Structured Settlement Protection Act

The young woman had received structured settlement money from a lawsuit won by her family fifteen years earlier from a fatal car crash deemed the negligent fault of the automobile maker. The father had died in the accident and the three million dollar judgment was for the only child. The annuity purchased for the child was worked out among the father's attorneys and representatives of the child services of the state. The policy money, would increase each year as the young woman matured and financial needs increased until she reached twenty five, when three thousand dollars a month would begin to filter into the woman's bank account, continuing indefinitely. However, she was graduating from high school with good grades and was eligible to attend an Ivy League school where the young woman had eyes on becoming a doctor someday. The woman would have to pay for all educational bills and three thousand dollars a month, even though the money was tax free and a reality for life, would not be enough to fund the med school aspirant's dream.

On the woman's eighteenth birthday, she sat down with an attorney to explore getting a lump sum amount from the annuity received many years before. The young lady was adamant about getting all the money left from the annuity, but the wise attorney took time to explain that as much as thirty percent or more of the total money would go to a company specializing in structured settlement transactions, and that the woman should consider only taking out what was absolutely necessary for the anticipated educational costs that would be incurred, and have that money placed in a secure CD until needed. The soon to be college bound woman sat and contemplated what the attorney had suggested, and agreed to the professional's wisdom on the matter. A plan was conceived by the two of them that the woman would seek a lump sum from no more than a million dollars of the annuity, while the remaining amount would be reallocated in a way that would give the security of a monthly income for years to come.

The woman was fortunate to have been born at the time she was, because the Structured Settlement Protection Act of 2002 gave protection to all the woman's decisions regarding the lump sum money that would be received from the upcoming transaction. Prior to this law, any person requesting structured settlement money be changed to a lump sum allocation was often taken advantage of by the companies offering to buy annuities or other monthly or yearly allocated financial plans. Between 1988 and 2002, factoring and transfer companies were at odds with the issuers of such things such as annuities, typically life insurance companies. Often, many holders of structured settlement policy money had very negative experiences with factoring and transfer companies, including having information withheld, and the fact that lump sum payments could affect, in adverse ways, the tax liabilities of the clients. The Structured Settlement Protection Act placed into law a number of safety nets for Americans facing the same issues as the young woman. "Finally my brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue, and if there be any praise, think on these things." (Philippians 4:8)

The Structured Settlement Protection Act of 2002 mandated a number of safeguards for those holding structured settlement money. This legislation demanded that all transactions going through a factoring or transaction company be approved by a state court, which would investigate to ascertain if the transaction from structured settlement money to a lump sum payment is good for the client and the client's dependents. Additionally, the issuers of annuities, the life insurance companies, were brought into the loop, contrary to factoring companies' standard policy of years past. Often, the life insurance companies were caught off guard when lump sum settlements were arranged, and the new owner of the annuity was discovered. The Structured Settlement Protection Act also called for the client receiving a lump sum payment to obtain professional counsel on every aspect of the transaction's affect upon the future quality of life for the client.

The young woman, making one of the biggest decisions in her entire life, had advantages never dreamt of by clients facing the same options years before. These people, often times not financially able to seek professional advice, lost not only a substantial amount of money in the transfer process from structured settlement money to a lump sum allocation, but became subject to higher tax brackets, often taking much of the lump sum needed desperately for real financial needs to fulfill excise obligations. The television commercials of today that are sponsored by factoring or transfer companies make it seem so attractive to those getting small, monthly checks to cash in and get a lump sum payment. Why wouldn't someone want to go from one hundred and fifty dollars each month to fourteen thousand dollars in pocket for the bill collectors knocking at the door? It is always the dilemma of the human race: the lure of a temporary pleasure or ease of pain that can be possessed for a seemingly small price, or the reality of a long term commitment that will provide security, albeit not necessarily comfort, for a lifetime, and in spiritual matters, for eternity.

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