FREQUENTLY ASKED QUESTIONS
What is a structured settlement?
Are structured settlement designs flexible?
Why
would someone sell his or her future payments?
Would
I have to sell my entire payment stream?
If
I sell all or part of my future payments, what will it cost me?
If
I sell all or part of my future payments, how long will it take to get my
money?
Does
Rapid Settlements buy payments that are not guaranteed?
What
can I do if the court has denied my structured settlement transfer?
What
are some of the federal tax rules applicable to structured
settlements?
Are there tax consequences if I sell all or part of my structured settlement payments?
What is a “qualified
assignment”?
Is Rapid Settlements bonded and insured?
What are Rapid Settlements’ underwriting criteria?
What is a structured settlement?
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.
Are structured settlement designs flexible?
Structured settlement designs are 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 specifically to your case.
Why would someone sell his or her future
payments?
Since the payment stream was negotiated and agreed to in consideration of your anticipated needs, you generally should not sell your payments unless you have other needs that cannot be met through other more viable options. The questions you should ask yourself are:
- Do I need the money now?
- How much money do I need now?
Some
good reasons as to why you might need the money would be to buy a house,
pay for an education, pay off a high-interest credit card balance, invest
in a business opportunity, or to keep from filing 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 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 as well as the revenue stream that continues after 5 years. Another alternative would 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.
Would 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 currently need.
Although you may want as much money as you can get at this time, you should
decide exactly how much money you really do 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.
If I sell all or part of my future payments,
what will it cost me?
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, future payments, annuity, mortgage note, or other long-term obligation.
If I sell all or part of my future payments,
how long will it take 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.
With specific regard to court-approved structured settlements (this does not apply to out-of-court settlements and other types of long-term obligations), we only purchase future revenue streams in states that have enacted Structured Settlement Protection Acts for your protection. While specific provisions may vary by state, in general, the laws require that a court order be obtained to sell your anticipated payments due under a structured settlement. The court process does take some time, during which a judge reviews the documents to ensure that you are receiving a fair amount and that the payments that you have retained are protected. Once you are in court, there are statutory waiting periods, and the judge and the insurance companies may further delay the proceedings, as you may have already experienced. However, the total process is usually completed in a matter of weeks.
Does Rapid Settlements buy payments that
are not guaranteed?
Yes. Rapid Settlements is one of the only companies that will purchase non-guaranteed ("uncertain" and "for life") and guaranteed ("certain") payments. In the case of non-guaranteed payments, please complete the online form (found under Contact Us) or contact one of Rapid's account executives to help you identify the life payments that are appropriate for purchase by Rapid Settlements. Rapid does not require the purchase of a life insurance policy and all underwriting is done in-house by Rapid Settlements.
What can I do if the court has denied
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 payment. Depending upon 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.
What are some of the federal tax rules
applicable 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.
Are there tax consequences if I sell
all or part of my structured settlement payments?
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 payment, 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.
In what states does Rapid Settlements
purchase structured insurance settlements, annuities, and other long-term
obligations?
Currently, we are working with structured settlements in those 39 states that have enacted Structured Settlement Protection Acts. Those 39 states (in alphabetical order) are:
Alaska Arizona California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kentucky |
Louisiana |
North Carolina |
Several states have legislation in process at this time. Because new legislation is being passed regularly by additional states, you should contact us even if you live in a state not listed. At this time, we are not working with structured settlements approved by courts outside the United States.
Rapid Settlements purchases structured insurance settlements, annuities and other long-term obligations. We draw upon a team of CPAs, financial analysts, attorneys, and others to expedite the purchase of annuities and other financial instruments. Many of these transactions require court approval, and Rapid Settlements is staffed to process these transactions as applicable throughout the United States.
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 company or an 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.
How can claimants assign periodic payments when the insurance company says that they are not assignable?
The annuity itself is not assignable because you do not own the annuity. The life insurance company or its subsidiary, that initially issued the annuity, typically owns it. Therefore, since you do not own the annuity, you cannot assign it. What you do own, and therefore can assign, is the right to receive periodic payments due under the release and settlement agreement. That is an absolute property right you have under the settlement agreement–it is your right to receive the periodic payments that you may assign in exchange for a lump-sum payment.
Is Rapid Settlements bonded and insured?
Rapid Settlements has a Blanket Third-Party Fidelity Bond to protect you from any fraudulent, dishonest, or negligent acts committed by Rapid Settlements’ employees or contracted legal and accounting consultants. Rapid Settlements is also insured for commercial general liability.
What are Rapid Settlements’ underwriting
criteria?
Our overriding concern for consumer protection and for 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.