Sometimes when a plaintiff settles a case for a large sum of money, the defendant, the plaintiff's attorney, or a financial planner consulted in association with the settlement, will propose paying the settlement in installments over time rather than in a single lump sum. When a settlement is paid in this manner it is called a "structured settlement". Often the structured settlement will be created through the purchase of one or more annuities, which guarantee the future payments.
A structured settlement can provide for payment in pretty much any schedule the parties choose. For example, the settlement may be paid in annual installments over a number of years, or it may be paid in periodic lump sums every few years.
Potential Disadvantages of Structured Settlements
Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home, or other expensive item, yet be unable to muster the resources because they can't borrow against future payments under their settlement.
Some people will do better by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.
Selling a Structured Settlement
If you have a structured settlement, you may have been approached by a company interested in purchasing your settlement, or may be curious about selling your settlement in return for a lump sum buyout. About two thirds of states have enacted laws which restict the sale of structured settlements, and tax-free structured settlements are also subject to federal restrictions on their sale to a third party. Also, some insurance companies will not assign or transfer annuities to third parties, to discourage the sale of structured settlements. As a consequence, depending upon where you live and the terms of your annuities, it may not be possible for you to sell your settlement.
Keep in mind that companies which buy structured settlements intend to profit from their purchase, and sometimes their offers may seem quite low. You may benefit from approaching more than one company in relation to the sale of your settlement, to make sure that you obtain the highest payoff. You also want to be sure that the company which wants to buy your settlement is established, well-funded, and reputable - you don't want a fly-by-night outfit to obtain the rights to your annuities but to disappear or go bankrupt before paying you the buyout money. You may have to go to court to get a judge to approve the buyout. It is usually a good idea to consult with a lawyer before entering into an agreement to sell your settlement.
Special Considerations
Any person entering into a structured settlement should be on guard for potential exploitation in relation to the settlement:
Excessive Commissions - Annuities can be highly profitable for insurance companies, and they often carry very large commissions. It is important to ensure that the commissions charged in setting up a structured settlement don't consume an inappropriate percentage of its principal.
Overstated Value - Sometimes, after negotiating a particular settlement figure, the defense will overstate the value of a structured settlement. As a result the plaintiff, in accepting the settlement, in fact obtains a significantly lower dollar value than was agreed upon. Some defendants have nominally paid the full amount of the settlement, knowing that they would later obtain significant rebates from the annuity companies they used. Plaintiffs should consider compariing the fees and commissions charged for similar settlement packages by a variety of insurance companies, to make sure that they are in fact getting full value. A plaintiff may wish to make it a condition of the settlement that the defendant will actually pay the full value of the settlement in setting up the structured settlement, and that any rebates received by the defendant for annuities included in the settlement be payable to the plaintiff.
Self-Dealing - There have been cases where the plaintiff's lawyer is also in the insurance business, and sets up a structured settlement on behalf of a client without disclosing that the attorney is purchasing the annuities from his own business, or is pocketing a large commission on the annuities. Similarly, there have been situations where the plaintiff's attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing that the financial planner will be paying the attorney a referral fee in relation to the client's account. Make sure that you know what financial interest, if any, your lawyer has in relation to any financial services sold or recommended by the lawyer.
Life Expectancy - It is unfortunate, but many people who receive large personal injury or workers' compensation settlements will have a shortened life expectancy as a result of their injuries. It is important to consider life expectancy in association with any structured settlement, and to consider whether it is appropriate to enter into an annuity where payments will cease upon death. Sometimes it will make sense to insist upon an annuity that pays a minimum number of payments, or one that will pay a balance into the plaintiff's estate, such that the value of the settlement is not lost to an insurance company upon the plaintiff's untimely death.
Using Multiple Insurance Companies - For larger settlements, it often makes sense to purchase annuities for a structured settlement from several different companies, dividing the settlement between those companies. This can provide you with protection in the event that a company that issued annuities for your settlement package goes into bankruptcy - even in the event that one of the companies defaults in part or in full on your settlement payments, you would still receive full payment from the other companies.
Structured Settlement Investment - Get your Cash Now!
How to Consolidate Your Bills
Introduction
Consolidating your bills is a great way to make monthly payments more efficient and less of a headache. By reducing the number of bills you pay on a regular basis, whether through debt consolidation, balance transfers, or simply a little reorganization, you'll be more likely to make all your payments by their due dates, saving you time and money.
Step 1: Eliminate Unnecessary Bills
It's possible that your bills can be combined or eliminated altogether.
Pay cash when you can. (Photo by Copernicus Johnson)Credit Cards
It's advised that the average person carry between 2 and 6 credit cards. While some experts recommend carrying multiple cards, you may not need as many as you're currently carrying.
To reduce the number of credit card bills you pay each month, cancel one or two accounts.
Cancel your newest account(s) to maintain the good credit history on your older cards!
Or transfer balances to a low rate card. You'll have only one bill, with less interest.
You can keep other accounts open for future purchases.
Store Charge Accounts
It's advised that individuals carry only one favorite store charge cards, since these cards typically have high interest rates and no rewards program.
Limiting your store charge accounts will reduce the bills you pay each month.
Avoid the temptation to open up new charge accounts, regardless of the incentives they may flash in front of you.
Again, consider transferring existing balances to lower rate credit cards to eliminate excess bills and pay less in interest over time.
Mobile Phone Bills
Consider switching to a family plan so that you only pay one bill each month for everyone's service. You'll eliminate all that extra paper, and probably save money, too.
Pay Cash
Not only will paying cash eliminate the bills that show up a month later, you might even save quite a bit in the process.
Many retailers have to pay a percentage of each sale to credit card companies. Since you paying cash can save them money, ask if they can pass that discount on to you, their loyal customer.
Carrying cash can also limit your spending—you see how much you're spending instead of "just charging it."
Pay in Larger Chunks
For bills like car insurance, you often have the option of paying a larger amount only two or three times a year. Doing so, if you can afford it, can make you eligible for a discount as well.
Step 2: Set Up Auto-Payments Online
Stop writing checks. (Photo by Jeinny Solis S.)Most banks have an online bill pay option, that will automatically deduct regular expenses from your savings or checking account. You can often set up automatic payment for other bills, linking them to a bank account or credit card. Not only is online bill pay faster, but it's also more secure and easier to monitor. Plus you're saving checks and postage!
Check in with your bank about automatic payments.
Also investigate what your options are for other monthly expenses (phone bill, credit card payments, student loans, etc.).
Be sure to keep a careful watch on what's going in and out, both for your financial safety and so you're aware of what you're spending.
If you have attached recurring bills to a credit card, make sure you don't rack up high balances without realizing it.
You're consolidating bills to save time and money, not to pay high interest rates!
If you set up automatic payments for your credit cards, schedule that at least the minimum amount due be deducted each month from your bank account. This way you avoid late payment fees, and the interest rate hikes associated with missed payments.
TIP: Speed up auto bill pay even more by using this easy Firefox method.
Step 3: Consolidate Existing Debt
Eliminating as many debt payments as possible will not only reduce the number of bills you have to pay each month—you'll be on track to pay down debt faster.
(Photo by Steve Woods)See Mahalo's guide to How to Consolidate Debt for information on reducing your debt load.
Be sure to read Bankrate's debt counseling advice before consolidating, particularly if your plan includes taking out a home equity loan.
If you're suffering from too many student loans, visit Mahalo's guide to How to Consolidate Student Loans.
Remember that student loan consolidation rates change every July, so be careful when you consolidate that type of debt.
You can consolidate credit card debt by transferring balances to the card with the lowest rate.
Carefully research any associated fees.
Remember that balance transfers won't solve existing debt, and they can negatively affect your credit score.
You may wish to seek out a professional debt adviser, such as one through the NFCC, the National Foundation for Credit Counseling, or the AICCCA, the Association of Independent Consumer Credit Counseling Agencies.
Additional Tips
Although these tips won't necessarily consolidate your bills, they will consolidate the time you spend paying them!
Try Changing Due Dates
Some creditors allow you to change your bills' due dates, which may make it easier to pay multiple bills at the same time.
Making due dates fall as closely together as possible will reduce the times you must sit at your desk writing checks.
Call creditors like your student loan administrator or your credit card company to see if you can change your due date.
Be sure to consider when you usually receive your paycheck, so you'll have enough in your account to cover all the bills by their deadlines.
Limit New Accounts
Think about the services you require and try to pare down the providers you use. Multiple accounts for movie rentals, department stores, or even newspaper subscriptions probably aren't necessary and eliminating them can make it less likely you'll overspend.
Conclusion
If you're able to consolidate your bills to a manageable degree, you should free up time to concentrate more fully on your budget. You may also find yourself enjoying extra money each month as the result of on-time payments, or other bill pay incentives. More than anything, consolidating bills will help you get a better sense of where all your money goes each month, letting you concentrate on how you might save more in certain areas. Plus you can enjoy the time you would otherwise spend writing checks and mailing bills!
If you think you need more advice on how to reduce your debt load through consolidation, please visit Mahalo's guide to how to consolidate debt. There you will find counsel on the ins and outs of the procedure, from refinancing options to finding a credit counselor.
How to Find a Secured Loan Calculator
Introduction
A secured loan is a loan backed by the borrower's collateral; the collateral is forfeited to the lender if the borrower cannot pay the loan. Secured loan calculators help borrowers estimate the monthly cost and interest of a loan so they can decide if they'll be able to make loan payments and what terms will be best for their finances.
Step 1: About Secured Loan Calculators
While all online secured loan calculators are not created equally, you should be able to enter basic information on all of them, such as:
(Photo by Mahalo)The loan amount.
The total amount of money you will borrow.
The repayment period.
Also known as the term of the loan or the life of the loan, this is the number of months or years you have to pay off the loan.
The interest rate.
The exact interest rate on your loan.
Step 2: Check Your Loan Provider's Website
Often your potential lender (the bank or lending institution) will have a secured loan calculator available on their website.
Step 3: Search Online
If your loan provider does not have secured loan calculator, you can do an online search.
Conclusion
Use one of the many online secured loan calculators to estimate your monthly loan payments and determine which loan will offer you the best deal. Unsure how to use a loan calculator?
How to Purchase Structured Settlements?
There are many legal requirements and restrictions that affect who can buy structured settlements, so if you are interested in purchasing a structured settlement, you will want to work with a company who matches structured settlements with investors.
What are Structured Settlements?
When law suits are settled, damages may be awarded in a lump sum, or a series of payments. A settlement which is awarded in a series of payments over time is called a structured settlement. Structured settlements are generally created by using a third party intermediary to provide the financing.
How to Purchase Structured Settlements?
State and federal law may restrict the sale of structured settlements, and there are many legal complications that can arise. Since you'll be exchanging cash for the right to receive future payments, you'll want to make sure that you are protected.
Work with an established broker.
Look for a structured settlement financing company who is a member of the National Structured Settlements Trade Association who also places settlements with private investors.
Get multiple quotes to ensure you get the best deal.
Retain an attorney to review the agreement to ensure your interests are protected.