Why you may want to consider using an IPA (Independent Professional Advisor) for your structured settlement transfer.
All state transfer statutes require that sellers of structured settlement payments either receive, or knowingly and voluntarily waive Independent Professional Advice. Consequently, it bears explaining why the lawmakers thought it necessary to include this requirement. After all, individuals can sell any other asset of value under the sun without consulting a professional, so why should the sale of structured settlement payments be different? The answer lies is that structured settlement payments are intended to provide an ongoing source of income as compensation for personal injury. When payees sell structured settlement payments they are changing, at least in part, a payment structure put place for their long term benefit. As a result, the lawmakers of the various state transfer statutes thought it was important for individuals to consult an outside source on the merits of changing the structure of the payment stream or structure of the long term benefit, at least in part, an asset intended to provide a long term benefit.
Adequate Independent Professional Advice should consist of the following:
1)A full review and discussion of the transfer agreement. Any items of vagueness or anything that raises a question should be discussed immediately with the transfer company.
2) An analysis of the ongoing monthly financial needs of the client minus the annuity payments being sold. While the payee may raise a significant lump sum through the sale, thought should also be given to what is being sold and how monthly, ongoing expenses will be paid long after the lump sum has been used for its intended purpose.
3) An exploration of alternative to the sale. Taking into account that structured settlement payments cannot be pledged as collateral for a loan, money may still be available via a loan, say by borrowing against equity in one’s home, at a lower discount rate than the proposed sale. You and your advisor should explore all alternatives prior to making the decision to go through with the transfer.
4) Advice as to the tax liability. The IRS has determined via private letter ruling that the lump sum received from the sale of structured settlement payments is excluded from the calculation of gross income just like the receipt of the payments themselves, but all tax questions should be asked of the advisor, not the transfer company.
5) Validate the decision to sell. If a financial advisor cannot determine whether the transfer is in your best interest then it is highly unlikely that a judge will make that determination.
Not only is Independent Professional Advice considered by the law, it plays a vital role to the benefit of the sellers of structured settlement payment rights. Sellers who seek out such advice may feel better about their decision over the long haul and have a firmer financial foundation upon which to build a better future.
Knowledge of all your options and the pros and cons of making a transfer is something that a qualified Independent Professional Advisor will be able to help you understand. With a well-researched plan of action regarding the transfer is a benefit to you as the payee. Having a plan in place is of paramount importance in making the decision to either go through with the transfer or seek another option.
you may want to consider using an IPA or Structured Settlement Attorney
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