by John Darer CLU ChFC CSSC
Greg Bresiger's piece "New House Rules" in the August 12, 2007 New York Post "The Tip Sheet" suggests new house rules and behavior modification is needed for home ownership. Among the old rules/new rules:
Old: Use your house as a piggy bank New: Only borrow against your house for very important things
Old: The value always goes up New: Over the long term yes, short term no
Old: Your house is an investment New: You can't just sell your home like a stock
Old: Put down a small down payment New : Banks want 20% down to realize the American dream
Old: Get a variable rate mortgage New: Being an interest rate pig will get you slaughtered
Many of these concepts apply to structured settlements and how certain structured settlement payees perceive them.
- Your structured settlement is NOT a piggy bank. It is a source of guaranteed income. If you already have a structured settlement there's a good chance that a steady source of income is valuable to you. Because selling your structured settlement payment rights is an expensive source of capital, only consider selling your rights to your structured settlement payments for very important things and only if you have exhausted ALL other sources.
- Investments do not always go up. Even if the long term trend has been positive you must weigh your tolerance for volatility and your need for guaranteed income against that opportunity. If someone who is a not a financial planner, who has no securities license and insurance license, is telling you to sell your payment rights for some nebulous investment opportunity, run don't walk. Discount much of the syndicated crap you see on the Internet, unless you can verify the author's credentials. There are a number of so-called "experts" who are professional writers or even part-timers. A number of these have no practical experience and have only written one or two articles filled with inaccuracies. I've tried to identify some of the garbage on this blog.
- Your structured settlement is an investment of sorts. However, you can't just sell it (structured settlement payment rights) like a stock. Procedures are in place through the structured settlement protection acts in your state to help protect you. As more judges become better educated on their responsibilities under these acts, the value of these acts will be strengthened. Be aware that It could take several months to complete the transaction, or it could cost you big time if you sold your structured settlement payment rights without Court approval.
- If you play your cards right and with a little bit of luck you could beat the long term IRR of a structured settlement. But wouldn't you buy "insurance" if the dealer has an ace showing? In this case the dealer's "ace" is stock market volatility. If you know you have a good chance of getting beat don't throw caution into the wind. Structured settlements are a form of insurance. The broker or settlement planner actually needs a life insurance license to place or create a structured settlement.
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