by Structured Settlement Watchdog
In a still published 2012 Kitces Report article entitled “Is Structured Settlement Annuity Investing a Good Idea? Yes But…”, Michael Kitces proved that even people with 8 financial credentials were getting it wrong about structured settlement investments. Very smart guy. Unfortunately Kitces didn’t do his homework here.
You Can’t Invest in a Structured Settlement Annuity. Period.
Kitces is mistaken in stating that “generally the sale of a structured annuity results in the transfer of the actual annuity contract” (as shown in the screenshot). The process does not involve selling a structured annuity or any annuity or insurance product. Instead, it involves the transfer of structured settlement payment rights, a receivable, which represents a crucial distinction.
A “Structured Settlement Investment” is an investment in structured settlement receivables (payment rights), not an investment in an annuity as misleading ads touting “secondary market annuities” suggest
The structured settlement payment rights are transferred in a structured settlement factoring transaction
Whether through ignorance, poor research or intent, the structured settlement secondary market ripples misinformation about structurred settlements to the detriment of consumers and even those with 8 financial credentials.
In the comments to the same article one of the commenter chimes in about Kitces’ comments about state guaranty fund payments to investors.
“-the beneficiaries, payees or assignees of insured persons are protected as
well, even if they live in another state [so if you have the annuity assigned to you, you are protected]“
This comment was irresponsible then and would be reckless if it were made in 2022 (see highlighted #2 below)
- But you DON’T have the structured annuity assigned to you. You never would. The structured annuity is owned by the qualified assignment company as it was when the structured settlement was established for the benefit of injured person as compensation for their injuries. What is happening is the transfer of structured settlement payment rights. Structured settlement payment rights are not an annuity.
- The 2017 updates to the Life & Health Guaranty Association Model Act (#520), expressly exclude investors in acquired structured settlement payments rights. 37 States have adopted the 2017 revisions as of June 2022 . The bad news for investors is that there is a retrocative exclsuision from the adoption date in your state, so you’re not protected even if you bought the investment prior to the adoption date in your state.
Last updated August 17, 2022