Structured Settlements and IPA's

Updated: Oct 19

If your considering selling a structured settlement or insurance annuity consider this.

Selling a structured settlement is always a money loser 100% of the time.


A structured settlement is a financial arrangement between an insurance company and a person that arranges for the payment of court awards and lawsuit settlements in tax free installments instead of in a single payment. Each structure is created for the specific individual so that it’s valuable and helpful for them. The payment period and amounts will vary.


Structured settlements are now used in a wide variety of types of lawsuit settlements such as:

  • aviation

  • construction

  • auto

  • medical malpractice

  • product liability

Other uses for structured settlements are:

  • divorce

  • minor children

  • estate planning

  • tax planning

  • trusts

Structured settlements may include income tax and spendthrift provisions.


Your attorney and structured settlements professional invested time, effort and expertise in creating your individual settlement plan, so we recommend that any decision you’re considering to sell the payments be carefully and seriously considered. Often, it’s just better for your situation to keep your payments rather than sell them.


While the original settlement was set up with your future needs in mind, times change. So, you may be faced with the need to adapt to unexpected events in your life. That’s when selling part or all of your structured settlement may be a good option so you can get cash for structured settlement payments.


The Structured Settlement Protection Acts are laws in 49 states and the District of Columbia that exist to protect recipients of structured settlement payments from the predatory purchasing practices often associated with the sale of structured settlement payments. Specifics of the laws vary from state to state, but all protection acts reflect the same basic intent.

Structured settlement factoring transactions
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Download PDF • 562KB

Structured settlement factoring transactions, which implemented the protections, imposes a 40 percent tax on anyone who acquires settlement payment rights in a transaction that doesn’t qualify for an exemption.


To get an exemption, a payment sale must receive approval from a local court, which determines whether the sale complies with the relevant state’s SSPA.


Regardless of whether you choose a lump-sum payment or a structured settlement, it is worth your while to consult with a tax professional, accountant, or financial planner to determine how the structure of your award or settlement will help you to maximize your outcome based on your personal circumstances and to achieve your financial goals.


As a Registered Investment Advisor, Akin Investment will be happy to meet with the interested parties. We will provide a comprehensive review of the recipients financial condition and discuss the options that are available to them. At the conclusion of this review we will provide an "Independent Professional Advice" letter.


Independent Professional Advisors (IPAs) are certified financial services experts. The Structured Settlement Act of 2002 defines the qualification for this role as professionals working as certified public accountants, actuaries or licensed professional advisors. Their expertise enables them to consider the pros and cons of a major financial decision and to provide you with a written recommendation.


Structured settlement recipients pursuing the sale of payments can meet with an IPA and receive a recommendation in favor of or in opposition to selling payments.


The cost will depend on which type of professional you turn to and their rates. Consultations (which include formal documents) can range from $500 to $1,500. Some buyers will reimburse sellers for this cost, but will not directly choose and pay for the IPA as this could result in a conflict of interest. Federal law prohibits the IPA from being affiliated with or employed by the settlement buying company. This protects the seller and ensures advice is impartial.


Sellers then bring the recommendation to court—if the letter endorses the transfer—when attending the required hearing that is part of the selling process. A judge considers the IPA’s recommendation as a factor in deciding whether or not to give approval.


In Mississippi:

The purchasers must advise the seller in writing to seek professional advice.

Structured Settlement Protection Act Mississippi
.pdf
Download PDF • 530KB

In South Carolina:

The purchaser must advise the seller in writing to seek professional advice. Transfers of structured settlements related to workers’ compensation benefits are not allowed.


Structured Settlement Protection Act”. South Carolina
.pdf
Download PDF • 530KB


 

Need help? I'll be happy to guide you. Remember Akin Investments is a fiduciary advisor. We sell no insurance or financial products.