Sell Structured Settlement Legal Requirements and Court Approval 1 — Questions and Answers
Question 1: What are state-level laws governing the sale of structured settlement payments commonly called?
- Annuity Transfer Acts
- Structured Settlement Protection Acts (SSPAs) (Correct answer)
- Payment Rights Assignment Laws
- Consumer Finance Protection Statutes
Correct answer: Structured Settlement Protection Acts (SSPAs)
Virtually every US state has enacted a Structured Settlement Protection Act (SSPA) that sets out the requirements for a valid transfer of structured settlement payment rights.
Question 2: As of 2024, approximately how many US states have enacted their own Structured Settlement Protection Acts?
- About 10 states
- About 25 states
- Nearly all 50 states (48+) (Correct answer)
- Only federal law applies — no state laws exist
Correct answer: Nearly all 50 states (48+)
Nearly all US states (48 or more) have adopted SSPAs, creating a near-universal state-law framework requiring court approval for transfers.
Question 3: Under a typical SSPA, the court approving a transfer must find that the transfer is:
- Profitable for the factoring company
- In the best interest of the payee, taking into account the welfare of dependents (Correct answer)
- Approved by the original defendant's insurer
- Consistent with IRS guidelines
Correct answer: In the best interest of the payee, taking into account the welfare of dependents
The 'best interest' standard is the central test courts apply under SSPAs — the judge must find the transfer serves the payee's and dependents' financial interests.
Question 4: Who typically files the petition with the court to approve a structured settlement transfer?
- The payee independently
- The factoring company (or its attorney) on behalf of the transaction (Correct answer)
- The annuity issuer
- The original plaintiff's attorney
Correct answer: The factoring company (or its attorney) on behalf of the transaction
The factoring company typically bears responsibility for preparing and filing the transfer petition with the court and covering associated court costs.
Question 5: Which parties are generally required to receive notice of a structured settlement transfer petition?
- Only the payee
- The annuity issuer, obligor, and any other interested parties identified by the court (Correct answer)
- The IRS and state tax authority only
- Only the factoring company and the court
Correct answer: The annuity issuer, obligor, and any other interested parties identified by the court
SSPAs require that the annuity issuer, the obligor (insurance company), and other interested parties receive formal notice of the transfer petition so they can appear and object if warranted.
Question 6: What does an 'independent professional advice' requirement in an SSPA obligate the payee to do?
- Hire a financial planner paid for by the factoring company
- Obtain advice from an independent attorney, financial advisor, or accountant before completing the transfer (Correct answer)
- Attend a state-run financial education class
- Use a court-appointed guardian ad litem
Correct answer: Obtain advice from an independent attorney, financial advisor, or accountant before completing the transfer
Several states' SSPAs require that the payee receive — or at minimum be offered — independent legal or financial advice before the transfer is executed.
Sell Structured Settlement Legal Requirements and Court Approval 1
What are state-level laws governing the sale of structured settlement payments commonly called?