In the last couple of decades, the secondary market for transferring life contingent structured settlement payments as rates have come down and the value of future payments has increased. As with any burgeoning industry, this one comes with a lot of misconceptions about the process, so in this article we will review some truths and some myths about the structured settlement funding process.
Myth #1: You can’t transfer or sell life contingent payments.
You can absolutely obtain funding for your future life contingent payments. The process is largely similar to that of guaranteed structured settlement payments, however the process for valuing life contingent payments is a bit different. For guaranteed payments, the risk is largely associated with the claims-paying ability of the annuity issuer, and because these issuers are large insurance companies with well-capitalized balance sheets, investors are comfortable with the risk. However, life contingent payments come with an additional risk: mortality of the beneficiary.
The investor in the payments must make an assessment about the longevity of the beneficiary to determine the probability that life contingent payments continue to be disbursed. This is typically done by obtaining a life expectancy report that gathers information about your lifestyle to make the appropriate assessment. With the help of such a report, an investor can properly underwrite mortality risk and make an offer for your life contingent payments. However, keep in mind that because of this additional risk factor, the “discount rate” applicable to the transfer will typically be higher than that for a typical transfer of guaranteed structured settlement payments.
Myth #2: The timeline for obtaining the present value of your future life contingent process takes from six months to a year.
Transferring future structured settlement payments, whether guaranteed or life contingent, is governed by state and federal statutes that make little differentiation between the two types of payment streams. There are certain jurisdictions where hearing dates are scheduled further out in the future than other jurisdictions, but this is due to the volume of other matters that the court is scheduled to rule on.
In reality, if a settlement transfer of life contingent payments is experiencing multiple delays, it’s likely because the funder is not experienced with these types of payments and has made mistakes along the way. Life Contingent Capital specializes in the valuation of future life contingent payments and is committed to a smooth and quick funding process.
If you have any questions about the time or for a free quote, you can reach out to LCpayments online or give them a call at (833) 760-4006. Oftentimes, they can provide a quote over the phone in just minutes!
Or, head over to this page if you’d like more information on these types of settlements.
Myth #3: I’m responsible for covering expenses involved with selling life contingent payments.
By law, the purchaser you are working with to transfer future payments is required to disclose all fees and charges that would be deducted from the agreed-upon purchase price. Other items in this “disclosure statement” include a full description of the amounts and due dates of payments being transferred, present value of the future payments subject to the transfer at the federal discount rate for valuing annuities as well as the aggregate value of the payments being transferred.
Life Contingent Capital charges no fees whatsoever in connection with obtaining a life expectancy report or other documentation required to consummate a transaction. They also cover the costs of filing transfer paperwork and obtaining a court order approving the transfer. Therefore, at the culmination of the settlement funding process, you’ll receive exactly the purchase price that was agreed to in the transfer agreement. No surprises!
Myth #4: Even after my transaction is approved, the funding process takes weeks and sometimes even months.
Delays in funding are rare but do happen to those investors that are inexperienced with life contingent payments. Their network of investors understands mortality risk and the documentation needed to properly document it, which means they are ready to fund as soon as a court order is obtained. Typically, it may take a few days to receive your funding via wire transfer or bank check, but this is a standard timeline in terms of submitting the appropriate paperwork to the investor.
Life Contingent Capital and its affiliates are purchasers of assets. Nothing written on this website or blog should be construed as financial, tax or legal advice; you should obtain independent financial, tax and legal advice in connection with any transfer of structured settlement payment rights.
