Part 3 Continued – Disclosure and Transfer Documentation
This document, the disclosure statement, will also show you the true cents on the dollar. This is called the “quotient”. To calculate the quotient, we would take the net payment amount being paid to you, divided by the current IRS Discounted Value of the payments. As an example, if you sell $150,000.00 in payments, the IRS values the payments at $100,000.00, and we are paying to you $75,000.00, the quotient would be 75%. You would actually get 75 cents on the dollar. It is important to note that since the payments you are selling are not due until some future date, you do not use the total payment amount of $150,000.00 to calculate your quotient. The IRS Discounted Value is considered the true current value of the payments.
Now, depending upon your individual State statute, a few days thereafter, we would provide to you the 2nd set of documents, called the Transfer Agreement (”T/A”) package. Under most states, we would wait either 3 days or 10 days thereafter, however, it could occasionally be either 14 days or even simultaneously sent to you. When discussing the process timeline with your Account Representative, you should go over your individual state requirements so you know what exactly the process will be for your transaction.
The Transfer Agreement package will include several documents, including the heart of your structured settlement transaction, the “Transfer Agreement”. This is where you are agreeing to sell the specific payment stream to us, and we are agreeing to purchase the payments from you. You should note that this document is a legal and binding contract between the two parties, and thus you are encouraged to seek legal advice prior to signing it. Not all states require you to obtain legal advice, but any time you are going to sign any contract, it is a pretty good idea.
Together, these two packages include most of the documents you will need to sign to process a transaction. There will still be a few more documents to sign later, but these two packages are needed to begin the process of purchasing your payments.
Next week, look for a discussion on the Affidavit for Court. This is an extremely crucial document for the file and is needed to obtain judicial approval of the transfer.
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