If you are considering selling your future structured settlement payments for an immediate lump sum in Massachusetts, it's important to understand the laws surrounding this type of transfer. In addition to federal law, 49 states have their own laws that govern the process of transferring the rights of a structured settlement annuity.
In Massachusetts, the law surrounding the transfer of rights to future structured settlement payments is Chapter 231C Structured Settlement Contracts.
Section 2. (a) No direct or indirect transfer of structured settlement payment rights shall be effective, and no structured settlement obligor or annuity issuer shall be required to make a payment directly or indirectly to a transferee of structured settlement payment rights, unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction or responsible administrative authority, such as an administrative law judge, based on the court's or responsible administrative authority's written express findings that:
(1) the transfer complies with the requirements of this chapter and will not contravene other applicable law;
(2) not less than ten days before the date on which the payee first incurred an obligation with respect to the transfer, the transferee has provided to the payee a disclosure statement in bold type, no smaller than 14 points, specifying:
(i) the amounts and due dates of the structures settlement payments to be transferred;
(ii) the aggregate amount of the payments;
(iii) the discounted present value of the payments, together with the discount rate used in determining the discounted present value;
(iv) the gross amount payable to the payee in exchange for the payments;
(v) an itemized listing of all brokers' commissions, service charges, application fees, processing fees, closing costs, filing fees, referral fees, administrative fees, legal fees, notary fees, and other commissions, fees, costs, expenses and charges payable by the payee or deductible from the gross amount otherwise payable to the payee;
(vi) the net amount payable to the payee after deduction of all commissions, fees, costs, expenses and charges described in clause (v);
(vii) the quotient, expressed as a percentage, obtained by dividing the net payment amount by the discounted present value of the payments, which shall be disclosed in the statement as follows: ''The net amount that you will receive from us in exchange for your future structured settlement payments represent ___% of the estimated current value of the payments'';
(viii) the effective annual interest rate, which rate shall be disclosed in the statement as follows: ''Based on the net amount that you receive from us and the amounts and timing of the structured settlement payments that you are turning over to us, you will, in effect, be paying interest to us at a rate of ___% per year''; and
(ix) the amount of any penalty and the aggregate amount of any liquidated damages, including penalties payable by the payee in the event of a breach of the transfer agreement by the payee;
(3) the payee has established that the transfer is in the best interests of the payee and the payee's dependents;
(4) the payee has received, or waived the right to receive independent professional advice regarding the legal, tax and financial implications of the transfer;
(5) the transferee has given written notice of the transferee's name, address, and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of the notice with the court or responsible administrative authority;
(6) the transfer agreement provides that if the payee is domiciled in the commonwealth, any disputes between the parties shall be governed, interpreted, construed, and enforced in accordance with the laws of the commonwealth and that the domicile state of the payee is the proper place of venue to bring any cause of action arising out of a breach of the agreement; and
(7) the court or responsible administrative agency has made a determination that the net amount payable to the payee is fair, just and reasonable under the circumstances then existing.
Click here to read the full Massachusetts law.
To sell your future structured settlement payments, you'll need to comply with both state and federal law. These laws are in place to protect you.
In 2001, Congress enacted the Victims of Terrorism Relief Act, which includes a provision relating to structured settlement factoring transactions (26 U.S. Code § 5891). This provision imposes a high excise tax on structured settlement factoring transactions unless the transactions are “approved in advance in a qualified order.” The Act defines a qualified order, and it requires that the order be issued “under the authority of an applicable State statute by an applicable State Court.” Since then, 49 states and the District of Columbia have enacted state statutes setting for the procedures for court approval of structured settlement factoring transactions.
Qualified order. --For purposes of this section, the term “qualified order” means a final order, judgment, or decree which--
(A) finds that the transfer described in paragraph (1)--
(i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and
(ii) is in the best interest of the payee, taking into account the welfare and support of the payee's dependents, and
(B) is issued--
(i) under the authority of an applicable State statute by an applicable State court, or
(ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.
26 U.S. Code § 5891 also offers some helpful definitions and other rules for selling structured settlement rights. Read the full law here.
We have a few articles that might be helpful if you are considering selling your structured settlement payments:
Transferring the rights to your future payments is permanent, and it's not the best choice for everyone. We encourage you to speak with a financial expert about your asset and to weigh all your options if you are in need of immediate cash.
CrowFly is committed to creating a positive experience that is built on trust, accessibility, and transparency for people who have structured settlements. For more information, contact CrowFly at 833-CROWFLY, email firstname.lastname@example.org, or get started with a structured settlement quote.