November 13, 2008 at 12:30 am
· Filed under Annuities and NPV, Structured Settlement Transfers ·Tagged better business bureau, broker, comfortable, court, downward spiral, history, judge
Once you find a broker that you’re comfortable with and has made you a fair offer, call the better business bureau and find out if they have a good or bad history. Check to see how many complaints have been made against them in the past year and their entire history, to make sure they’re not on a downward spiral over the past 12 months.
Remember, you’re going to have to get this agreement past a judge in your local court, so make sure you have gotten some good advice along the way. I highly recommend a financial planner at least, or if we’re talking some more substantial amounts of money, an estate planning attorney.
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November 13, 2008 at 12:29 am
· Filed under Annuities and NPV ·Tagged annuity, broker, chances, lowball, Market value, quote, quotes
Now back to the main topic of finding the best deal for someone to buy your stream of annuity payments. You know how much you’re going to get over the lifetime of your structured settlement, and you know what the present value of that cash flow is. Now you need to find some brokers and get a few quotes.
I recommend getting no less than three quotes. Chances are you’ll get two lower and one higher quote, which is why three is the magic number. With two quotes, you might get two lowball figures, whereas I’ve found it’s quite uncommon for a third to be below market value as well.
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November 13, 2008 at 12:28 am
· Filed under Finance Math ·Tagged bank, discount rate, integral, interest rate, Net present value, present value, today's dollars
Let’s take a minute to talk about net present value calculations since they’re quite integral to the operation you’re trying to perform. So imagine that you have 100 dollars, and you have a bank account that you can put it in and get 3% interest. In one year that 100 dollars will be worth 103 dollars.
We can work that equation backwards as well, and find out what the PRESENT value of 103 dollars one year from now is, given that our DISCOUNT RATE is 3%. Remember, discount rate is always the percent interest that you could earn on the money if you had it in your possession. If you could ear 10% in the stock market on your money, your discount rate for figuring out what money is worth in today’s and tomorrow’s money would be 10%.
So, if I told you I wanted to borrow $1000, and I would pay you back one year from today, you would know that unless I paid you $1100 you would be losing money.
Alternately, if I asked you how much you would give me today if I gave you $1100 on year from now, you could tell me that you would give me $1000 in today’s dollars for $1100 of next year’s dollars.
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November 13, 2008 at 12:27 am
· Filed under Finance Math ·Tagged complex, documents, First step, payments, phased payments, trivial
The first step is to figure out how much future money you have coming to you. That means looking at the documents that set up your structured settlement, and finding out how many additional payments you have coming to you and how much each payment is for. This can be a trivial task, as in 36 more payments of $400, or a very complex task with phased payments, lump sums, and varying amounts for a lengthy period of time.
Once you have this figured out, perform a net present value calculation using a high and a low discount rate so that you know what the present value of your future payments is. This is the starting point for all your negotiations.
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November 13, 2008 at 12:26 am
· Filed under Annuities and NPV ·Tagged annuity, complexity, court, factors, present value, Selling settlements
Selling a structured settlement isn’t as easy as you might think. There are several factors that contribute to the complexity, including figuring out the present value of future payments, the fact that it is a court-ordered agreement that must be reassigned by the courts, and the terms and conditions that the settlement was awarded under.
I highly recommend that you seek the advice of a financial counselor before you embark on this journey, but it’s not required by law. But remember, you have to convince a judge that this is in your best interest, and a financial profession might be a lot more convincing than you.
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