Sell Structured Settlement The Selling Process 1 — Questions and Answers
Question 1: What is the term for a company that purchases structured settlement payment rights from a payee?
- Annuity issuer
- Factoring company (Correct answer)
- Settlement broker
- Claims adjuster
Correct answer: Factoring company
Factoring companies (also called purchasing companies) buy the right to receive future structured settlement payments from the payee in exchange for an immediate lump sum.
Question 2: When a payee sells their structured settlement payments, they typically receive:
- The full face value of all future payments
- A discounted lump sum less than the total value of future payments (Correct answer)
- Extra interest on top of future payment values
- The same amount the annuity is worth at maturity
Correct answer: A discounted lump sum less than the total value of future payments
Factoring companies apply a discount rate to calculate a present value, meaning the lump sum offered is always less than the total of all future payments.
Question 3: What is the 'discount rate' in the context of selling structured settlement payments?
- The interest rate on the annuity
- The percentage deducted from payments for taxes
- The rate used to calculate the present value of future payments (Correct answer)
- The court filing fee percentage
Correct answer: The rate used to calculate the present value of future payments
The discount rate is applied by the factoring company to convert future payment values into a present lump-sum amount, representing the buyer's profit margin.
Question 4: What is the first step a payee should typically take when considering selling their structured settlement?
- Immediately sign a purchase agreement
- Consult an independent financial advisor or attorney (Correct answer)
- Contact the annuity issuer to transfer ownership
- File a petition with the court
Correct answer: Consult an independent financial advisor or attorney
Before agreeing to any sale, payees are strongly advised to consult an independent financial advisor or attorney to fully understand the long-term financial implications.
Question 5: Which document formally transfers the rights to structured settlement payments to a factoring company?
- Annuity policy
- Purchase and sale agreement (transfer agreement) (Correct answer)
- Court judgment
- Insurance assignment form
Correct answer: Purchase and sale agreement (transfer agreement)
The purchase and sale agreement (also called a transfer agreement) is the contract between the payee and the factoring company specifying the payments being sold and the lump sum to be paid.
Question 6: How long does the typical structured settlement transfer process take from agreement to receiving funds?
- 1–3 business days
- About 45–90 days (Correct answer)
- 6–12 months
- 2–5 years
Correct answer: About 45–90 days
The transfer process usually takes 45–90 days because it requires court hearings, mandatory waiting periods, and notification to all interested parties.
Sell Structured Settlement The Selling Process 1
What is the term for a company that purchases structured settlement payment rights from a payee?