Sorry Einstein structured settlements but as it has been said before – Einstein does not equal more cash
If there is a secret formula to obtain more cash from your structured settlement annuity, lottery, or investment annuities it’s this, MC=MO . More cash equals multiple offers. To ensure you receive the most money for your settlement call multiple companies and compare the offers. In the end you’ll be happy you did.
Is it Einstein or just an average client?
Taking a look at the Einstein website under reviews, they have a video testimonial of a Hispanic client praising Einstein for their large lump sum. The young lady claims to have won the lottery but was just receiving $15,000 a month for life; Einstein helped her convert her payment into a lump sum so she could buy an oceanfront property in Miami and a Bentley.
At the end of the day individuals who sell their annuities, structured settlements and lotteries can do what they want with their lump sum, but gloating about buying an oceanfront property and a Bentley can hardly be considered a typical and noteworthy reason to sell your payments. This reason will certainly not satisfy the best interest determination by the judiciary across many States in the US.
Perhaps a more realistic example is a father who inherited his recently deceased son’s annuity and is selling the future payment streams to pay for the funeral expenses that are in excess of $8,000.
There have never been more companies offering to buy your future payment streams in exchange for a lump sum than there are today. While the process of selling an annuity, lottery, or even a pension is not complicated the decision should not be taken lightly. Consult with your trusted friends, family and advisors about the decision and always research the company you are considering doing business with.
You may recall an 81 year old resident of Rhode Island winning the third largest Powerball lottery in the history of the game. That winning would have paid out $336.4 million in the form of 30 annuity payments paid over 29 years. The winner elected not to take the annuity and instead chose a lump sum of $210 million.
Not only was Ms. White the winner, the State of Rhode Island also experienced an increase to its general fund. The state fund received $22.8 million more than the previous year.
Ms. White set up a trust, pleasantly named the Rainbow Sherbert Trust, for which the lump sum will go into.
While Ms. White opted to accept the lump sum amount, lottery winners and holders of annuity, and structured settlement policies may also opt for a lump sum through the secondary market. Contact Rescue Capital for more information.
Did you know that 9-10 lottery winners are broke within 5 years? It’s not surprising since most people are ill-equipped to handle the windfall of instant money. While structured settlement annuitants and lottery winners who opt for the annuity have better protection against unwise spending, bad investments, con-men and trustee mismanagement there are some safe guards that should be taken if you ever come into money.
Former dot-com millionaires, financial gurus and lottery experts have a great amount of advice on how to preserve your money including:
- Shhh, don’t say a word: Don’t update your Facebook status and call everyone you know telling them the good news. There was one case of a gentleman who bragged about receiving a legal settlement only to have his house robbed. You will have enough strangers, long lost family members and charities coming out of the woodwork soon enough so try to keep it a secret.
- Don’t change your lifestyle: One expert suggest that you do not change anything about your lifestyle for 1 year. I know that seems really tough to do especially if you’re living on your buddy’s couch but let the money sink in and don’t make foolish purchases.
- Get help: Hire a lawyer, accountant/tax expert and financial planner to help you make decisions regarding the money. Make sure you get a least 3 names and they are a member of the following organizations--National Association of Personal Financial Advisors, the Financial Planning Association, and the Certified Financial Planner Board of Standards. The American Institute of Certified Public Accountants has a list of CPAs who've earned the Personal Financial Specialist designation. The Securities and Exchange Commission (SEC) also has an area on their site to check financial firms and planners.
- Tax time: Depending on where you live, where you got the money from (lottery versus lawsuit) and how you’re receiving the payments there will be host of tax issues to consider. Get with a tax expert to discuss all of the implications before you do anything with the money. Don’t be like those few “celebrities” that didn’t pay their taxes and ended up in jail.
- No friends: Don’t lend money to old friends and don’t make new friends. Stay away from people in general because they will want to borrow from you or have an investment for you. Many times these new friends are scammers.
- No investing: Sit on your money and do not make any investments like buying artwork, businesses or stocks. Again see rule number 2.
- The 2% rule: If you can’t resist a major deal do not put more than 2% of your money into it. This way if this great deal doesn’t pan out you’re preserving your wealth.
- Watch your spending: If and when you make a few purchases keep it reasonable. Don’t buy a million dollar mansion or brand new cars for the entire family. Know where all your money goes, any fees associated with your purchases and other costs.
- Protect your identity: If it is possible protect your identity. Change your phone number, avoid appearing in articles and don’t make public donations. If you can, form a trust instead of using your name and always keep a watchful eye on your credit report.
- Stay healthy: Stress can kill you and no matter how much money you have it means nothing if you don’t have your health.
Mistakes bloggers make about annuities, loans, mortgages, reverse mortgages and structured settlements
Sometimes bloggers and tweeters annoy me. Usually I try to ignore my disdain but occasionally, my twitter followers can attest, they get on my last nerve. They write posts with erroneous information about financial terms that confuses the hell out of most people. I am pretty sure they're doing it to trick search engines but seriously folks you need to get the facts. Here’s a list of some of the most common errors that bloggers make.
- Annuities and Structured Settlements are NOT the same thing:
A structured settlement is a financial arrangement. An annuity is a financial product that provides a series of payments over a specific period of time such as a lifetime. Delivered on a set schedule, these payments can be paid monthly, quarterly, biannually, or annually. There are many different types of annuities but they are typically sold by insurance companies. Many individuals purchase them in order to have a reoccurring source of income during retirement. As in the case of a structured settlement, the insurer, or designated third party, purchases an annuity from a life insurance company in order to provide periodic payments to the claimant.
- Lottery winnings are NOT structured settlements:
When you win the lottery you have the option of receiving a cash lump sum or an annuity. This is not a structured settlement.
- Annuities are NOT the same thing as a mortgage:
Again an annuity is a financial product used to grow money in order to give the owner a constant stream of payments in the future, such as when they retire. A mortgage is a loan secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front.
- A Reverse Mortgage is NOT an annuity:
Reverse mortgages allow homeowners 62 years of age and older to convert some of their home’s equity into cash. Paid in a lump sum or in installments, borrowers continue to live in home as long as they maintain the home as well as pay the taxes and insurance on the property. They also have to pay for mortgage insurance. Once the last borrower dies or moves out the home is sold, the lender collects their money and remainder goes to the borrower or their heirs. With many reverse mortgages an extended, but temporary, nursing home stay can cause the homeowner to be kicked out of their homes.In addition to the compound interest, borrowers must pay significant upfront costs with a reverse mortgage such as origination fees and closing costs. These fees are typically more expensive than when you buy a house. Remember like a traditional mortgage, the money has to be paid back.
- An annuity and amortization is NOT the same thing:
Amortization, on the other hand, is paying off debt in regular installments over a period of time such as with a mortgage or loan. With each payment that you make, a portion of your payment is applied towards reducing your principal and another portion of your payment is applied towards paying the interest on the loan. It can also be the deduction of capital expenses over a specific period of time (usually over the asset's life). Amortization measures the consumption of the value of intangible assets, such as a patent or a copyright. It is similar to depreciation except that depreciation is used when referring to tangible assets like a building, or equipment and amortization is used solely for intangible assets. (See 1 & 3 for annuity)
- Structured Settlement Factoring Transactions are NOT loans – A Structured Settlement Factoring Transaction is when you sell your future payment rights to a third party for a cash lump sum. This is not a loan. You do not have to pay the money back and it has no effect on your credit score.