Elements Of The Structured Settlement Protection Act

Because over the early years of structured settlements there was some activity that

might have been perceived as abuse, many states elected to enact a structured settlement protection act modeled after a template created and enacted by the National Conference of Insurance Legislators. There are now at least 46 states that have laws in place, all of which are aimed at protecting those who have received structured settlements in the past and want to change to a lump sum settlement for part or all of any remaining payments.

There are components that are similar in most or all state laws that cover transfers. For example, the seller must receive statements of full disclosure prior to the transaction completion. The seller has the right to know every aspect of transaction terms and how it will affect the amount of money that is received. The terms should be straightforward and should be described in language that could be understand by a relatively uneducated person.

The law or statutes provides that notice must be given to certain parties as part of a transaction. These are parties that will be affected by the actions when the transaction is completed. This mandate prevents a deal from being completed without some interested parties being made aware of components included within the transaction.

A recommendation that the seller should consult with appropriate professionals about the terms of the proposed assignment of future payments is included in the statutes in most states. The professionals might be those knowledgeable in legal matters. They might be tax accountants or financial planners. In any instance, the professionals should be those who are specialists rather than generalists.

Perhaps the most significant clause in the statutes is that of court approval. In most instances, the wording mandates that the proposed transaction must be in the "best interests" of the seller. Further, the courts are obligated to look at the best interests of any dependents. There is no clear definition of what constitutes best interests in the law. That decision is left up to the courts. The term has been defined rather loosely in practice.

The tenets of the a structured settlement protection act are designed to protect a less than scrupulous buyer from taking unfair advantage of the seller. Since approval of the transaction depends on a thorough review by a third party--the courts--the protection is as good as the review and ruling by the judge or fact finder in the case.

by: Paul Easton

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