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Frequently Asked Questions
What is a structured settlement?
How flexible are structured settlement designs?
Why would I sell my future payments?
Do I have to sell my entire payment stream?
What will it cost me if I sell part of my future payments?
How long will it take me to get my money?
Does BestFACT, LLC buy payments which are not guaranteed?
What can I do if the court denies my structured settlement transfer?
Are there federal tax rules that apply to structured settlements?
What are the tax issues if I sell all or part of my structured settlement?
What is a "qualified assignment"?
What are BestFACT, LLC's underwriting criteria?
What is
a structured settlement?
In 1982, a bipartisan coalition of legislators in Congress amended the federal tax code. Their action, The Periodic Payment Settlement Act of 1982 (Public Law 97-473), formally recognized and encouraged the use of structured settlements in physical injury cases by designating payments from a structured settlement as tax-free.
Structured settlements are a method of compensating injury victims and are completely voluntary agreements between the injury victim and the defendant. Under a structured settlement, an injury victim does not receive compensation for injuries in one lump sum, but rather in a stream of tax-free payments designed to meet future medical expenses and basic living needs.
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How flexible are structured settlement designs?
Structured settlements are designed to be very flexible and can be designed for virtually any set of needs. A simple design might provide for equal payments at set intervals, such as equal payments every month for 20 years. However, a more complex design may include both increasing and decreasing amounts over time according to anticipated needs as they apply to your case.
Why would I sell my future payments?
Since the payment stream was negotiated and agreed to based on your anticipated needs, you should generally not sell your payments unless you have other needs that can not be met through other more viable options. The questions you should ask yourself are: (i) Do I need the money now?; and (ii) How much money do I need now?
Some good reasons why you might need the money now are to buy a house, pay for an education, pay off a high-interest credit card balance, invest in a business opportunity, or to avoid filing for bankruptcy. On the other hand, wanting to sell your payment stream to go on a cruise around the world or buy a new luxury vehicle might not be in your best interest.
For example, if you owe $20,000 on a credit card that is charging you 22% interest, you are probably paying over $365 each month in interest charges alone, and that is before paying down any of the principal balance. If you sell all or part of your structured settlement revenue stream to pay off the $20,000 balance, you have reduced your "expense stream" by that same $365 each month. That reduction in your "expense stream" may offset the revenue stream you sold.
The second question becomes significant when you only want to sell a portion of your revenue stream. Because you can sell a portion of the revenue stream without selling the entire revenue stream, you can pick and choose which payments to sell and which to retain. For example, based on your personal situation, you may want to only sell the revenue stream from years 2 through 5, and retain the revenue stream for the next two years and the revenue stream that continues after 5 years. Another alternative could be for you to sell only a portion, perhaps half, of all of your payments for the next ten years, while keeping the revenue stream from the unsold balance.
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Do I have to sell my entire payment stream?
It is in your best interest to sell as little of your payment stream as necessary to get the funds that you need now. Although you may want as much as you can get now, you should decide beforehand how much money you really need. We can customize transactions for you. We can arrange for you to sell your entire revenue stream, a portion of your revenue stream, or we can even split monthly payments and lump sum payments in many cases.
What will it cost me if I sell part of my future payments?
The most important thing to remember is that you do not owe us anything unless we get results, so it costs nothing to start working with us. We have no hidden fees or charges. You pay us nothing up front and will not incur any out-of-pocket expenses to complete the sale. In some cases, we may collect reimbursement for our out-of-pocket expenses by deducting amounts for certain previously disclosed items such as court costs, legal fees, or broker commissions from your net lump sum payment. We are generally compensated for our services over time from the discount rate applied to purchase the future revenue stream from your structured settlement, annuity, mortgage note, or other long-term obligation.
How long will it take me to get my money?
We can usually put cash in your pocket in a matter of days. While the actual transfer process may take several weeks, we work with highly experienced attorneys who give us the confidence to get you cash immediately, rather than wait for the final transfer approval. In some instances, we may require additional collateral, but we will be flexible in working with you to get you the money you need as quickly as possible.
Does BestFACT, LLC buy payments which are not guaranteed?
No. BestFACT, LLC only purchases settlements that are backed by "A" rated companies.
What can I do if the court denies my structured settlement transfer?
Despite frustrations you may have with the courts and the parties you have dealt with in the past, Rapid Settlements can help. We have full confidence in being able to work with the courts to obtain an approved structured settlement for you, which will include a partial lump sum. Depending on the collateral you have, Rapid Settlements can still put cash in your pocket, often in a matter of days. And you will have cash in hand plus an approved structured settlement transfer instead of the "be patient" letters you may now be getting.
Are there federal tax rules that apply to structured settlements?
The Periodic Payment Settlement Act of 1982 (Public Law 97-473) formally recognized and encouraged the use of structured settlements in physical injury cases by designating payments from a structured settlement as tax-free.
Section 104(a)(2) of the Internal Revenue Code clarifies that the full amount of the structured settlement payments, including the acceleration when, for example, Rapid Settlements purchases your annuity, is tax-free to the victim.
What are the tax issues if I sell all or part of my structured settlement?
The Internal Revenue Service has ruled that where a claimant (i.e., you) assigns periodic payments due to be received under a settlement agreement in exchange for a lump sum, the lump sum remains tax-free.
As part of the Tax Relief Act of 2001 (H.R. 2884) signed by President George W. Bush on January 22, 2002, individuals who must sell their structured settlement payments to meet unplanned financial needs are protected. This legislation made it mandatory for individuals to seek court approval when they sell their structured settlement payments, and works in conjunction with state laws directing how these types of transactions will be completed. In addition to benefiting and protecting the individuals, it also makes clear that annuity providers will suffer no tax consequences as a result of these transactions. The legislation states that annuity owners and providers do not now owe, nor have they ever owed, taxes as a result of these transactions.
What is a "qualified assignment"?
The defendant or its insurer may transfer the obligation to make future payments through a "qualified assignment" to a secure and experienced financial institution, such as a life insurance or annuity company. The assignment provides the injury victim with strong financial security, and the defendant can close its books on the case. This process relieves the defendant of further responsibility for the payments, and transfers the administration and record-keeping responsibilities.
To protect the public, Congress specified (in IRC Section 130) the requirements to establish a qualified assignment:
- The assignee assumes the liability from the
defendant;
- Both the victim (and attorney) and the defendant
agree that the payment schedule cannot be "accelerated,
deferred, increased, or decreased"
- The payment stream may be excluded from the
recipient’s gross income for tax purposes;
- The injury must be a physical sickness or injury;
and
- A highly secure funding asset, such as an annuity
or U.S. government bond, must be used to fund the payments.
What are BestFACT, LLC's underwriting criteria?
Our overriding concern for consumer protection and the integrity of each transaction, dictate that we adhere to certain guidelines for evaluating each potential transaction. These guidelines are consistent with the underwriting requirements of the National Association of Structured Settlement Purchasers. Our staff will help you with the documentation to make the process as fast and easy as possible. Each claimant must meet the following requirements:
- Submit a complete and signed application with
all requested attachments.
- You must not be a convicted felon.
- You cannot be in bankruptcy or in the prospect
of bankruptcy. However, you may have been discharged from a past
bankruptcy filing.
- You must be competent to enter into a contract
(or a court order will be required). This means, for example,
that you are at least 18 years of age and not adjudicated incompetent.
- Your household income must be in excess of
$10,000 per year exclusive of the settlement payments.
- Limitations apply if you cannot work, or if
you rely on the settlement for medical necessities.
- The following debts must be paid simultaneously
with or prior to funding: (i) federal, state, or local tax liens;
and (ii) past due alimony and child support.
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