Structured Settlement Offers

and

Independent Professional Opinions

 

 

     Do you have a structured settlement? Are you considering cashing in?

 

     If so, we can provide you with an independent professional opinion.

 

What is a structured settlement?

 

     A structured settlement is a contract of installment recovery in which the amount recovered is not paid in a lump sum.  Structured settlement payments can be made by either (1) a financially sound defendant or (2) a highly rated insurance company.  The defendant typically makes a qualified assignment of its liability to make the payments to the annuity subsidiary of an insurance conglomerate and provides a single premium annuity.

 

What do we do?

 

     We will provide you with a through independent professional advice, analysis (“IPA”).  Our IPA will include the following:

 

• A background check on the buyer

• An analysis of hidden fees

• An analysis of the discounted present value of your structured settlement

 

Example: $1,000.00 in 30 years would buy you as many goods and services, as $411.99 today considering the annual inflation rate of 3%. Or, $411.99 is worth today as much as $1,000.00 in 30 years considering the annual inflation rate of 3%. In short, the discounted present value or DPV of $1,000.00 in 30 years with the annual inflation rate of 3% is equal to $411.99.  This example stands true to understand DPV calculation in any currency.

 

• An analysis of the present value of your structured settlement payments

 

Example:  If you were to receive $480,000.00 in 240 time periods (e.g. weeks, months, or years) from now, that $480,000.00 would be worth only $1,619.02 today.  So, if today you were to invest the $1,619.02 at a rate of 2.40%, you would have $480,000.00 at the end of 240 time periods.

 

• An analysis of whether any portion of your structured settlement is excludable from gross income under IRC § 104(a)(2)  

 

What Does Michigan Law Require?

 

     Michigan has enacted specific legislation, effective in 2006, to deal with this situation.  Specifically, Michigan’s Revised Structured Settlement Protection Act, MCL 691.1301et seq., is designed to mesh with the federal tax code (i.e., IRC 5891), which taxes a transferee acquiring rights to future structured settlement payments. That Internal Revenue Code provision does not directly impact the transferor, but rather, the buyer of structured settlement payments.

 

     The key requirement of the Michigan statute is that there can be no transfer of the structured settlement payment rights unless and until there has been a final court or administrative agency determination . . . 

 

• that the transfer is in the best interest of the payee, taking into account the support of the payee’s dependents; 

• that the transferee has advised the payee in writing to seek independent advice and has either received the independent advice or waived the opportunity to do so; 

• that the payee would not suffer imminent financial hardship if the transfer is not approved; and, 

• that if the transfer occurred, it would not leave the payee unable to pay living expenses. 

 

       (MCL 691.1304)

 

     The statute also contains precise disclosure requirements. Not less than three days before the date on which the payment agreement is executed by the payee, the transferee must give to the payee a notice stating in bold 14-point type each of the following:

 

• the amounts and the due dates of the structured settlement payments to be transferred

• the aggregate amount of the payments to be transferred

• the discounted present value of the payments to be transferred “under federal standards for valuing annuities”

• the gross advance amount of the payments to be transferred, a listing of transfer expenses, and the net advance amount

• the penalties or liquidated damages payable by the payee if the payee breaches the transfer agreement

• a statement that the payee has the right to cancel the transfer agreement without penalty or further obligation not later than the third business day after the date that the payee signs the agreement

 

      (MCL 691.1303)

 

     Perhaps the most important and potentially contentious of these is the determination of the net present value of the payments to be transferred.  Under federal valuation rules, the IRS issues a monthly Revenue Ruling containing various interest rates to be used for various purposes in the following calendar month, including the so-called section 7520 rate used to value future annuity payments. That Revenue Ruling is typically released on the 20th day of the each month, and those rates are to be employed the following calendar month.

 

     If you have a structured settlement and need independent professional advice, contact us today.give us a call.