Not surprisingly, the amount paid by the second plaintiff for the recycled payment stream is much greater than what the factoring company paid to the original payee.

The factoring company markets the recycled payment stream based on its apparently attractive yield. However, because the recycled payment stream is taxable and also fraught with risk, the deal is not as good as advertised.

The settling plaintiff will be taxed on the difference between what she paid for the recycled payment stream and the total amount of payments received. Because the plaintiff acquiring recycled payment rights has no direct relationship to the source of the recycled payment stream, the annuity, there could be serious legal consequences in the event of the insolvency of the factoring company. The plaintiff acquiring the recycled payment rights has no clear rights against the annuity issuer and therefore may have her only recourse against the factoring company.

Moreover, while structured settlement payments may be exempt from the claims of creditors in certain states, such exemptions are unlikely to apply to recycled payment rights. Similarly, should the purchaser of a recycled payment stream seek to sell her recycled payment stream rights, she would not receive the protection of the SSPA offered the original payee receiving tax-free periodic payments, such as the right to review disclosures including information on the discount rate being charged and the accompanying court approval.

Of what should be of even greater concern to the purchaser of a recycled payment stream is the growing number of cases in which the underlying plaintiff who sells his annuity payments seeks to have the sale vacated on the grounds that he lacked authority to sell or that the court lacked jurisdiction over the transfer.

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Brokers are paid standardized commissions by the life insurance company that issues the annuity. You can even call for no payments for say 10 or 15 years, with payments starting thereafter as a way to fund your retirement. They have to be set up properly, and you can't own the annuity policy or the tax benefits won't work. Apart from special benefits to insurance companies, the arrangement allows you to be a mere recipient of the periodic payments over time.

Like other tax deferral ideas, their results are more impressive the longer their term and the slower they pay out. They aren't for everyone, and you shouldn't structure every nickel you receive.

Once they are set up, they generally can't be changed. Most states require a court hearing before they can buy a structure. I handle tax matters across the U. Selling a structured settlement annuity may be helpful if the holder faces: Medical expenses Home purchase or renovations Education expenses, such as college tuition Pressing financial obligations Time-sensitive business or investment opportunities Selling the Right to Receive Payments Insurance companies own annuities, not people.

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Pros and Cons Structured settlements have grown in popularity because of their many benefits. Pros can include: Structured settlements are a guaranteed flow of income through the agreement term, commonly spanning years. Structured settlements are tax-free. Payments cannot be affected by the changes in the stock market. Payments are a valuable asset that can be valued and sold in a competitive marketplace. In the event a recipient dies, structured settlement payments can be deferred to a beneficiary. Structured settlements are often a welcomed compromise in a lawsuit, with advantages to both the plaintiff and the defendant.

Structured settlement payments are not flexible once established.

If your circumstances change and you need a larger monthly payment or a lump sum for an emergency, you cannot access the funds without selling payments. A judge must approve all sales. If you withdraw from your structured settlement early or incorrectly, surrender fees and IRS penalties may apply. Luckily, some of the cons can be mitigated if the annuity holder sells part of or all of their future payments.

Structured settlement annuity buyers can provide sellers with an immediate lump sum of cash in exchange for some or all of their future payments and a fee. Structured Settlement Process Establishing a structured settlement is a legal process that starts in court. The present value of a structured settlement annuity is dependent upon a few different factors including: The amount of the payments The time of disbursement Current interest rates Creditworthiness of the issuing insurance company In addition, a judge must sign off on a structured settlement sale before it is finalized, requiring a plaintiff to present a reason for cashing in their structured settlement annuity.

Get Cash from CBC Settlement Funding If you decide selling all or part of your future structured settlement payments is the right choice for your financial needs, CBC Settlement Funding can provide you with a lump sum cash advance for all or part of the total amount.