I just heard a radio ad for a way to get high income on an investment-you buy a “structured settlement” contract.
As I understand it, such an investment arises because someone who has been awarded a large amount of money (in a court case) wants their money “up front”-instead of being paid over 10-20 years. In effect, the guy who was awarded-say $1 million will take a fraction of the present value of the annuity awarded him/her. You buy him out, and get the income stream from this. Firms like “Peachtree” and JG Wentworth do this.
Are there that many beneficiaries of court judgments to make this widespread?
Our firm has roughly five clients per year who structure their settlements. They were more common in the past, when interest rates made the tax free growth aspect of the structure much more appealing. Still, they are a great idea for a portion of any large settlement, to avoid pissing through the money in a few years, as is common. FYI, Many states now require court approval before you can sell your annuity.
There would have to be, since there are so many commercials touting said service.
Why would someone structure their settlement only to turn around and sell it at a fraction of its value in order to get cash now? Wouldn’t it be better not to structure it at all and get the entire enchilada up front to begin with?
I would have to guess that the recipients of the structured settlements don’t set out to immediately turn around and flip them to a third party.
The total value of the settlement probably looked very attractive when they signed the settlement, but those who decide to sell their settlement for a cashout are probably broke (or in debt), and, after a few years under the structured settlement, decide that the prospect of a pile of cash right now is more useful to them than having the money come in a bit at a time over the next X years.
Structured settlements are settlements of something–typically either a lawsuit or a workers compensation claim. The claimant will usually be represented by counsel. The settlement will have to be agreed to by the claimant, the counterparty, the insurer, lawyers for the preceeding, and (often) a judge.
This group of interested parties is more likely to prefer a structured settlement. Judges and lawyers know that people with long-term medical needs are likely to mismanage lump sum windfalls, and try to avoid them. Insurers know that claimants who blow windfalls are more likely to come back and make more claims. (I just realized that my job also gave me lumbago!!!)
Once the claimant has settlement in hand, however, he or she is more of a free agent. The settlement starts to burn away at their brain–It’s my money and I want it now! Getting approval to sell a structured settlement is often easier than getting a lump sum approved to settle the original claim.
Yeah, can someone address this?? How can such an apparently thriving industry exist? Where are all these settlements coming from? 
I mean, that “JG Wentworth” guy from the commercials, “It’s MY money, I want it NOW!” is a virtual B-list TV star these days.
I am just posting here to make sure I keep up with the convoservation. I have a vested interest int this. I have a debt owed to me by a former renter. I’d like to see what comes up.
J.G. Wentworth alone has bought over $4 billion worth of annuities and structured settlements over the past twenty years, according to this 2010 press release. So there is apparently a significant market …
I’m just glad there actually is a market for this stuff because those J.G. Wentworth commercials where they are all singing about it are just the absolute best commercials ever made.