When it comes to your money, most people assume that how it’s used is really up to them. That includes structured settlement payments and annuities. However, that’s not actually the case. Most states now have laws in place governing how structured settlements must be handled, including sales (technically transfers). Can a court actually reject a structured settlement transfer? The straightforward answer is yes, the court can deny any transfer, but there’s more to the story.
A Deeper Look
To really understand what’s going on here, you need to know more about the history of the industry. Many states and consumer advocate groups have long taken a dim view of structured settlement transfers due to the predatory nature of some companies operating in the country. These companies preyed on the unwary and the desperate, convincing them that selling structured settlements was the best option for their financial situation.
Most states have now enacted laws to protect consumers from these companies. The immediate upshot is that all transfers (sales) must go through litigation – the case has to be heard by a judge. The judge will then determine if the transfer is in the payee’s best interests and whether or not to allow the sale to move forward. In many cases, the judge denies the transfer. Why is this?
Reasons for Denial
There are as many reasons for transfer rejection as there are attempted transfers. The most common reason is that the transfer is “not in the payee’s best interests”, which can mean virtually anything. However, there are other mitigating factors. For instance, if the funding firm recommends that the payee seek legal counsel prior to entering a transfer arrangement, chances are good that the court will reject the proposal. If the court does not see evidence of real financial need in the payee’s life, then the proposal will be rejected (unnecessary expenses are not considered “needs”).
Finally, the court can also reject a structured settlement transfer if the transfer is not deemed “fair and reasonable”. For instance, if the funding firm is offering a payout of only 50% of the total settlement payments (for the life of the settlement), chances are very good that the court will not grant the proposal.
As you can see, there are many reasons for a court to reject a structured settlement transfer. Your best defense is to show real financial need and ensure that you’re working with a funding firm that’s offering fair terms.