May 12, 2010
Most everyone has seen some version of a commercial about structured settlements, usually tied into “getting cash now.”
It can be confusing, complex topic, and many companies are not communicating accurate information. It’s actually a simple concept, but the legal documents make it seem much more complicated than it is.
What is a structured settlement?
A structured settlement, strictly defined, is a negotiated agreement in a tort action to provide payments over time. It happens after a court process where one party was hurt and the other party is told to pay. The matter could be personal injury, worker’s compensation for an on-the-job injury, property loss, wrongful termination or a wrongful death claim where a spouse and/or minor children are seeking compensation for lost wages and intangible support, or similar issues. Structured settlements are not usually considered for minor or short-term injuries.
It should be noted that lottery payments are not structured settlements. Those are agreements for periodic payments over time. There are fewer regulations on how to cash-out those payments – turning that revenue stream into a single payment.
May 15, 2008
Settlement Quotes released our discount rate and present value calculators for the public earlier this month. Now, we are providing a way that individuals can place our calculator on any website so consumers will be further educated about discount rates and pricing of structured settlement factoring transactions.
At this time there is not a reliable source for consumers to understand or price a structured settlement factoring transaction on their own. The only other known source by this author is TValue which costs in excess of $2k. Now, there is an opportunity for structured settlement brokers, judges, and attorneys to place these calculators on their websites, so tort victims will have the resources to price the present value or discount rate of their structured settlement.
Here is the page to obtain the code for the following calculators:
If you would like an effective discount rate calculator, please email me at acravenho@structuredsettlement-quotes.com or call directly at (860)454-4179. Please note that there is a small bug if you place both calculators on the same page. Please only place 1 calculator on any given page, otherwise they will not function properly. This should be fixed by Saturday.
April 8, 2008
Knowing something about at least the basic principles of investing is fundamentally important if you plan on getting into that game. Just as you wouldn’t buy a house without getting all the information on the structure and costs, or a car without ‘kicking the tires’, anyone who wants to invest their money either in the stocks or annuities should get to know a few basic terms and what they mean, the Time Value of Money is one of these.
In a nutshell, the concept behind it goes like this: We all know that having an something right at the moment is better than getting the same thing down the road. It’s better to have $50 dollars in your hand now than $50 dollars in your hand 3 years from now. Two things about this concept are important to understand. If you’ve got the money promised to you a 3 years from now, you’ve got to defer spending it for that time. Makes sense, right? It’s not hard to understand that you can’t spend what you don’t have. But there’s more.
You also miss the chance to make that money grow by investing it. This is a quick example of one of the big ideas behind investing—The Time Value of Money. The interest rates that we all hear so much about are the way that the macrocosm of a national or in some cases international economy determines the Time Value of Money. There are some other considerations that you’ll need to have a look at as well to get a complete understanding of this idea. The next is what economists call the Present Value. This all may sound like a lot, but it’s really just another simple concept.
Take that $50 dollar bill that we were using as an example. Simply put, the Present Value of that note is determined by the amount that you can earn today with it. If you’ve got that money in your hands, you can invest it or spend it, but right at the moment that it rests in you hands it’s worth 50 bucks. That’s easy. Now, we’ll add a little something to the mix.
There’s another idea that we should look at just so our whole treatment of the Time Value of Money is complete, and that’s called, as you might have been able to guess, the Future Value. So let’s have a look at what this means by taking our $50 dollar example again. The value we just discussed is of course the amount that you can earn in the future and one of the things that determines that is the interest rate. This is the lynch pin that determines the Time Value of Money. You might be asking yourself why this is important—there’s a simple reason for that too.
If the interest rates are low you might get more for your money in terms of value by spending it now. This is just one of the decisions that you’ll need to make when you’re thinking about investments of various kinds, including the ones that you want to make over the long and short term.
How Does This Relate to Structured Settlement Factoring?
Structured settlement factoring is based upon principals of time value of money. Is it better to wait years for your money, or to get your money now? The simple answer to this question is that it is better to wait for your money due to the discount rates applied to a structured settlement factoring transaction. The more complex answer is “why” do people need cash now for their future payments. Structured settlement factoring is setup for individuals who are in desperate need for money, not for individuals who have other options besides factoring their settlement payments.
It is always best to consult with a financial professional before cashing out a structured settlement or annuity policy. A financial professional will be able to help you find other options, if available, and if not available will be able to help you complete the process of factoring a structured settlement.
March 9, 2008
Settlement Quotes has received several inquiries for an explanation on why there is such a large difference between the present value and future value of a cash flow. We will use as an example the highly publicized Ciemielewski case to show our readers how the time value of money effects the lump sum payment an annuitant receives when factoring a structured settlement.
Mr. Ciemielewski was receiving two lump sum payments in 2019 and 2024. Settlement Quotes offered this individual $32,000, which is an 8.5% discount rate. To make this equation easier for our readers, we will say that Mr. Ciemielewski was only receiving one payment of $100,000 in 2024. The $100,000 figure would be the future value of the cash flow, while the $32,000 figure would be the present value of the cash flow.
Here are the formulas for Present Value and Future Value of a lump sum:
- PV= Present Value
- FV= Future Value
- i= rate at which the amount will be compounded each period or discount rate
- n= is the number of periods
Why can you only offer $32,000 for the $100,000 payment?
Because of the time value of money. Is $100,000 today the same as it will be in 2024? Actually, it is not. $100,000 can do far greater things now, than it will be able to do in 2024. This is the reason we can only offer $32,000 for the future payment of $100,000.
Lets take a look at what Mr. Ciemielewski can do with the $32,000 for the next 16 years.
This illustration shows how the time value of money effects the present value from the future value. If Mr. Ciemielewski saves the entire $32,000 at a decent interest rate, he can result in the same amount of money he would have previously received if he did not factor the payment.
Now lets compare our $32,000 offer to Sececaone’s $10,000 offer.
This illustration shows how miserable Senecaone’s offer to Mr. Ciemielewski really was. After 16 years at a 7% interest rate, he would not accumulate enough money to match our initial offer of $32,000.
We will continue with more examples and tools at a later date to help our readers better understand how the structured settlement factoring industry works. If you have any questions please comment and let us know.
February 14, 2008
How important is a companies reputation when purchasing structured settlement payments from tort victims? JG Wentworth is one of the largest companies in the structured settlement factoring industry, but it is important to note this companies Better Business Bureau record. The illustration below depicts an interesting trend over the last 12 months.
JG Wentworth has received 20 complaints over the last 36 months, but over the last 12 months this company has received 10 of the 20 complaints which is a 100% increase from the previous 24 months.
What is the increase in complaints attributed to?
February 13, 2008
It has come to this authors attention that consumers are having a difficult time factoring settlement payments where the original payee was Executive Life of New York. Several individuals have contacted us complaining of companies dropping their entire case days before the court date.
Settlement Quotes has been able to locate a few investors that are willing to purchase Executive Life Insurance of New York payments which are currently being payed out by Metropolitan Life (MetLife). Feel free to contact us to receive more information.
February 7, 2008
The following statement: “it is more expensive to sell less,” when referring to a structured settlement factoring transaction is true when speaking in structured settlement factoring language. The pricing structure of the factoring market uses discount rates as a scale to determine the cost to the annuitant or tort victim. There are several reasons that it may appear to be more expensive to sell less of your structured settlement.
Every structured settlement factoring transaction has standard costs associated with it. Below is a pie chart outlining these costs:
- Filing fees and court costs range from $2300- $2800 depending on the state
- Insurance transfer costs range from $500- $800 depending on insurance company and double if the payments are split
- Miscellaneous fees usually range from $150- $175
- Lien search costs are $300 (to make sure that the annuitant does not owe taxes, child support etc.)
- Fedex costs $50
These standard costs are present on every structured settlement factoring transaction whether the tort victim is selling a present day value annuity of $10K or whether they are selling an annuity with a present day value of $100K. The discount rates of the annuity are effected by the amount of costs to complete the transaction. The graph below illustrates the scenario.
As you can see the larger the present day value of the annuity, the lower the discount rate of the transaction equates to.
This scenario is an example of how the discount rates are effected by the standard costs of a factoring transaction. Settlement Quotes does NOT suggest to sell more structured settlement payments to reduce the discount rate of the transaction.
This blog post is to help tort victims and other financial professionals understand the relationship between the present day value of an annuity and the discount rates of a transaction. If you have any questions or concerns, please comment below and if you would like to learn more about structured settlement factoring click here.
November 30, 2007
67%Living to 100 Years Old
Settlement Quotes – Structured Settlements
This is a new tool brought to you by Settlement Quotes. Please feel free to play around with and stay tuned in the next few days for another great tool.
November 12, 2007
There are several reasons the National Structured Settlement Trade Association (NSSTA) is important to the structured settlement factoring industry. One of the main reasons this organization is not only important but vital to the structured settlement factoring industry is because without it there would not be structured settlements for the factoring companies to factor.
The structured settlement industry can survive without the factoring industry, but the factoring industry cannot survive without the structured settlement industry. It is important to remember this when marketing for a factoring company. Many factoring companies belittle structured settlements by using phrases like, “cash out your small payments for a large lump sum.”
These phrases may not seem harmful but to an individual or attorney seeking to setup a structured settlement these phrases can mean they choose a different option. The NSSTA has done a great job promoting this great settlement tool. In the future, hopefully more factoring companies will feel this way about structured settlements.
November 10, 2007
A structured settlement resulting from a personal injury tort claim can be sold for a lump sum of money to a structured settlement factoring firm. What many individuals who do sell these future payments to a factoring company don’t know is they can sell as many or as few payments as they would like.
Many of our clients here at Settlement Quotes choose to sell only a portion of their future structured settlement payments. These clients usually payoff their credit card debt or unsecured debt with the lump sum of money that they receive from us. We think it is important that the structured settlement stay in tact as much as possible to secure the fixed income that you do receive otherwise you can dwindle the lump sum payment away in the matter of years.
It is important to remember that cashing out a structured settlement can be expensive, so it is recommended to only factor your structured settlement once. We want you to keep part of your future settlement payments, but we also want you to be financially secure. If you have other large expenses that you may need money for, add that into your lump sum that you will need before you factor your structured settlement.
Feel free to contact us to receive multiple structured settlement factoring quotes from out network of structured settlement funding companies.
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