Minnesota recently became the first state to require outside counsel during the structured settlement factoring process. Factoring, or the sale of structured settlement annuity payment rights, has long been fraught with predatory practices. Minnesota’s legislation follows a Star Tribune series unveiling the devastating consequences faced by individuals who sold their payment rights. Here’s how you can protect your clients from risking their financial security.
What is structured settlement factoring?
A factoring company purchases the rights to all or a portion of structured settlement annuity payments. In exchange, the factoring company pays the original annuitant an immediate lump sum cash payment. The cash payment is often deeply discounted, leaving your client with pennies on the dollar and the loss of their long-term, tax-free income. In the meantime, the factoring company enjoys the full value of the structured settlement annuity policy.
While the sale of structured settlement payments requires court approval, the Star Tribune reported that judges are routinely deprived of information that could flag cognitive or mental competency issues. Individuals who suffered the consequences of initial injuries are then faced with the potential to be victimized again.
Creating a Thorough Plan
A detailed settlement plan is the key to preserving your client’s settlement for the long term. As soon as you open a case, contact your settlement consultant to begin helping your client plan. Your consultant will:
- Assess your client’s present and future financial needs
- If necessary, help your client access supplementary government benefits
- Determine issues that may hinder settlement resolution
- Review structured settlement annuity rates and other settlement options that may meet your client’s objectives
Your settlement consultant will also educate your client on strategies used by factoring companies. Your client can move forward armed with a comprehensive plan and the knowledge to protect themselves if factoring companies approach them.
Contact Your Sage Settlement Consultant Today
The best defense against factoring is ensuring your client has a customized, comprehensive settlement plan. For more information about structured settlement options, contact your Sage consultant today.