The enactment of laws for Structured settlement
The history of structured settlement is almost two decade old and the lump sum payment was the only method available until the introducing of periodic payment. In 2001, Congress passed HR 2884, as a Federal Legislation, passed by the President in2002. This has been referred as Internal Revenue Code § 5891 which came into effect on July 1, 2002. This states a law that all factoring industries have to meet the excise laws of IRC under 5891.
Also the transactions have to comply with the state laws and federal laws for taking benefit from excise taxes. Further IRC 5891 states that structured settlements factoring transactions have to be approved by the state courts. This is in accordance with the qualified statute. Qualified state statutes also state that the transfer must be in the interest of seller considering the interest of welfare of the family and dependents. As on date all the transfers are made through the procedure of court. All 46 state laws are implementing transfer laws with effect from 11 November 2008. Some of the provisions of state transfer laws include, contract disclosures, notice to interested parties, professional guidance about the proposed transfer. Court approval of the transfer, that it is in the interest of the seller, considering the welfare of the dependents. Therefore, this indicates a fact that the entire process of structured settlement is completely driven by laws. There can be no negotiations or personal grievances in any area, until court approves and issues orders. The entire procedure with regard to structured settlement carried out as per state laws differ from state to state.
But in order to have an understanding about the legal provisions, a broker or a legal professional advice must be considered. This will also give a clear picture about how claimant can benefit from factoring transactions. Although there are many controversies for factoring transactions, it continues to gain prominence. There are few terms which are used only for factoring transactions and these are discount rate, discounted present value and best interest standard. This article concludes that the legal process with the assistance of court, is much safe for drawing benefit from structured settlement. Also the history of structured settlement has helped in bringing amendments and new provisions into effect. The impact of structured settlement is expected to be good and positive always. There is not a requirement of legal sources outside the law of structured settlement. The biggest benefit that is available from structured settlement is torts are settled between the two parties.