Factoring introduces the potential for several unfavorable outcomes.
Impact 1: Loss of Guaranteed Long-Term Income1
Structured settlements are designed to provide injured claimants with guaranteed lifelong income with annuity payments guaranteed by MetLife. Once your future annuity payments have been sold to a factoring company, these guarantees transfer to that company. Factoring your future annuity payments means that you will not receive your full settlement amount. The payout of a structured settlement is always higher than the money you purchased the annuity with (i.e. if you purchase a $100,000 annuity, you are guaranteed to receive more than that by the end of your guaranteed payments). If you factor your payments, you will be losing that extra money and the factoring company will give you less than your payments are worth1.
Impact 2: Loss of Tax-free Advantage
As an injured claimant, the annuity payments you receive from us are completely tax-free. Once you sell your annuity payments to a factoring company, you forfeit that tax-free right on those periodic payments.
Here’s an example: You and the defendant settle on a plan where you structure $385,000 which will provide you with a total expected benefit of $480,000. Starting in the middle of next year, you will begin to receive $2,000 a month in annuity payments for 20 years. Before your payments begin, you decide to sell 10 years of your future annuity payments in exchange for $50,000 to a factoring company. This leaves you with only $240,000 in total annuity payments over the course of 10 years. Your total expected benefit is now $290,000 instead of $480,000. You lose money, but the factoring company benefits from the growth of the annuity payments over the years and by giving you a discounted rate for your benefits.
Impact 3: Public Assistance Implications
Structured Settlements help individuals who are injured and in need of assistance. Often the benefits provided can help keep homes safe, families together, and medical needs met, which affords families the stability they need so they don’t have to turn to government supplemented programs.