14 Dec Changes to Purchasing Regulations In Maryland Gives Annuity Sellers Peace of Mind
Structured settlements are typically awarded following a successful lawsuit, insurance claim, or some other legal proceeding resulting in monetary damages. One of the reasons they’re preferred is due to the fact that they can save you anywhere between 25 and 35% in state and federal taxes on interest income that would otherwise be subject to tax.
The issue of questionable businesses that buy structured settlements has become a popular area of concern after much was made of one rogue company; this past summer The Washington Post highlighted cases in which recipients were awarded less than market value in exchange to sell annuity payments.
Fortunately, residents of Maryland will be able to sell annuity payments and get cash for structured settlement payments without any fear or reservations as the state’s highest judicial authority, the Maryland Court of Appeals, approved regulation reform at the end of November that’s intended to better protect individuals selling a structured settlement and future annuity payments.
The changes will make the entire process more transparent and help judges determine whether or not the purchase agreement is in the best interest of the selling party, according to The Washington Post. The new changes in place are meant to make it harder for judges to simply “rubber stamp” these kind of agreements, as they routinely have in the past.
“There were no guidelines before,” said Judge Alan M. Wilner, who chairs an advisory committee that proposed the additional rules in October. “The judges were left with whatever the [company] was telling them, which was next to nothing. Often, the [settlement recipient] wasn’t there in court, so I don’t know whether the judges who were having these things before them even knew what kinds of findings they had to make.”
One of the areas of concern involved the independent financial advisers that a seller is required to have to explain the benefits and potential drawbacks if they were to sell annuity payments. In one of the cases, the same adviser was assigned to a multitude of cases with the same purchasing company, potentially creating a conflict of interest.
Under the new regulations all prospective sellers will also now have to appear in-person to court so the judge can question and talk things over with them personally. The only downside to these new changes could be the extra burden and slowing down of the process. Many people choose to sell their payments because they need the money now. Even “immediate” annuities don’t start paying out until 30 days and many are subject to early-withdrawal penalties of as much as 10%.
While Patricia LaBorde, president of the National Association of Settlement Purchasers, agrees there is work to be done to ensure the consumer is protected, she isn’t convinced blanket legislation from the judicial branch is the right answer.
“In general, the best solution is a legislative one,” she said. “Changes need to be made in Maryland, and I think it’s most appropriate that it’s handled by the legislature.”
State lawmakers have already said they plan to address potential new legislation this January.