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Structured Settlements: The Effects On Disability Benefits

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There are many benefits of selling structured settlement payments but if you are also claiming one or more disability benefits, you should get advice about whether a lump sum will affect your entitlement to them.
The information below is intended to give you some guidance on the likely impact of a lump sum on various public disability benefits but the only way to find out for sure is to speak to your Social Security office or a trusted lawyer or credit counselor.

SSDI, SSI and Settlement Money
Many of our customers whose structured settlement was awarded in response to a successful workers’ comp, personal injury or medical negligence suit, are also in receipt of a public disability benefit like SSDI or SSI. Naturally, they wonder if selling their structured settlement and receiving a lump sum will affect their eligibility for these benefits.

The first place to start is by pointing out some important differences between these two types of support.
Public disability benefits are of two types: Social Security Disability Benefit (SSDI) – also known as Disability Insurance Benefits (DIB) – and Supplementary Security Income (SSI).
If you are already in receipt of SSDI, your benefits won’t be affected by receiving your lump sum. This is because SSDI is an entitlement benefit based on previous payments made under the Federal Insurance Contributions Act (FICA). Your employer will have withheld around 6% from your pay packet to fund SSDI. Or, if you were self-employed, you will have paid into the Social Security fund via your tax return. Either way, the fact that you are already receiving SSDI means that you have fulfilled the eligibility criteria. This situation will not change when you receive a lump sum from selling your structured settlement.
SSI on the other hand is a means-tested benefit for disabled, blind, aged or low-income people. This benefit is likely to be affected by any change in your financial situation. SSI pays out a maximum of $2,000 per month (or $3,000 if you’re married). Since one component of SSI calculations is an asset test, the increase in your assets from a lump sum payment will almost always reduce or end your entitlement to SSI for a while. You must report your change in circumstances to Social Security so they can make the necessary calculations.

It should be pointed out that even if you don’t sell your structured settlement, the periodic payments you receive will affect your SSI entitlement as it is counted as income.

How are Medicare and Medicaid Affected?
Disability often comes with considerable medical expenses such as doctor’s visits, prescriptions, surgeries, therapies and transport to and from appointments. Again, it’s no surprise that many of our customers wonder whether their entitlement to Medicare or Medicaid would be affected if they sold their structured settlement for a lump sum payment.

The situation is almost exactly the same as with SSDI and SSI. Medicare is a health insurance that is available for disabled people who are eligible for SSDI (and have been receiving benefits for 24 months). As such, eligibility is based purely on prior contributions made under FICA. Again, if you are receiving Medicare now, you must have already been deemed eligible and your lump sum will have no effect on Medicare entitlement. However, your income will be used to determine your Part B and D premiums for the tax year in question. If your lump sum raises your income above the current threshold, you will be required to pay the higher rate Part B and Part D premiums. This only affects the tax year in which you receive the funds so later years will revert back to normal.

Medicaid is also a health insurance available to disabled people (and also the blind, elderly, children and people on low income). Like SSI, Medicaid is a means-tested benefit and your eligibility might be affected by receiving a lump sum from a structured settlement sale. If you lose Medicaid, you could find yourself needing to pay a lot of money for medical care, including expensive prescription medications, so you need to speak to your Social Security office or an attorney for some specific advice.

SNAP, which provides food assistance, and HUD, which provides housing benefit, are also means-tested and will be affected by a lump sum payment.

It should be added that gifting your money to someone else or even donating it to a charity does not protect your entitlement to needs-based benefits. The money is still regarded as a resource belonging to you and could mean you are denied benefits for a time or asked to pay back benefits already received.

If you do decide to go ahead with selling your structured settlement, make sure you contact Social Security within 10 days to report your change of circumstances.

Protecting your SSI and Medicaid Entitlements
There are a number of ways to protect eligibility for SSI, Medicaid and other means-tested benefits.

One way is by spending the lump sum in one go (or enough of it to bring you down to your SSI resource limit). Your Social Security office will be able to tell you exactly what that dollar amount is. This strategy is known as SSI lump sum spend down. Before you jump at this option, you should be aware that, although you will remain eligible for SSI, you will likely still need to repay some or all of your SSI for the month you receive the lump sum on (and it will also be counted as an asset for the following month). In some states, the lump sum only counts as income the month after you receive it so if you spend it all in the first month, you may not lose any benefit.

When opting for a spend down, Social Security will suspend your benefit payments until you can provide proof that you have spent the money. Therefore, you should make sure you keep all of your receipts as evidence or at least ensure your spending is accurately reflected in your bank statement. You will need to provide the evidence to Social Security within 12 months. Providing they are satisifed you have spent the money, they will reinstate your SSI benefit. Otherwise you will have to reapply.

Placing your funds in a special needs trust (SNT) is another way of protecting your eligibility for public benefits as they will then not be counted as an asset. However, there are restrictions on what you can use SNT funds for. Common SNT-funded expenditures include transportation, travel, legal services, nursing care, therapies and educational opportunities. If you think an SNT might be the way forward in your cirumstances you should get appropriate advice. A probate or elder lawyer will be able to help you with that.

Sources of Further Support
For most issues regarding your eligibility for Social Security benefits, your first point of call should be your Social Security office.

For further legal advice, you can contact your local legal office or a volunteer attorney program. The attorney who represented you in your original case should also be able to provide you with information about your specific situation.

Other sources of support include non-profit credit counselors (try the Financial Consulting Association of America and the National Foundation for Credit Counseling).

CAN I GET A CASH ADVANCE ON MY STRUCTURED SETTLEMENT?

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Structured settlement advances are a common topic among former plaintiffs who had accepted a structured settlement in lieu of a lump sum following a successful court case.
Before we answer this question, it is important you are clear about your current situation because how the detailed answer applies to you depends upon this.
Are you:
• Someone not looking to sell your structured settlement at all?
• Someone considering selling part or all of their structured settlement (but not yet committed)?
• Someone committed to selling and ready to research structured settlement buyers?
Be aware that the answer that follows only applies to those people at least open to the idea of selling their future payments. The terms of these legal agreements are set in stone and you cannot renegotiate them. If you don’t sell your structured settlement, a cash advance will only be possible if it was actually written into the original agreement.
So, presuming you are open to the idea of selling your structured settlement to a buyer…

The short answer is yes!
The good news for anyone interested in selling their structured settlements on the secondary market is that, thanks to the Structured Settlement Protection Act, their rights to obtain cash for structured settlements are upheld in law. Even in states which do not have their own protection act (and the vast majority do), structured settlement recipients are protected by the laws of the state where the insuring company is located.
There are plenty of structured settlement buyers, including New Leaf Structured Settlements, who offer cash advances so it is just a case of finding one that meets your needs.
Later in this article we will cover the seven precautions you should always take before signing a contract with a buyer. However, before that you should think hard about whether selling your structured settlement is the right course of action for you in the first place.

Should you sell your structured settlement at all?
If you are still undecided about whether to sell your structured settlement (and even if you are committed to the process), it is worth understanding that there are cons as well as pros.
First, you are giving up a certain amount of future security. The terms your lawyer initially negotiated will have taken into account your expected present and future financial needs. If your situation hasn’t changed, you need to think very carefully about whether your need for a cash advance is genuinely in your best interests. If not, the court will probably deny the sale anyway so you need to be honest.
However, for many people, their circumstances have changed enough to warrant the access to a lump sum of cash. In this case, a court is likely to approve the sale.
The other major disadvantage is that the lump sum you receive will be discounted so you won’t be getting the full value of your award. Discount rates vary and should form a large part in your decision over who to sell to.

Why Americans sell their future income streams?
Why do Americans decide to give up part of their future security for an immediate cash injection?
Broadly, there are negative and positive motivators. Negative motivators might include emergency car repairs or debt. The compound nature of debt means that it can start spiraling out of control unless urgent measures are taken. A cash advance from a sold structured settlement can provide that lifeline.
More positive motivators are funding a college course, making a down payment on a house or starting or investing into a business. Other positive factors might include an expected increase in future payments or reduction in expenses due to changed circumstances. Perhaps you are able to work longer than was initially expected or you no longer need to buy replacement wheelchairs due to a medical improvement.
Providing the benefits of early access to cash outweigh the reduction in future security, the court will usually find in your favor.

Why are cash advances on structured settlement payments so popular?
The above situations explain why you might want to sell your structured settlement but why would you need an advance on the monies?
Simply put, the transfer of assets from you to the buyer is a legal process which means it inevitably takes a long time. How long? This can vary wildly but the fastest transactions usually take a month at least. Others might drag on for a quarter of a year or more.
Without a cash advance, some structured settlement sellers would face weeks without the use of a car for work, months of extra debt interest or the loss of an investment opportunity.
In our experience, people who want a lump sum in lieu of structured settlement payments need the money yesterday.
Despite the urgency, it is important to do your due diligence prior to selling your valuable asset.

Before you sell: 7 precautions you must take
To help you make a wise decision on who to sell your structured settlement to, we have come up with seven issues you should address before signing any paperwork:

  1. Do you need top sell all of your structured settlement? Partial sales are possible and may be a better course of action if you need to preserve some future security.
  2. What is the discount rate offered? Can you get a better deal elsewhere?
  3. Does your chosen buyer charge interest or fees on a cash advance? How much are these?
  4. How and when will the repayment of the advance be collected? New Leaf Structured Settlements deduct advances directly from the final lump sum.
  5. For those companies which deduct the repayment from your bank, what happens if the funds aren’t there?
  6. How large an advance is available to you?
  7. How soon can the advance be in your bank account?

Why you should consider a cash advance from New Leaf Structured Settlements
We at New Leaf Structured Settlements are confident that we can provide our clients with a cash advance within 24 hours of them signing the sales contract for their guaranteed or life contingent structured settlements. In many cases, we can even have the funds over to them the very same day.
In fact, we’re so sure we can achieve this deadline that we will pay out a further $1,000 on top of the negotiated lump sum if we are late.
Our cash advance payment options are also very flexible. Depending on what our clients prefer we are able to send a check, wire the money to a bank or even top up a pre-paid card.

Next steps
Having read through this article, if you are convinced that you need a structured settlement advance, your next steps are, as follows:

  1. Get a quote from a reputable structured settlement buyer. We recommend you take up the free quote offer from New Leaf Structured Settlements.
  2. When you’re happy with your choice of buyer, sign the contract.
  3. Fill out all the necessary paperwork and collect together any ID and other documents requested.
  4. Arrange a court hearing to obtain court approval.
    If this process seems daunting, don’t worry. Most reputable companies offering money for structured settlements will hold your hand through the process.
    We look forward to speaking with you and wowing you with our highly competitive structured settlement advance guarantee.

7 Structured Settlement Myths You Should Not Fall For

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Many people who have been awarded structured settlements find that their circumstances have changed to a degree that the original award no longer serves them. In a lot of cases, immediate financial support in the shape of a lump sum payment would enable the person to achieve a pressing need or desire (mobility car payment, college fees, home deposit, etc.) yet they are unable to access the money they need because it is locked away inside a structured settlement plan.

In short, a tool designed to give them long-term financial support has instead become a chain around their neck.

The good news is that there are plenty of companies, including New Leaf Structured Settlements, who can unlock that chain by purchasing structured settlements for a lump sum.

If you are somebody who could do with accessing your structured settlement cash early but are skeptical about selling, perhaps your judgement is being affected by a structured settlement myth like the ones covered in this article.

Therefore, the first set of myths we present are those that often prevent structured settlement owners from selling their asset and unlocking their much-needed cash.

Myth 1. Structured settlement buyers are only interested in buying large settlements

When many people think of structured settlements, they envision the payments awarded to plaintiffs in workers’ compensation, personal injury and wrongful death claims. These often involve significant amounts of money as they are designed to provide for expenses such as future medical care, child support and retirement income.

However, there are many other types of cases that can be resolved using structured settlements, even when the sums involved are relatively minor. Some examples include:

  • construction defects
  • divorce
  • employment dispute/wrongful termination
  • environmental claims
  • pre-1997 workers’ comp claims
  • psychological damage
  • punitive damages
  • sexual harrassment/discrimination

Even the payment of lottery winnings are sometimes set up as a structured settlement.

Structured settlement buyers will often consider snapping up settlements worth as low as $10,000 so if you were in receipt of a small award, don’t immediately assume no one will be interested in buying it.

nf4Myth 2. Structured settlement owners have to sell all of their settlement at once

Related to the first myth is the notion that selling a structured settlement is an all or nothing deal. This can lead to structured settlement owners losing out on the immediate financial support they need because they think their future security would be jeapordized.

In fact, it is perfectly possible that a seller will agree to purchase only a part of your structured settlement award, giving you the best of both worlds: money now and a safety net for the long-term.

If you are now ready to talk about selling your structured settlement, be careful you don’t fall for the next myth on our list.

Myth 3. A traditional financial planner can best advise structured settlement owners on whether to sell or not

Some people who would otherwise benefit from selling their structured settlements are unfortunately put off by the very person who should have their best interests at heart: their financial planner.

Traditional financial planners are often not up to speed on the structured settlements market and they may harbor their own biases against these instruments. Of course, any advice to give up future security in exchange for immediate support shouldn’t be given lightly but that can lead financial planners to be too conservative and inflexible.

If your financial planner is overly negative, consider getting a second opinion. For example, dedicated structured settlement planners are much more knowledgeable about the industry and better placed to give informed advice.

Myth 4. Selling structured settlements benefits the buyer at the seller’s expense

Linking into the previous myth is the idea that structured settlement buyers are predators, taking advantage of desperate people.

Nothing could be further from the truth. Although some firms are more aggressive in their pursuit of business, this is no different than in any other industry (insurance, windows, automobiles, etc.)

Rather than shunning a whole industry because of a few bad apples, the savvy structured settlement owners will logically weigh up the terms of any deal before making an informed decision.

Besides, the sale of a structured settlement can only be approved by a court and only then when it has been proven that the sale is likely to be in the best interests of the seller. Few other transactions, financial or otherwise, are subject to the same legal scrutiny.

We now look at some myths involving investing in structured settlements.

Myth 5. Structured settlements provide a poor rate of return compared to traditional investments

This stubborn myth often arises from investors looking only at the headline growth rate of a structured settlement. What they fail to take account of is the tax-free status of most structured settlement awards.

As an example, using a tax rate of 25% , a structured settlement of 3% would equate to a pre-tax rate of 4%. A rate of 5% is equivalent to a 6.67% taxed investment. When you bear in mind that states like California, pay a much higher rate of tax than that (over 50% federal and state taxes), the rate of return of a tax-free structured settlement begins to look a lot more attractive.

Although it is true to say that investing in structured settlements will rarely deliver the double digit returns that other investment vehicles offer, the low overheads involved mean that sellers can often offer a good rate of return, especially when you consider the security you get.

This last point leads us nicely into our penultimate myth.

Myth 6 Structured settlements are risky to invest in as they are dependent on market conditions

Structured settlements are often incorrectly catrgorized as high risk investments. In contrast to investments in equities, commodities and property, where prices rise and fall with market conditions, the return rate of structured settlements is guaranteed. Whatever happens in the market, the rate of return will stay the same, making this type of investment perfect for planning purposes.

Structured settlements are often backed by stable reinsurers with huge amounts of capital behind them, adding another layer of safety.

As with any investment, there is a degree of risk but this is mainly to do with a lack of liquidity. Unlike riskier investments, you have to wait for your returns to become due. If you do need to access the cash earlier than this you can only sell the structured settlement on which will erode its value. Another risk is the erosion caused by inflation which affects any long-term investments.

Myth 7. Structured settlements are of no interest if you have an established portfolio

This final myth is often cited by novice investors with unbalanced portfolios. They may have invested in various stocks, shares and funds and feel that they have no need to add in any structured settlements. More experienced investors understand that the long-term, guaranteed income provided by insurance-backed structured settlements are the perfect countermeasure to short-term, liquid assets which are hypersensitive to market fluctuations.

Hopefully, this structured settlement myth buster has put you in a better position for making an informed decision whether you are considering investing in or getting money for structured settlements. If you are interested in selling, please call New Leaf Structured Settlements for a free

How to get Cash in Advance on a Structured Settlement

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A sale of a structured settlement involves the assignment of future payment rights from the person receiving the payments (known as the payee, annuitant or structured settlement recipient), and a third party. The process of selling a settlement of this nature is governed by not only Federal law but also governed by the state where the annuitant resides. While state laws differ slightly, many of the individual laws have common elements. These elements include a disclosure period, a court filing, a notice provision and the assignment for a lump can only be consummated by the entry of a court order.