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Selling Your Structured Settlement | Beware of Conflicted Advice When Selling

by Structured Settlement Watchdog

An economist on our listserv recently told a story a Marketing professor at his university who bought a new washing machine and was bragging about how he picked his washer and the great deal he got.  He said he went to two different appliance repair stores and asked them which brand to buy, and took their advice.  Now what he didn’t consider was that the repair stores only make a profit when someone has to bring in a machine to be repaired.  What good repairman is going to tell him to buy the machine he never sees in his store?  That's something good to know if you ever have to buy a new washer, but conceptually it's also good advice if you are considering selling your structured settlement payment rights.

The buyer of your structured settlement payments rights (structured settlement buyer) is conflicted in giving you advice because he/she only makes money if you sell your payments for a deep discount. Be sure that the person you are speaking to is a licensed insurance professional or a lawyer (not working for the buyer of your structured settlement payment rights for a deep discount) to discuss the financial alternatives that may be available to you. Perhaps you won't have to sell your structured settlement payment rights to a structured settlement buyer for a deep discount.

"We Buy Structured Settlements" Say The Ads. Yeah right!

by Structured Settlement Watchdog

"We Buy Structured Settlements! We Buy Structured Settlements! We Buy Structured Settlements!" cry out the endless ads all over the internet and print media. But is it really true? Can those advertisers indeed buy structured settlements?

Who buys structured settlements? First let's look at the definition of structured settlement under the United States' Internal Revenue Code.

For purposes of Federal taxation,  a structured settlement is defined by IRC Section 5891(c)(1) as an arrangement that meets the following requirements:

i.  A structured settlement must be established by:

(a)    A suit or agreement for periodic payment of damages excludable from gross income under IRC Section 104(a)(2); or

(b)    An agreement for the periodic payment of compensation under any workers’ compensation law excludable under Section 104(a)(1); and

ii.  The periodic payments must be of the character described in subparagraphs (A) and (B) of IRC Section 130(c)(2) and must be payable by a person who:

(a)    Is a party to the suit or agreement or to a workers compensation claims; or

(b)    By a person who has assumed the liability for such periodic payments under a Qualified Assignment in accordance with IRC Section 130.

Patrick J. Hindert of S2KM, and co-author of Structured Settlements and Periodic Payment Judgments also defines a structured settlement as a "package of financial and/or insurance products, generally including periodic payments, that a claimant accepts to resolve a personal injury claim or to compromise a statutory periodic payment obligation."

If one accepts the definitions included in the Internal Revenue Code, as well as from one of the industry's foremost scholars, then those advertisements are false. Let's elaborate.....

When a structured settlement is created who actually buys the qualified funding asset (generally a structured settlement annuity, but can be a US government obligation)? In the majority of cases the periodic payment obligation is assigned to an assignee, by way of a qualified assignment (referred to in the IRC definition). If this is the case then the assignee receives consideration for taking on the assignment and buys the structured settlement annuity. If the case is unassigned then the Defendant or The Defendant's Insurer buys the structured settlement annuity. In either case the "buyer" buys the structured settlement from a licensed insurance agent/broker.

Other than the above you can't buy a structured settlement. A factoring company, such as any one the advertisers in question, cannot buy a structured settlement unless it is a Defendant or Insurer on behalf of the Defendant and the case does not utilize a qualified assignment, or it is acting as an Assignee. I have no knowledge of of any scenario where this would be the case.

A structured settlement factoring transaction accurately describes what is really happening and its right there in the Internal Revenue Code as such. A structured settlement factoring transaction is one which effects the transfer of the structured settlement recipients rights to receive the future structured settlement payments (future periodic payments). "We do structured settlement factoring transactions", or SSFTs, or FTs, or TPPRs ("transfer of periodic payment rights"), or whatever, just doesn't sound as sexy and simple as "we buy structured settlements" and of course it is more of a mouthful to say.  I guess the truth is hard to swallow.

Last updated September 5, 2021