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Integrity Funding
Sources
Annuitys & Structured Settlements: The
Controversy Of Selling Payments
by: Virginia Dunn
"Are You Receiving Payments From A Structured Settlement,
Annuity Or Lottery But You Need Cash Now?"
You've seen the ads. A distinguished gray-haired gentleman
touting the benefits of selling your structured settlement
payments. Loud, high profile commercials encouraging you to
get cash now for your future annuity payments. "Get Your
Money Now" seems to be all over the cable channels.
What is this wave of commercials and who are these people
who are trying to get you to sell your structured
settlements and annuity payments? Is selling your structured
settlement payments legal? Isn't there language in your
annuity contract that says you can't do this? Is it smart to
sell your annuity payments at the present day value for a
lumpsum of cash?
Much controversy has arisen about this relatively new
practice of cashing in ones structured settlements or
annuity payments, a practice which is just one facet of a
much larger industry known as "Diversified Cash Flow".
Is it legal to sell your structured settlement or annuity
payments? Your insurance company will tell you "NO". And yet
people are selling them all the time. What is the real scoop
here?
Structured settlements, and the annuities that go along with
them, are an interesting animal and the entire picture is
highly complex & difficult to understand. The annuities
themselves represent a very large income stream for
insurance companies. Additionally, the fact that the
settlement awards are structured provides a means for the
insurance industry to secure huge tax breaks from the
government.
Here is their pitch: By structuring the payments of an
injury award over time, the insurance company is providing
long-term support for the injured party, thereby keeping
them off of welfare. By keeping these people off of the
roles of government subsidy, insurance companies are
providing a valuable public service - hence, they should
qualify for tax breaks.
Our government agrees.
Obviously, there are a lot of holes in this philosophy. The
first one that comes to mind is this - Structured
settlements include annuity payments to the injured party
which are tax free. They are NOT reported to the government
as income. Since there is no record of these payments, what
is to stop the recipient from going on welfare anyway?
Another thing to think about is that many people who receive
these payments do in fact work full time and were never
candidates for welfare in the first place. Some received
these payments as compensation for the wrongful death of a
spouse or a child, some may have sued an employer or an
irresponsible professional, company or industry. There are
many ways that a settlement can come about and only a
fraction of those settlements are for injuries that could
force people onto welfare.
Of course, the insurance companies make a lot of money on
these deals, not only in the tax breaks they receive, but
also from the interest they earn on the annuities that are
purchased for the structured settlement payments to be made.
(Note that the annuity does not belong to the injured party.
It belongs to the insurance company. Any income earned from
the annuity that is above and beyond the required payments
belongs to the owner of the policy, and who is that?) And,
it goes without saying that the injured parties, as well as
their attorneys, would be quite surprised to learn just how
little was actually paid in order to meet those future
structured settlement payments.
How profitable are these settlements and annuity agreements
for the insurance industry? It's hard to say and the
insurance companies want to keep it that way. Their industry
is spending tons of money and flexing their political
muscles to stop the practice of selling annuity and
structured settlement payments altogether. To this end, they
have been lobbying heavily at the state level to enact
legislation to make the selling of structured settlements
and annuity payments illegal. Already in the states of
Illinois, Connecticut, Kentucky, Virginia & West
Virginia, their lobbyists have successfully placed
roadblocks which have made it difficult or impossible for
people to sell their payments. They call this protecting the
clients interests. (Note that although this practice is
presently illegal in Texas, an alternative "loan" program
has been introduced, with that states blessing.)
Will this bring an end to the selling of structured
settlement and annuity payments?
Not a chance. In fact, the evidence indicates that just the
opposite is true. Structured Settlement Purchasers are
fighting the huge insurance lobby on a variety of fronts -
and clearly holding their own. Instead of slowing the
traffic of sellers, the number of people who are converting
their structured settlements and annuitys payments to cash
is growing by leaps and bounds. Why? Because people need
access to their money.
Insurance companies have demonstrated over and over again
that they are totally inflexible in regards to the payments
of structured settlements. It does not matter how
drastically your circumstances have changed. Once you've
settled, you're done. There is no way to gain access to any
of your money in advance of the payment due date, no matter
what the crisis or how desperate the circumstances. It is
this total lack of flexibility in helping recipients in a
time of need that prompted the creation of the structured
settlement purchasing industry. It was an answer to a clear
need and a desire to help that has now formed into a win /
win situation for many, recipients and investors alike.
Annuity and structured settlement purchasers, or "funders"
as they are known, have launched a campaign aimed at
bringing this industry into the mainstream. The Diversified
Cash Flow Institute, together with the Open University, has
brought forward their vision of educating people about this
industry and the options that are now available, for both
structured settlement payment recipients and professionals
who desire to work in this arena. Other members of the
structured settlement purchasing community are using
television, radio, newspapers and the world wide web to get
their message out.
What is that message? Simply that if you are locked into
payments from a structured settlement or annuity case, and
waiting for those payments is not serving you - you now have
a choice. You should know your options. Structured
settlement purchasers urge recipients to examine their
individual situations and then make an informed decision
about what is best for you, for your family, for your
life.
After All, It Is Your Money!
The preceeding article was written by Virginia M. Dunn,
an independent broker, certified diversified cash flow
specialist, and owner of Integrity Funding Sources. For more
information on this subject, or to learn how to get top
dollar when selling your structured settlement or annuity
payments, please visit our website @ http://IntegrityFunding.net
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