Bentzen Funding Solutions

Attorney or Judge problems?

I have had a couple of requests lately from brokers to write something that they can hand to a judge in their jurisdiction who is considering denying a minor structure. See if this will help you:

I have been a structured settlement broker since 1987.  In 2002, after the enactment of IRC5891, I decided that my expertise in the structured settlement business could be much better served assisting those annuitants in need to obtain a portion or all of their structured settlement.

I feel that it is prudent to answer a few common misconceptions about the factoring of structured settlement annuities:

I don’t recommend structured settlements since the claimant will just factor it out anyway

In reality, only a small percentage of structured settlements are factored annually.  I know of no statistics to back that comment up, however, there are statistics on the dissipation rates among claimants who have chosen to take a lump sum instead of a structured settlement.  One study found that 95% of claimants have exhausted their awards within 5 years.  This refers to all adults.  The statistics on dissipation rates, I’m sure, would be far worse for those who have only just reached “adult” status. From my experience a structure that provides funds to an individual upon reaching age of majority is an effective means to prevent that young adult from squandering his award. Keep in mind, that with IRC5891, all annuitants who would like to cash out their structured settlement must receive court approval to do so.  This approval process takes into account the financial needs of the annuitant and is an effective way to ensure that the funds will not be utilized for unnecessary purchases.

The parents will try to cash out a minor’s structured settlement

With the enactment of IRC5891 this scenario is highly unlikely as the courts are not keen on approving such transfers.  There would have to be some extreme need on behalf of the minor along with the necessary proof.  Additionally, many states will insist upon a court appointed independent GAL to be a party to the proof of need. In the time that I have been working on this side, I can recall only two such cases that were extreme enough for the courts to allow a transfer.

The annuitant will lose 50 percent factoring

In this case, many compare the cumulative future payments with the present value lump sum payment offered by the factoring company, failing to take into consideration the discount to account for the time value of money.  For instance, if an annuitant has 200 payments of $1,000, the cumulative payments would be $200,000.   In this case, a factoring transaction would net the annuitant approximately $100,000 or 50% of the cumulative total. This equates to a discount rate of approximately 10%.   However, in this scenario, the factoring company has to wait almost 17 years to collect all these monthly payments, during which the equivalent present value of these payments is continually diminishing.  A dollar will not have the same purchasing power in 2024 as it has today.

Factoring discount rates are outrageous

The enactment of the legislation combined with increased competition has driven down the discount rates considerably.  Currently, my rates range from 8.5% - 13% depending on the size and duration of the annuity.  Keep in mind that these are effective rates that include all legal fees and costs to present the case before the courts. Taking into consideration current credit card rates, an annuitant who is drowning in credit card debt is much better off paying off their creditors from a factoring transaction.  Again, in a situation whereby the annuitant wants to pay off their creditors, the courts will request proof of the debt to ensure that the funds are being utilized for the purpose stated.

Please feel free to contact me to further discuss this information or any specific case that you have before you.

Rhonda Bentzen, CSSC

BENTZEN FUNDING SOLUTIONS       

Direct:  615-599-2048

Toll-free:  877-BENTZEN

SSP mid-year members only meeting

There was a great turn-out for the SSP's first ever mid-year meeting in Scottsdale, Arizona over the weekend.  The meetings was open to SSP members only and included such topics as Medicaid Liens, Personal Injury Tax Planning, Dissipation Risk, Annuities & Managed Money, Settlement Planning and Annuity Testimony.  The meeting ended Sunday, just in time for folks to return home and prepare for the first semester of the RSP designation, which commenced yesterday.

The SSP's Annual meeting will be held again in D.C. in March.  Stay tuned for more updates as we get closer.

One of the benefits of being a SSP member is the opportunity to attend AAJ meetings and help "man" the SSP booth.  This gives members an opportunity to bump into and keep tabs on their attorney clients!  The next opportunity will be at the AAJ Winter meeting in San Juan, January 25-29, 2008.

Please call me for more information on SSP membership.

    

"I never get those calls"

I was visiting with a structured settlement broker last week.  He said to me "You know I keep telling you that we never get those calls....maybe every 5 years...".  I said to him, "you're not getting the calls, but I guarantee your office is getting them".   So he calls in the receptionist and asks her.  She says "yep, we get tons of them....at least one per week".  Of course he was shocked and informed her to make sure all of those calls go to Bentzen Funding Solutions - where they belong! 

If you don't educate your clients and your staff, you are forcing these annuitants right into the hands of our TV friends.  Remember, the top 2 advertisers are factoring 800 cases per month!!

As always, It's Ben Fun!