Eugene Ahtirski Structured Settlement Attorney
Structured Settlement Questions & Answers
1. Does the "independent professional advice" that I seek still have to get paid if the transfer agreement does not get through?
Yes. Whether it's an attorney, certified public accountant, actuary or other licensed professional; their compensation for rendering independent professional advice is not affected by the occurrence or lack of occurrence of a settlement or transfer.
If they were engaged by a claimant or payee to render advice concerning the legal, tax, or financial implications of a structured settlement or a transfer and they are a licensed professional, then they have met the qualifications to get paid, according to law in California.
2. Can the transferee or the Company wanting to buy my structured settlement recommend an attorney or licensed professional to help advise me?
No. The transferee may refer the payee ONLY to a lawyer referral service or agency operated by a state or local bar association and that is it. If they do otherwise, they will be breaking the law in the state of California.
What has happened the past is the transferee (the company buying your structured settlement) will recommend a licensed professional that is on their payroll and/or the payroll of the casualty insurers that is funding the transferee. So claimants never got a straight answer, never got a fair shake at the contract.
3. What is meant by a factoring company?
An agent who buys or sells for a principal on a commission basis without having title to the property. This is your middleman. The factoring company is acting as an agent for a larger company that is a state-insured and approved insurer.
It is not easy for an Insurance Company to get the state approval, especially in California. If you went to the California Department of Insurance's website, you could type in the name or just a couple of letters of a name, and see if the company shows up. If it does, it is a state approved insurer.
4. The factoring company is charging me certain expenses? Is this legal and what are they?
It is legal. The word "expenses" in this context, is clearly explained in the California Code of Regulations. By law, the factoring company can charge you for:
their commission, service charges, application or processing fees, closing costs, filing or administrative charges, legal fees, notary fees and other commissions, fees, costs, and charges that a payee would have to pay to transfer the structured settlement payment rights of a structured settlement agreement or that would be deducted from the gross consideration that would be paid to the payee in connection with the transfer of the structured settlement payment rights of a structured settlement agreement.
By law, the company is supposed to list each expense so you can see, and hopefully your attorney (you should have one at this point) will see too. This list is supposed to show up in the contract itself.
5. Do I have to be living in California to transfer my structured settlement in the state of California?
No. The legal term is "domiciled", which means whichever state you have a substantial connection with, or consider your permanent residence. This covers people who live in their RV or vehicle and "live" in many states all the time, and who do not 'claim' a permanent residence - we got you covered too.
You do not have to be domiciled in California, BUT the structured settlement obligor or annuity issuer has to be domiciled in California.
6. What does the phrase, "structured settlement obligor" mean?
The party that has the continuing periodic payment obligation to the payee under a structured settlement agreement or a qualified assignment agreement. Like MetLife for instance. The defendant purchased an annuity from MetLife in order to compensate you for the personal injury. MetLife would be the obligor.
7. Am I the transferee?
No, not if you're the one trying to sell your structured settlement payment rights. The transferee is the entity or factoring company that will be receiving your payment rights.
8. Why is the term "transfer" used when I just want to sell my structured settlement?
It's a legal term. The state of California has defined "transfer" in this instance to mean, "...any sale, assignment, pledge, hypothecation, or another form of alienation or encumbrance made for consideration." When the term, "alienation" is used here, they mean " -- you -- separating from what used to be yours". "Encumbrance" means you're unloading what is a burden.
9. I am confused as to what exactly is a "qualified assignment". And, if I don't have one, there will be a tax liability of 40% to be paid by the transferee. What does this mean?
The government wants you to have a tax break, by not having to pay taxes (for all interested parties) on the transfer of your structured settlement rights. But they cannot give you the tax break unless you are a "qualified assignment".
According to the US Code, where they define "qualified assignment" for use in matters like selling your structured settlement so the IRS knows what they mean too:
"...means any assignment of liability to make periodic payments as damages (whether by suit or agreement), or as compensation under any Workman's Compensation Act, on account of personal injury or sickness..."
Basically, if your structured settlement was generated out of a court mediation or a court suit. Having the status of "qualified assignment" also gives you greater rights than a "general creditor". You are a creditor with greater rights than a general creditor.
This means, if there is any kind of bankruptcy of the company that is legally obligated to make payments to you, you would be paid off before "general creditors" would be paid off.
The term "qualified assignment" has many contributing elements that define it. Far too many for the scope of this FAQ section. But, for the quick definition, this will suffice.
10. Is my ex-wife considered a dependent in the eyes of the court, when they're considering my petition to sell my structured settlement?
Only if you're paying alimony or if you are legally responsible for her. "Dependents" means any minor children, your current spouse and all other family members and other persons for whom the payee is legally obligated to provide support - including alimony.
11. Will I receive payment after I sign the transfer agreement?
No, not immediately after. After you sign the transfer agreement, you will receive, or should receive a statement indicating that the payment will be delayed up to 30 days or more after you sign, so the courts have time to approve it. In that time period, a copy of the transfer agreement will also be sent to the attorney general.
The rules are a little different here if you are not domiciled in California at the time of signing the transfer agreement; best to consult with an attorney.
12. How will all of my notifications regarding the transfer agreements be sent to me? USPS? UPS? Fed Ex? What can I expect?
In California, by law, all notifications will be mailed via the United States Post Office, First-Class mail and will be deposited for mailing NOT LESS than five calendar days prior to the date on which notice is required.
As far as mail goes, (not Periodicals) the Post Office only forwards First-Class mail to a permanent address change for up to 12 months. Then it gets thrown away or Return to Sender. Make sure your current address is on file so you can meet the deadlines.
If there is any doubt that your Postal Carrier might not know your name at an address you believe is your permanent address, find out and clear the matter up by going directly to the Post Office, with your picture ID and documentation that associates you with the address and talk to the Carrier personally. You can do this before 7 a.m. and knock on the closed door and give your address, and that you wish to confer with the Carrier for that route. There should be no reason why you cannot receive this mail in a timely fashion.
13. It's my money, it's my contract, it's my life. Can I voluntarily "waive" a required provision in the transfer agreement?
No. As unfair as it may seem, none of the provisions required by law in the transfer agreement may be waived by the payee.
14. Who is responsible for submitting all of the necessary documents to the Courts and to the Attorney General?
It's actually to all "interested parties", and the Courts and the Attorney General. The transferee is responsible. The transferee is the company trying to buy the future payment stream from you.
It's a lot of paperwork and footwork. The transferee is also responsible to give you the "disclosure notice" which is a document required by law that is given to you before the transfer agreement contract.
15. When am I supposed to receive the "disclosure notice"?
Ten or more days before you (the payee) carry-out and complete the entire transfer agreement. The disclosure notice is like a summary of the transfer agreement. It's also like a court-ordered "heads-up" to you to make sure you are fully aware of what's about to happen and what the terms are.
16. What could delay the agreement getting approved?
One example is if the transferee, (company buying the structured settlement future payments), cannot locate all the documents required to be submitted to the courts. One of the documents needs to be to the "attorney of record" that assisted you if within the last 5 years with the initial structured settlement to alert them that this sale or agreement is about to take place.
This attorney is considered an "interested party" in the eyes of the law. With this designation as an "interested party" the lawyer could write objections or approvals to the sale that's about to take place.
If for some reason, the transferee cannot locate the attorney, and has literally asked you, the payee, about this and STILL cannot locate the attorney of record at that time, then the transferee does not have to submit paperwork from this attorney; but they have to try. That takes time.
17. I'm aware that the transferee is responsible to submit all necessary documents, but what is the time frame? I'm confused. There's the hearing, some disclosure notice, help!
Not less than 20 days before the scheduled hearing of your petition for approval for the transfer, the transferee has to file with the court and interested parties all required documents.
Not less than 10 days before that, the transferee has to give you a written disclosure statement that is required by law.
You have about a month and a half to two months wait before the hearing. Remember, the transferee has a lot of legwork to do. Your annuity contract could have a nondisclosure provision or a confidentiality clause and if that's the case, there will be a ANOTHER hearing scheduled to address just that.
18. What exactly are the necessary documents?
- A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court.
- A copy of the proposed transfer agreement and a copy of the form used for disclosure.
- A copy of the "disclosure notice" with signatures and dates (the dates are important on this document, they have to reflect a proper time frame).
- A listing of each of your (payee's) dependents, together with each dependent's age
- A copy of your annuity contract
- A copy of the underlying structured settlement agreement, if available
- Proof that all interested parties have received copies of all of this too.
If any qualified "interested parties" want to write a letter "for or against" this transfer - or just to respond - , those documents will be necessary too. And there's a specific time frame for this to happen.
And there is the document that needs to be sent to the "attorney of record" of the original settlement if it was within the last 5 years prior to the transfer agreement proposed date.
19. What exactly is meant by "effective equivalent interest rate"?
With respect to a transfer of structured settlement payment rights, means the annualized rate of interest on the net advance amount, calculated by treating the transferred structured settlement payments as if they were installment payments on a loan, with each payment applied first to accrued unpaid interest and then to principal.
20. What is the exact legal wording supposed to be in the transfer agreement?
This is important to know. It has everything to do with the total net amount you will be receiving. By law, the transferee has to break down what your effective equivalent interest rate is and why:
"YOU WILL BE PAYING THE EQUIVALENT OF AN INTEREST RATE OF ___% PER YEAR.
Based on the net amount that you will receive from us and the amounts and timing of the structured settlement payments that you are transferring to us, if the transferred structured settlement payments were installment payments on a loan, with each payment applied first to accrued unpaid interest to us of ___% per year, assuming funding on the effective date of transfer."
The quotient (expressed as a percentage) is obtained by dividing the net payment amount by the discounted present value of the payments.
Structured Settlement Questions