It might not be too tough for you to assume that structured settlements markets are a recent development in the financial sphere. However, you assumption would be wrong, as most of the premier players in the annuity selling and purchasing markets have almost 20 years of operational experience.
It was actually in the mid 1990s that the structured settlements purchasing industry got entrenched, in direct response to the increasing demand of annuity owners who wanted to sell off their long term cash inflows for immediate cash. However, this is nothing as compared to the gravity of other misconceptions and myths that are prevalent among people, in terms of what they think about structured settlements purchasing markets.
1. Attorneys are reluctant to suggest structured settlements to people because the latter are likely to encash them anyways
The above is a well spread myth about structured settlements. However, if one were to observe actual facts rather than assumptions, the results of the same would be that almost 95% of people having structured settlements stick to the annuity plans. The 5% who opt for immediate cash by selling off structured settlement annuities do so only because of severe changes in their financial conditions post the structured settlement scheme. In fact, the attorney ideally wants to suggest a financial recourse that can provide for the complete financial security of the client. So, a structured settlement that can be encahsed if justified by the severity of the situation proves to be the safest option from the attorney’s point of view.
2. When a person sells off his/her tax free long term annuities, he/she is bound to pay the taxes on the payment he receives from the structured settlement purchasing company
It’s sad to note how people are misled into continuing with their crawling annuities when immediate cash requirements stare them in their face, all because they are fearful of having to unnecessarily pay taxes on encashing their tax free annuities. However, it is clearly specified in the taxation laws that tax free annuities, if converted into immediate cash, will not attract any taxes.
3. All it needs to woo a person having structured settlement annuities into selling them off is a late night TV commercial!
There could hardly be anything more distant from the truth. The very nature of Structured Settlement Transfer Acts ensures that a person having structured settlement annuities has several routes to retract on his/her plans of selling the annuities. So, even if somebody makes the choice to sell instinctively, there is a lengthy period of processes, acknowledgements and approvals that provides ample opportunity to the person to retract.
Apart from the ones mentioned above, there are some other myths prevalent in the industry. It is wrongly believed that the structured settlements purchasing industry is not regulated, whereas there are several federal and state laws governing their practices. Also, the high rate of approvals from the court tends to raise suspicions among whistleblowers, something which is unfounded.
The above article is contributed by Alex H. Alex is a seasoned blogger who covers range of topics from personal finance to sports fitness.