement transfer states that the money is going to be used to invest with a financial planner.
Sell Structured settlement math
- Annuitant has been receiving payments from an annuity with a stable 5.45% income tax free internal rate of return. That's equivalent to 7.56% taxable in a 28% tax bracket. The annuitant's stuctured settlement was established in 2010.
- As I write this the stock market is set to drop more than 3% at the open due to fears about the coronavirus.
- The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol (NYSE Arca: SPY). SPDR is an acronym for the Standard & Poor's Depositary Receipts, the former name of the ETF. It is designed to track the broad S&P 500 stock market index. This fund is the largest ETF in the world. As I write this blog, SPY it is set for the 13th biggest gap down since the S&P 500 index began trading in 1993.
- At The internal rate of return on the Brooklyn annuitant's structured settlement is better than the companies offering factored structured settlement payments streams in the secondary market which would not have the same favorable tax consequences.
- Annuitant expected to sell her future payments with a discount rate that is nearly twice what he/she is earning tax free
- AAA rated Municipal Bonds are paying less than 2%
- And what investment fees is the financial planner going to charge 1%? 1% of $205,000 is $2,050 annually. So you start out down more than 50% on the present value and then THAT gets tapped on an annual basis for an investment with greater volatility that must first chug along to make up for what you lost before you even make a positive return on your investment.
A powerful time tested financial tool
Monte Carlo Simulation/Analysis in Structured Settlements and Settlement Planning Process (4structures.com)
A number of Florida based structured settlement factoring companies have solicited annuitants to sell structured settlement payments at deep discounts while partnering with financial planners, who have been using unrealistic investment assumptions, not accounting for volatility, sequencing of returns, or taxes