FAQ


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What is a Structured Settlement?

In 1982, a bipartisan coalition of legislators in Congress came together to pass legislation that 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.

 

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 to your case.

 

Why Would Someone Sell His or Her 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 cannot 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 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 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 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 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.

 

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 obtain 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 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, 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 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 payments due under a structured settlement. While the court order process does take some time, a judge reviews the process to ensure you are receiving a fair amount and that the payments that you have retained and not sold 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 typically completed in a matter of weeks.

 

Is RSL Funding Bonded and Insured?

RSL Funding is insured for only fraudulent, dishonest, or negligent acts. RSL Funding is also insured for commercial general liability.

 

Does RSL Funding Buy Payments that are Not Guaranteed?

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 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 payments due under a structured settlement. While the court order process does take some time, a judge reviews the process to ensure you are receiving a fair amount and that the payments that you have retained and not sold 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 typically completed in a matter of weeks.

 

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, RSL Funding 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, RSL Funding can still put cash in your pocket, often in a matter of days.

 

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, RSL Funding purchases your annuity, is tax-free to the victim.

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.

 

Are There Tax Consequences If I Sell All or Part of My Structured Settlement Payments?

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 RSL Funding Purchase Structured Insurance Settlements, Annuities, Mortgage Notes and Other Long-Term Obligations?

Currently, we are working with structured settlements in those 46 states that have enacted Structured Settlement Protection Acts. Those 46 states (in alphabetical order) are:

Alaska
Alabama
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wyoming

Several states have legislation in process. 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.

RSL Funding purchases structured insurance settlements, annuities, mortgage notes and other long-term obligations. We draw upon a team of CPAs, financial analysts, attorneys and others to expedite the purchase of annuities and mortgage notes. Many of these transactions require court approval, and RSL Funding is staffed to process these transactions throughout the United States.

We currently process loans related to mortgage notes.

 

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.

 

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 a subsidiary thereof, that 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.

 

What Are RSL Funding 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.