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Structured
Settlements
We commonly refer to the purchase of
lotteries, structured settlements and annuities as annuity-based
receivables. These three types of annuity-based receivables are very
different, yet very alike. We have distinct purchasing procedures and
requirements for each that we follow.
The annuity itself is not assignable by the annuitant because he or
she does not own it. It is typically owned by a subsidiary of the life
insurance company that issued the annuity or the original defendant's
casualty company. So they don't have the right to sell or assign the
annuity. What they do have is the right to receive the payments under
the settlement. That right is personal property which can be assigned.
We buy their rights to receive the payments.
Every insurance company will say that the annuitant is prohibited from
assigning his or her payments. The cash flow industry believes that
this
response reflects a general misconception about the provision of IRC
130 (c) that prohibits an acceleration by the company itself. Careful
analysis of the Code will reveal that it does not apply to the rights
of the annuitant to assign their payments to a third party. Our
funding sources have done their homework in this field and are
comfortable with all the legal issues involved.
Please don't interpret this to mean that there are no legal risks to
our
investors who purchase these cash flows because there are risks, and,
these risks must be properly addressed and will be priced accordingly.
Presently, our industry has contacted lobbyists, to lobby for
changes in the code to make annuity-based receivables assignable. This
will make purchasing these cash flows less difficult. Watch for these
changes to occur over the next three to six months. If you have any
questions about annuity-based receivables, please feel free to contact
us.
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