Structured Settlement Factoring Dissipation
Thursday, September 14, 2006 at 03:45PM For over 20 years, settlement brokers and planners have been able to help injury victims avoid the dissipation trap that sometimes affects lottery winners and others who receive large lumps sums of money unexpectedly by structuring their payments to meet their financial needs at the time of the settlement. They plan for the future as best as they can in order to provide financial stability for their clients. Structured settlements fit the need of the vast majority of individuals, but there are a small percentage of people whose financial situation has changed for one reason or another and they need access to a portion of their structured settlement payments.
The average purchase price for a factoring transaction on a structured settlement can range between $25,000 and $45,000 depending on the financial needs of the seller and the size of the annuity policy. Although most structured settlement factoring transactions do not require the annuitants to give up 2 times the purchase price as the Texas Lottery Cash Out Option Requires, it is safe to assume that the amounts they sell in future payments are less than $50,000 and $90,000. The average length of term purchased by Settlement Capital is around 8 years. So the annuitants are selling roughly between $6,250 and $11,250 a year. More than two thirds of all transactions purchased are partials which leaves the seller with additional money.
A Monthly Labor Review Online study on 496 Massachusetts lottery winners showed winning $15,000 a year for 20 years would not have a major effect a winner’s labor force participation, automobile expenditures, the value of the home they own, and their savings, according to the study. It would be irresponsible of me to suggest that selling $15,000 a year and coming into $15,000 a year would have the same financial outcome, but there are some parallels. Most of the dissipation stories of lottery winners and inheritance recipients are dealing with value upward of $500,000 to $1,000,000+ .
Not everyone who has a structured settlement will meet the best interest standard that is applied to each transaction to be able to sell their payments either. Each structured settlement factoring transaction will be reviewed by the court and must meet the best interest of the seller taking into account the welfare and being of the seller’s dependents in order to be approved. There is no review process for lottery winners or inheritance recipients to insure it is in their best interest.Those who are looking to sell their payments already have a plan in place proving to the court that the money is going to benefit them in the long run opposed blowing through it without thought. All of them were given the opportunity to seek independent legal or financial advise. The idea of structured settlement recipients dissipating their annuity should not be a concern given the relatively small values associated with the transactions coupled with the strict regulation governing the approval process.
View Printer Friendly Version
Email Article to Friend
Reader Comments