DCF Income Payments – FAQs

dcf income payments faqs

What Our Customers Ask Before Buying DCF Income Payments


DCF Income Payments form an important part of the financial landscape by providing liquidity to structured settlement sellers, and by providing a higher yield, high credit payment stream to buyers.

Properly structured and legally reviewed by our affiliate wholesale firm, DCF Exchange, these instruments offer a great guaranteed income alternative to today’s yield-starved investors. Advisers and individuals alike should take a close look at these high-yield, high credit quality safe-money alternative investments.

Here are a few frequently asked questions that our buyers typically ask:



DCF Income Payments are an excellent, high-yield alternative to other fixed income investments. In addition, they can also form a high-yield, guaranteed income source for risk-averse investors, or to fund future obligations.

Here are a few planning scenarios that illustrate the uses of these tools:

Income Now:

A couple has a wide disparity between their ages (60-year-old man, 50-year-old wife).  Traditional joint life annuities will offer very low payouts for this couple.

However, DCF Income Payments can be used to produce income for any buyer, or buyers, and of any age.  In this scenario, the couple may use Immediate Income DCF Payments to produce Income Now for a period of years, then use other tools to protect their money and produce income later, thus earning a higher yield than any other safe money option.

Income Later:

In addition to the Income Now Immediate Income DCF Payment, the couple may use Deferred Income DCF Payments to produce Income Later to guarantee income for the surviving spouse to re-position in the future.

Safe Growth Options:

Investors seeking high yield alternatives to CDs, or a couple with an age discrepancy as we detailed above, may use Lump Sum DCF Payments as a Safe Growth Option to ensure that principal is available for the future.  This may be used for income, or to fund education, gift, or other goals. Investors seeking alternatives to the complicated contractual terms of variable and index annuities with income riders rejoice at the simplicity and high yield available in DCF Income Payments.

The yield on DCF Income Payments is higher simply because the seller of a structured settlement is selling at a discount. These are existing, fully funded payment obligations. A buyer becomes the assignee of an existing payment stream- a note receivable bought at a discount.

See above- discounted cash flow is a hard concept for a lot of people, but it’s at the heart of this market. $100 in 10 years is worth $55 today at a 6% discount rate. There are 10 years of deferred, compounding accumulation, which means the purchase price today is just $55.

Using the same discount rate of 6%, a payment stream of $1000/ month for 120 months costs $90,724.32 today. Because the payments start immediately, each payment includes some portion of principal and some of interest. As principal is paid out, is no longer accruing at the discount rate, and thus the total amount of interest earned on a ten-year income stream is much lower than the total interest earned on a ten-year deferred lump sum contract.

Insurance companies are not issuing contracts that yields 6% in this marketplace. Rather, sellers are willing to sell their existing annuities at a discount that allows you to achieve a 6% yield.

In summary, Investors considering period certain Single Premium Immediate Annuities (SPIA’s) or using withdrawals from Fixed Annuities, Variable Annuities, or Indexed Annuities for cash flow, will find a DCF Income Payment a higher yield alternative.

Structured Settlement Annuities are considered to be senior obligations of the insurance companies issuing the annuity. Because structured settlements originate in lawsuits, payments that are made to settle the lawsuit are subject to a court order. Failure to make those payments would be contempt of court, and therefore are considered to be senior obligations.

In typical DCF Income Payment transactions, we facilitate you receiving the payments of an existing payment stream. In previous sections, we detailed how structured settlement annuities come into being and are funded, and why they are safe.

In a well structured and properly documented DCF Income Payment transaction, there are five key items that document a case transfer and ensure legal safety of payments to you:

  1. Benefits letter from the issuer to the payee, which establishes that the Payee has the payments to sell.
  2. Court order changing the payee name to you or an entity that benefits you, such as our Business Trust.
  3. Acknowledgment letter or stipulation agreement after the court hearing from the Issuer naming you or an entity that benefits you as the new payee of the specific payment stream you purchased.
  4. Legal Review reviewing all documents, notices, filings, UCC statements, and procedures in each case and every jurisdiction the case is subject to.
  5. Irrevocable Assignment of the cash flows from our entity that purchased the payments assigning the payments to you forevermore.

Of course, this is exactly what we do at DCF Annuities. Counsel reviews each and every case.

Unlike all other newly issued annuities, DCF Income Payments have no holding or administrative costs other than a nominal payment servicing fee and, if applicable, costs to your IRA custodian. Remember that originally, a claim or suit was settled with a monetary payment that purchased an annuity, either in a qualified assignment or directly by the defendant, to pay out future benefits to the injured party. This award has no costs or fees to the recipient, and thus has no costs to you too.

DCF Income Payments are a refreshing, “what you see is what you get” transaction, without complicated fees, riders, or other costs.

DCF Income Payment purchases can be arranged through a self-directed IRA custodian who is familiar with the asset class. There are special calculations to be done to account for required minimum distributions or RMD’s so it’s best to work with a custodian already familiar with the market.

There are a couple of IRA custodians that we recommend and will work with. Furthermore, we have discounted rates for self-directed IRAs available to our members and clients.

It’s important to note that while DCF Income Payments have no fees or costs other than the purchase price and a nominal payment servicing charge, IRA custodians do have some costs. We have a discounted rate available to our customers from the best Self Directed IRA custodians in the marketplace. See This Page for more info.

The typical DCF Income Payment buyer is a safe-money investor seeking an above-average yield, with very low risk and no volatility. Payment streams can be immediate income, short-term lump sum, long-term lump sum, or a mixture.

In a typical structured settlement annuity transaction, there will be an annuity issuer or obligor, an annuity owner, and a payee. The payee is the person to whom the payments are being made. This is the person who is injured in the suit or settlement, who is receiving the money.

In a lawsuit, typically the losing party will settle the claim against them by either purchasing an annuity to fund the future claims, or by assigning their obligations to pay the future payments through what is known as a qualified assignment. In a qualified assignment, the assignment company will then purchase an annuity to fund the future claims.

In both an assigned case and an unassigned case, you have the same parties, namely, the payee, the annuity issuer, and the annuity owner.

As a buyer of structured settlement payment rights, you become the new assignee of the original payments. Your payment rights are guaranteed by the annuity issuer, and in the secondary manner guaranteed by the annuity owner, who may either be an assignment company or the original losing party in the lawsuit.

In the unfortunate event of the death of the owner of a DCF Income Payment, executors and heirs have several options.

For Payment Streams Owned by an IRA:

If the payment stream was owned by an IRA, the beneficiary designation of the IRA account will govern how the IRA ownership is transferred. The IRA is the owner of the payment stream and thus the payment stream will continue to pay into the IRA even if the IRA ownership is transferred to a beneficiary. Contact the Self Directed IRA Custodian, typically GoldStar Trust, for more information on beneficiary designation.

That said, a payment stream itself is an asset that can be sold at any time, whether it’s in an IRA or not.

For those who inherit IRAs that contain one or more payment streams, they may want to consider selling the payment streams for cash to pursue other investments, or they may seek to take the stream out of the IRA as a distribution in-kind. Either of these are viable options to comply with the 10-year required minimum distribution rules enacted in the 2020 SECURE Act.

In either a sale or a distribution in-kind, contact us or the DCF Exchange for valuation of the remaining payments and for repurchase offers for those payments.

For Payment Streams Outside of IRA:

Heirs of purchasers of non-qualified DCF Income Payments have options as well.

First, payment streams owned by deceased individuals can be transferred to heirs directly by communicating with the payment servicer. The disbursing department at GoldStar will require a copy of the will and death certificate in order to change ownership of the remaining payments and update the payee banking details in accordance with the terms of the will.

That said, individuals who inherit a payment stream but would instead like a lump sum payout can sell the stream back to DCF Exchange. Please contact us at any time for the valuation of the remaining payments and for repurchase offers for those payments.

Payment streams owned in a trust will continue to pay to the trust. However, after a death, a new trustee or beneficiary may wish to sell payment streams owned by the trust. This is easily accomplished, simply contact DCF exchange for valuation and repurchase offers.

Download the ‘What To Do When DCF Purchasers Die’ instructions here.

FOR ASSISTANCE, CONTACT:

DCF Exchange, LLC
Nathaniel M. Pulsifer
[email protected]
(877) 321-7927

GoldStar Trust
For IRAs and Payment Servicing
(800) 486-6888

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  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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Safety of DCF Income Payments

safety of dcf income payments

Structured Settlement Annuities, where most DCF Income Payments come from, are issued to the original payees in compensation for injuries or other claims. These awards are negotiated by the parties, usually in a court case or out of court settlement. The winners of these settlements have legal counsel who have a duty to look out for their client’s interests, and consequently, when they opt for a Structured Settlement they are opting for the safety and well being of the clients over a long period of time.

The annuity companies that offer Structured Settlement Annuities are the strongest in the industry- Met Life, New York Life, John Hancock, Allstate, Symetra, Berkshire Hathaway… these are generally AAA rated carriers and in the business of conservatively managing risk and paying claims safely and on time.

Almost by definition, with Structured Settlement Annuities you are dealing with the best of the best right from the start.

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DCF Income Payments, also known as secondary market annuities (SMAs), originate as structured settlements of personal injury cases that include defined future payment streams backed by annuities.   

Individuals who sell some or all of their future payments do so in a court-ordered assignment process whereby the annuity issuers and legal counsel comply with state-specific transfer laws and IRS statutes.  DCF Exchange is a buyer of these payments and distributes DCF Income Payments through a network of financial advisors nationwide, including this website.

Purchasers of DCF Income Payments become the new payee of these transferred, in-force payment streams backed by annuities.  At no time are transferred payment streams pooled, aggregated, managed by or subject to fees of a manager. 

All purchaser acquisition funds and assigned payments are handled by a state and federally regulated bank and trust company in a dedicated escrow account environment.  

DCF Income Payments come in three categories:

For Income Now, use Immediate Income DCF Payments

For Income Later, use Deferred Income DCF Payments

For Safe Growth, use Lump Sum DCF Payments

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STRUCTURED SETTLEMENT TRANSFER PROCESS:

The transfer process making you a new payee under an existing payment stream is also very safe. There is a relatively uniform process adopted in 49 states that requires notifications, disclosures, and procedures to be followed. While the majority of the documentation is contractual, there is one step in the process where a court with jurisdiction over the original settlement also needs to rule that the transfer is in the seller’s interest.

While the court order is one key piece among several that properly document a transfer of payment rights, it actually does nothing to verify the payments. An investor’s name in the court order simply exposes the investor in a public manner. The process we use through our firm DCF Exchange protects investor confidentiality.

There are a variety of additional reasons that Structured Settlement Annuities are extremely safe. These are summarized below.

SAFETY FACTOR #1

An insurance company paying a structured settlement is a party to the court ordered transfer process. The payment remains in force throughout the transfer process regardless of who receives the checks. Just because the payee changes as a result of a court- ordered transfer does not change the underlying payment stream or give the carrier any right to stop making payments.

SAFETY FACTOR #2

There are five key items that document a case transfer and ensure legal safety of payments to you:

  1. Benefits letter from the issuer to the payee, which establishes that the Payee has the payments to sell,
  2. Court order changing the payee name to you or an entity that benefits you, such as our Business Trust
  3. Acknowledgement letter or stipulation agreement after the court hearing from the Issuer naming you or an entity that benefits you  as the new payee of the specific payment stream you purchased.
  4. Legal Review reviewing all documents, notices, filings, UCC statements and procedures in each case and every jurisdiction the case is subject to.
  5. Absolute Assignment of the cash flows from our entity that purchased the payments assigning the payments to you forevermore.

SAFETY FACTOR #3

Because a typical client of ours purchases multiple DCF Income Payments, purchasing contracts in the secondary market virtually assures that you will place assets in several companies with no sacrifice to average yield or overall performance. You will spread your risk among many carriers, all generally highly rated, and achieve high yield diversification.

DCF Income Payments, also known in the market as secondary market annuities, are extremely safe investments. If you haven’t yet, sign up to the right to view our live inventory and get started today!

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  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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Tax Treatment of DCF Income Payments

tax dcf income payments

How much tax will you owe on your DCF Income Payments? Structured settlements are tax-free awards to the original annuitant, per U.S. Code § 130, and carriers, therefore, do not issue IRS form 1099-INT for the payments to the original payees. 

U.S. Code § 5891 and IRS audit guidelines outline how a new assignee obtains an existing payment stream by means of qualified order in compliance with § IRS Section 5891. This is the path followed by DCF Exchange on all transfers of structured settlement payments and is documented in the closing book. These assigned payments are what we call DCF Income Payments, also known in the market as secondary market annuities.

In an IRS § 5891 compliant transfer, the tax-free treatment of income is preserved for the original annuitant, and the parties do not face a risk of an excise penalty tax. But just because the payments are tax-free to the original annuitant and no 1099-INT is issued, this does not mean it’s tax-free to the purchaser of an assigned payment stream.

As with any type of income, the tax treatment of income from assigned structured settlement payments is ultimately determined by the taxpayer and their tax adviser. Income from assigned payment streams is typically considered ordinary income and is recognized when received.

How To Tax on DCF Income Payments

The proportion of income vs. principal in any given payment is determined by the taxpayer using either an amortization schedule or an exclusion ratio applied to the whole payment stream. The exclusion ratio is shown on the amortization schedule for all payment streams sold by DCF Exchange. Please note, if the payment is in an IRA, then all IRA distributions will be taxed when they are taken, not when payments are received into your IRA.

Using The Exclusion Ratio

The exclusion ratio works like this: say you paid $100,000 and will receive $200,000 over 100 payments of $2,000 each. Exactly 50% of each payment would be income, and 50% is return of principal. Consult your adviser, but generally, this income is “ordinary income” for IRS purposes.

The exclusion ratio, therefore, is 50%- 1/2 of each payment is taxable income. This article explains it well, but consult your tax adviser for specific questions.

Using An Amortization Schedule

To be fair, there may be alternative ways to reflect the principal and interest in your payment stream by using an amortization schedule, which can be downloaded from the inventory page and will be provided with your closing book.

This method treats the payment stream in the same manner you would treat a loan or other receivable, where you are the lender, and recognizes interest income predominately in early years, and principal in latter years. This may or may not be beneficial for you.

At this time, it’s our understanding you can use either the amortization method or the exclusion ratio method, to calculate your taxes. But be sure to consult your own tax adviser.

Summary of Taxes & DCF Income Payments

So even though you will not be receiving a 1099 for the payments from the carriers based on current tax law, what happens in the future to tax law is anyone’s guess. Some now use an amortization schedule to allocate principal and interest, while others use the exclusion ratio.

DCFAnnuities.com and DCF Exchange, LLC do not offer tax advice, and this page is for general information only, so please be sure to consult your own tax adviser for more info.

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  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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DCF Income Payments – Case Studies

dcf income payments case studies

To give you a better idea of how we’ve used DCF Income Payments with other clients, please refer to these Case Studies. These are case studies describing each of the different types of DCF Payments, and how clients have used them to create stable, reliable income in a variety of situations.

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DCF Income Payments, also known as secondary market annuities (SMAs), originate as structured settlements of personal injury cases that include defined future payment streams backed by annuities.   

Individuals who sell some or all of their future payments do so in a court-ordered assignment process whereby the annuity issuers and legal counsel comply with state-specific transfer laws and IRS statutes.  DCF Exchange is a buyer of these payments and distributes DCF Income Payments through a network of financial advisors nationwide, including this website.

Purchasers of DCF Income Payments become the new payee of these transferred, in-force payment streams backed by annuities.  At no time are transferred payment streams pooled, aggregated, managed by or subject to fees of a manager. 

All purchaser acquisition funds and assigned payments are handled by a state and federally regulated bank and trust company in a dedicated escrow account environment.  

DCF Income Payments come in three categories:

For Income Now, use Immediate Income DCF Payments

For Income Later, use Deferred Income DCF Payments

For Safe Growth, use Lump Sum DCF Payments

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Case Studies Using DCF Income Payments

Find a case study that matches your situation, or browse the real examples below.

Client: Dan S.

Situation: 70 years old, Needed $5000/ month for 10 years, starting in 10 years, after a business sale note stopped paying off.

Due Diligence: Concerned with volatility, loss, can’t replace the capital at his age, and caution at doing business over the internet

Has: $300,000 cash to work with.

Solution: After doing extensive personal background checking on us, and speaking with our attorney and his own advisors, Dan decided to use DCF Income Payments. He used several deferred income deals averaging 5.5% yield to produce the desired income.

Client: George And Linda R.

Situation: Mid 50’s, Both Recently retired, debt free, seeking fixed term income, planned to move to Mexico and live cheaper.

Due Diligence: Had researched annuities online and met with multiple advisors. We encouraged him to continue the research and use us as a library or to bounce any ideas off. Over time, our honest advice helped Frank make his own informed decision.

Assets: $500,000 in 2 IRA’s

Solution: Our fixed income streams produced more than enough income for 20 years. They planned to save and reinvest over time and not spend all their income, but the certainty of income made retirement a reality. Surprisingly, both returned to work after putting these retirement plans into action, but did so complete by choice and because they got great offers.

Client: Colin K.

Situation: Higher income, late 40’s aged doctor. Excellent saver, seeking long term, deferred lump sum and income streams for planned retirement in mid 60’s. 20-40 year timeline

Assets: $600,000 cash and IRA

Due Diligence: Sought a long term, set and forget 6 to 7% yield for years. Chased the market down, but after seeing our income streams and doing due diligence on us and the industry, decided these were perfect.

Solution: Used multiple life contingent and fixed income and lump sum streams and a family trust to create a substantial deferred income and asset base for future. Of special note, he took advantage of ultra low home equity rates to refinance his home, and used the proceeds to buy a higher yielding payment that will pay off his mortgage with several hundred K extra. Generated several hundred $K net income over 18 years using otherwise stagnant home equity.

Client: Paul L.

Situation: Retired early, seeking ultra safe steady income.

Assets: More Than $2M

Due Diligence: Before working with us, he already owned multiple annuities and secondary market annuities but he found our advice, selection, and service to be far superior to his ‘other guys.’

Solution: Client spent $250K on deferred income ‘longevity insurance’ FIRST to secure lifetime income from age 80 onwards. Then used $800K to fill in a stable and defined timeline income using fixed payments. Has more than enough fixed income to live on. Using long term deferred longevity insurance, life contingent, and fixed term payments, Paul’s blended average assumed rate of return through age 100 is over 8%, all 100% safe. Turning $1M into over $8M fixed lifetime income. DIA/Lifetime income contracts bought early were the key to making it all work.

Client: Kurt H.

Situation: Late 50’s, just sold company, looking to create income with the down payment as his stock sale and note carryback matured and paid over time

Due Diligence: Needs income to be stable while the business note matures and pays off. Did due diligence by comparing our services to other vendors and by speaking to prior clients and our attorney.

Assets: $300,000

Solution: Purchase 10 year, immediate income payment stream.

Client: Dave L.

Situation: Late 50’s, seeking to use a stagnant IRA to create income to satisfy RMD’s and to live on. Substantial other assets, still semi-working.

Due Diligence: Dave is a confident investor and individual. Shopped the market widely, spoke to multiple vendors and advisors before committing. Ultimately, Dave brought the deal he wanted to buy to us from another vendor but wanted us to process it for him because he likes how we did business, how we spoke honestly, and how we handled legal review and transparency.

Assets: $200,000

Solution: 10 year deferred, 20 year payout DCF Income Payment in an IRA. Satisfies RMD’s and used money otherwise sitting in cash. 5.75% effective rate of return.

Client: Rick R.

Situation: Retired at 65 with IRA’s and substantial other assets.

Due Diligence: As an owner of multiple payment streams prior to knowing us, Rick had already addressed many of his concerns about structured settlement payment streams. He initially found us researching Hybrid annuities, then came back around to purchase fixed term payments.

Assets: >$2M

Solution: Initially invested in lifetime income FIA. After discovering structured settlement payments, he chose to surrender and ‘self insure’ longevity risk thru other assets. $1.8M investment producing over $4.6M in fixed income to himself and heirs over 35 years. Sufficient other assets and income to re-invest over time.

Client: Bill K.

Situation: Retired, Spouse working. Had pensions, SS, and a significant fixed annuity

Due Diligence: Attracted to the yield of DCF Income Payments so did extensive due diligence on us, spoke to an attorney and to prior clients before commitment.

Assets: $300K cash to invest

Solution: Created additional defined term income streams for 20+ years, while preserving the assets in both the fixed annuity and in other holdings. Pensions, annuities, and SS combined to create a broad and secure income stream.

Client: Bill F.

Situation: Retired early, with pension and savings. 2 High School aged boys ready for college

Due Diligence: Did his own extensive due diligence on us- tracked down where we lived, our family, called references, spoke to attorney. Documented all, all checked out.

Assets: $300,000

Solution: Bill created a high yield yet deferred income that would mature after the kids were out of college. Using deferred income payments, Bill created an income stream to support himself and wife. 

Client: Rob B.

Situation: laid off, significant savings, single man.

Due Diligence: Speaking with us for months about regular annuities, but did not take action until this product became available.

Assets: >$400,000

Solution: Within 15 minutes of us learning about these payments streams, Rob was our first buyer. They were perfect for his situation, and he created income and deferred lump sums that set him up for life. No other annuity offered the same yield and output. Has subsequently become a good friend, come on fishing trips with us, and has spoken to numerous other clients of ours as a reference.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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DCF Income Payment Rates – Effective Vs. Nominal

dcf income payment rates

Investors often have confusion about the rate of return used in annuities in general, and in secondary annuity rates in particular. DCF Income Payments are in reality quite simple- they are nothing more than an amortizing payment stream, with each payment containing principal and interest. It is basic Discounted Cash Flow (DCF) math that uses a discount rate and an amortization schedule to arrive at Price.

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DCF Income Payments, also known as secondary market annuities (SMAs), originate as structured settlements of personal injury cases that include defined future payment streams backed by annuities.   

Individuals who sell some or all of their future payments do so in a court-ordered assignment process whereby the annuity issuers and legal counsel comply with state-specific transfer laws and IRS statutes.  DCF Exchange is a buyer of these payments and distributes DCF Income Payments through a network of financial advisors nationwide, including this website.

Purchasers of DCF Income Payments become the new payee of these transferred, in-force payment streams backed by annuities.  At no time are transferred payment streams pooled, aggregated, managed by or subject to fees of a manager. 

All purchaser acquisition funds and assigned payments are handled by a state and federally regulated bank and trust company in a dedicated escrow account environment.  

DCF Income Payments come in three categories:

For Income Now, use Immediate Income DCF Payments

For Income Later, use Deferred Income DCF Payments

For Safe Growth, use Lump Sum DCF Payments

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UNDERSTANDING RATES ON DCF INCOME PAYMENTS


The amortization schedule shows the principal and interest component of each payment. Amortization refers to the reduction of a debt or investment over time by paying back the debt over the period.  With amortization, each payment is comprised of both a principal repayment component and an interest component on the debt/investment.

After each payment, the remaining principal is the loan or investment balance that is still outstanding. As more principal is repaid with each passing payment, less interest is due/received on the adjusted principal balance. Over time, the interest portion of each monthly payment declines and the principal repayment portion increases.

Amortization is most commonly encountered by the general public when dealing with either mortgages or car loans but in this case, refers to the periodic principal reduction plus the interest returned to an investor over the life of a DCF Income Payments.

The price paid for a DCF Income Payment (also referred to as a secondary annuity) is calculated using the internal rate of return on the payments (IRR). This is the rate that is applied to the diminishing principal balance each month until all the principal and interest has been returned to the investor.



TIME VALUE OF MONEY EXAMPLE


Discounted cash flows involve the concept of Time Value of Money- a dollar tomorrow is worth less than a dollar today. How much less? That requires the ‘Discount Rate’ to calculate, and discount rate and effective rate are synonymous for these investments.

Here’s a simple example:

$100 in 1 year at a 10% discount rate will cost $90.91 today.

A $90.91 investment today at a 10% Effective rate with monthly compounding will yield $100 in 1 year.



CALCULATING EFFECTIVE RATE FOR YOURSELF


The Effective Interest rate is also equivalent to the Internal Rate of Return, or IRR. To calculate in MS Excel, use the formula XIRR=((payments),(dates),0). This formula calculates the discount rate, or effective rate, for a given series of payments on definite dates. XNPV may also be used to solve for the purchase price of a series of payments on definite dates at a known discount rate.

Click Here for an Excel sheet of the example above.  Now, because of slight variations in the timing of amortization credits, discounted cash flow calculations in an amortization calculator will end up with slightly different values from MS Excel, and XIRR may vary by a few thousandths of a point. DCF Exchange, the secondary market annuity industry leader, uses amortization calculation in its inventory display tools.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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Guide To The DCF Income Payments Purchase Process

dcf income payments purchase

What happens when you do decide to buy a case? This article describes the DCF Income Payments purchase process in detail.


  • Before a Case is Available

    In a typical secondary market structured settlement transaction, a seller approaches an attorney, a factoring company, or other entity with a specific payment stream to sell.  The originator agrees on a discounted price for the payments and commences the work necessary to transfer the payments to their own account or to a new owner.

    At this point, these diverse sources of origination offer their payment streams for sale.  If it is a good payment, from a good company, DCF Exchange, our wholesale vendor, will buy it and provide the name of its business trust and address of a payment servicer which is applied to the various transfer documents.

  • Marketing a Case

    We market cases with two different statuses- “In Stock” and “In Pipeline”.  In Stock can close right away, and cases marked as In Pipeline may be 30 to 60 days.

  • Case Status in the Inventory

    All currently available payments are listed in our web-based inventory system, and display whether they’re In Pipeline, In Review, or In Stock.

    “In Pipeline” simply means the case can be reserved, but is not guaranteed to close. Buyers seeking certainty and speed of execution should consider instead our “In Stock” cases. DCF Income Payments marked as “In Pipeline” are in the court approval process. While you can reserve an “In Pipeline” case, the transaction may take 30 days or more to close. If the case isn’t approved in court, the transaction is canceled. There’s no cost to reserve a case and no cost to you if the case is not approved.

    “In Review” cases marked are approved in court and in the final stages of our legal review process. “In Review” cases are typically ready to close in 5-10 days.

    “In Stock” means that the case has passed all due diligence and is ready for immediate funding. The case is available for immediate re-sale as it is in inventory. DCF Income Payments marked as “In Stock” are ready for immediate sale. These cases have been thoroughly reviewed, and the court transfer and approval are complete.

    “48-Hour Hold” cases means they has been held temporarily for another party. Feel free to contact us or your advisor to place a backup hold.

    “Reserved” cases have been reserved by another party, but the transaction hasn’t closed yet. We do accept backup offers, so it’s smart to keep an eye on the “Reserved” list.

    Because this is a fast-moving marketplace, our buyers pick cases nearly always in the “In Pipeline” stage while they are being processed and before the court date. These buyers are aware that occasionally cases (about 1 in 15) do not close, and that generally, and with most of the delays due to the court process.

  • Reservation and Contracts

    After you select a case to buy from our DCF Income Payments Inventory, our unique and revised procedure requests minimal documentation from you.  We have eliminated the hassles of the transaction. Our newly revised annuity Purchase Offer tells us how you want your checks to be made out and where mailed to, such as a Trust, an LLC, Joint Tenants, etc, and describes the purchase terms and conditions.

  • With every case, the DCF Exchange, LLC, our wholesale vendor, puts its capital on the line before any purchaser reserves the case, and has a deeply vested interest in making sure the payment stream is transferred fully and completely.

    Only after we know it’s done, and done right, is it made available to the Purchaser to fund and close. The review process involves the following steps:

    A thorough review of the court order and supporting court documents, including:

    1) Petition,
    2) Proof of service on all interested parties,
    3) Final signed and file-stamped court order.

    Review of all of the disclosures to the original annuitant and interested parties required by state law

    Verification with the insurance carrier that the assigned payments exist and are available to be transferred

    Confirmation of a clean credit check, lien search, and docket search on the original annuitant to verify that the structured settlement payments can be transferred free and clear.

    Confirmation by the insurance carrier via acknowledgment or stipulation agreement of the court-ordered transfer of the payments.

    Examination of the transfer and assignment documents to ensure that all right, title, and interest in the cash flows are conveyed absolutely and irrevocably to the purchaser.

    Preparation of Absolute Assignment of Cash Flows.

  • Funding

    We typically fund and close “In Stock” cases in just 1-3 days.  They are “Off The Shelf” and ready to close.

    With “In Pipeline ” cases, we will notify you when the case is court-approved just prior to the court date as closing will be just a few days to a week later.

    Once we have reviewed all the documentation of a case and it has passed legal review, a closing book is produced showing the complete chain of title transferring the payments.  AFTER the closing book is delivered, client funds are required.

  • Closing Book

    After legal review of the case, a Closing Book will be prepared and sent electronically to you. Funding is required within two days of receipt of this Closing Book and the amortization schedule showing the final annuity purchase price will be in this Closing Book together with wiring instructions.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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DCF Income Payments and IRAs

DCF Income Payments and IRAs

DCF Income Payments can easily be purchased in qualified retirement accounts. Qualified funds may be in a Roth, a 401K, 403b, a Simple IRA, or other qualified vehicles. To buy a DCF Income Payment using qualified funds, we need to utilize a self-directed IRA. Many self-directed IRA custodian options exist but we have identified two with experience in the asset class with low costs.

Rolling funds over from one custodian to a new one is a very simple process, but it can take a week or two. For clients who are planning to use qualified funds, it is often best to open the self-directed account first, even before you reserve a deal. Read on to understand more about DCF Income Payments and IRAs.



Self Directed IRAs: Set-Up, Transfers & Rollovers

Self-directed IRAs are needed when making investments in DCF Income Payments with qualified funds


USING SELF DIRECTED IRAs WITH DCF INCOME PAYMENTS:



There are three self-directed IRA custodians we work with. Provident, IRA Services, and Gold Star Trust all have familiarity with the asset class. However, Gold Star Trust is head and shoulders above the other two in terms of speed, service, and low cost. They are doing a great job for us and we recommend all our customers and advisors use them. Their paperwork will be shown in the video demo.

Download “Gold Start Trust Roth IRA Documents” Shown In This Video

Download “Gold Star Trust Traditional IRA Documents” Shown In This Video

THERE ARE THREE STEPS IN A DCF INCOME PAYMENT/IRA TRANSACTION:

  • Open the Gold Star IRA Account– Complete and sign the application and pay account opening fee
    • Account establishment fee of $65 annual/$25 opening can be paid by credit card.
    • Input “DCF Exchange” on Page 8, as the Broker Dealer company name.  This authorizes us to communicate with Gold Star regarding your DDCF Income Payment purchase, but does not grant any investment direction permissions.  You may also specify additional advisors on this form also.
  • Fund the Gold Star IRA- Page 5, IRA Transfer, or page 6, Rollover Certification
    • Depending on the current custodian and the investments held, transfer may take 2 days or 4 weeks.
    • Typically, we wait until the DCF Income Payment is court approved, then initiate transfer of funds to Gold Star.
  • Buy the DCF Income Payment-
    • The DCF Payment closing book will be emailed via Docusign with a Direction of Investment form included and ready for purchaser signature
    • Once the DOI is signed, Gold Star signs the Absolute Assignment and the Servicing Agreement as custodian, and funds the purchase of the DCF Income Payment
    • Closed/Funded/Complete

ABOUT SELF DIRECTED IRA’S

Self-directed IRAs are simply IRAs held by a custodian that permits you to direct your own investments- you can choose to buy DCF Income Payments, real estate, or any other sort of investment.  A self-directed IRA custodian will not offer you investment advice- they just ensure the account is in compliance with the IRS.

By contrast, many IRAs held by brokerages like Schwab or Fidelity let you pick from only a few Fidelity or Schwab mutual funds- they are restricted and captive and may offer traditional stock picking advice.

BEST CASES FOR QUALIFIED FUNDS

IRAs are designed to offer tax deferral for investors saving for retirement… and they are designed to be SPENT in retirement as well.  Most investors can’t touch the money in their IRAs for a long time, and too often, people shoot for income contracts in an IRA and produce income (and return of principal) that they can’t take out.  Instead, take advantage of these deferred interest rates and consider deferred lump sum cases.

RMD DETAILS

Holding DCF Income Payments in a qualified vehicle requires the custodian to calculate the Required Minimum Distribution (RMD) each year. Be aware that long term deferred DCF Income Payment contracts in qualified vehicles for investors over 70.5 years of age may be subject to RMDs yet not produce cash flow.  Advisors should be sure there is sufficient money for RMDs when using deferred contracts in IRAs.

DCF Income Payments and IRA’s FAQ

Below are some frequently asked questions on DCF Income Payments and IRAs:

There are many self directed IRA custodians, but only a few are familiar with the DCF Income Payments, also known in the market as a secondary market annuity.

Out clear favorite that we prefer above all others is  Gold Star Trust Company.  Gold Star is the trust-only branch of a  mid-sized Texas based bank and has a specialized niche in DCF Income Payments and secondary market annuities business.  Gold Star offers fantastic customer service and the lowest prices of any self directed IRA custodian, and is our preferred SDIRA partner.

To be fair, there are two other custodians we can work with for customers who already have accounts, namely IRAServices and Provident Trust Group.  Both understand DCF Income Payments and are easy to work with, but Gold Star is a superior value and quality of service.

If you plan to use an IRA, you’ll need to open the account first. Fill out and return to us, we’ll fill in your IRA documents for you and mail to you for your signature, with a return envelope too to make it easy.

You do NOT need to fund your IRA to open the account, but as it sometimes takes time to open, and then again to transfer money, we prefer to have IRA buyers open their accounts prior to reserving deals to prevent delays.

Depending on the custodian, there may be fees for adding multiple DCF Income Payments to your IRA, but there are generally no fees for receiving funds from the insurance company into your IRA.

Now, depending on what you direct your custodian to do with your IRA funds in terms of distributions, you may incur fees, as outlined in their fee schedule.  That’s not something we control and is at your discretion.

Our preferred custodian, Gold Star, charges no additional fees to add multiple DCF Payment, and their distribution costs are minimal.

None of the money coming in to the IRA from a DCF Income Payment will be subject to withholding or taxation. The money you direct to come out of your IRA for distribution to you, however, would be taxable.  Those withdrawals are all up to you and your accountant.

That said, lottery DCF Payments ARE subject to withholding by the state lottery commission. Typical lottery winners have a $0 cost basis in their prize so all the income is taxable and taxes are withheld by the lottery commission in the state of issue for both state and federal. But as you bought the lottery payment, you DO have a cost basis.

In this case, Lottery payments purchased in your IRA will require your IRA to file for a refund in the State that issues the lottery.

While there are no fees to insurance companies, there may be minimal costs for payment servicing. Otherwise, DCF Income Payments are What You See Is What You Get.

IRA custodians have fees, as laid out in their fee schedules. How you choose determines the fees.

There are generally no costs associated with receiving a check into your IRA from a DCF Income Payment.  There may be some minimal costs for adding multiple IRAs, depending on your custodian. All custodians, however, have some costs for disbursements, and depending on your case and intentions, we can help determine which is best for you.

Now, depending on what you direct your custodian to do with your IRA funds in terms of distributions, you may incur fees, as outlined in their fee schedule.  That’s not something we control and is at your discretion.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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DCF Income Payments – Pros & Cons

dcf income payments pros and cons

As with any investment, there are pros and cons to DCF Income Payments. Take a moment to read through these pros and cons, and scroll down to see the most frequently asked questions we get from customers.

Remember, DCF Income Payments are used in three distinct ‘safe money’ scenarios- Income Now, Income Later, and Safe Growth.  The ‘pros’ for one scenario or investor may be a ‘con’ in another investor.  The only important answer is, is it right for YOU?

Fixed Term Investment

Guaranteed Payment, Pays to Buyer or Heirs

Pros

A guaranteed yield for a fixed period of time, paying to you or heirs.

Cons

Payment stream has an end date.

Analysis:

With DCF Income Payments, you are making an investment that stops paying when the principal and interest is paid back.  This is just like when you borrow money- the loan is closed and the payments cease when you as the borrower pay in full… but in the case of a DCF Income Payment, you are the one receiving the payments from the insurance carrier.

If you know you need to secure an income for retirement that you and your spouse can never outlive, you should consider a Lifetime Income Guarantee (AKA LIG) policy, with DCF Income Payments filling in the years prior to the LIG starts.

Alternatively, consider an Immediate Annuity or a Hybrid Annuity with a lifetime income rider.  LIG and Immediate Annuities are tied to lifetime(s), and you can not outlive the income. That payout, however, may be lower than a DCF Payment Income unless you live a very long time.


Frequency and Duration of Payments

Absolute Payment

Pros

Payments accrue to the payee/ buyer you specify on your purchase reservation. That may be you, your spouse as joint Tenants, your heirs, your Trust, or your estate. What You See Is What You Get.

Cons

In some states, this may create probate issues.

Analysis:

Create a Trust to be the receiving entity, to skip probate. Plus, nearly all our payment streams use a servicing company to receive the payments, for ease of reassignment or change of payee. Consult your own tax and estate planners regarding Trusts.


Liquidity

DCF Income Payments Do Not Offer Partial Surrender Liquidity

Pros

DCF Income Payments pay out exactly as scheduled, to you or your heirs.

Cons

You can liquidate (re-sell) a DCF Income Payment, but the amount you receive depends on the interest rate environment at the time you decide to sell.

Analysis:

Devote only that portion of your assets that you can safely set aside in a fixed and long term investment. Deal with liquidity with other assets. Know that it is easy to re-sell all the payments, but no easy to get partial liquidity.


Profitability

DCF Income Payments Are More Profitable Than Other Fixed Investments

Pros

Attain a higher yield with your fixed income allocation, when compared to other comparable options such as bonds, CD’s or Fixed Annuities.

Cons

What’s not to like about higher yield payments?

Analysis:

This is self-explanatory. Higher yield fixed income means lower cost to secure your financial future, leaving more left over.


Volatility

DCF Income Payments Have No Volatility

Pros

Self-evident. DCF Income Payments are priced based on current market discount rates. If rates fall, you may have contracts that can be sold at a profit.

Cons

A DCF Income Payment is priced based on current market discount rates. If rates rise, you may face a discount to face value if you are forced to sell, in addition to the legal costs and discount required to re-market a case.

Analysis:

Consider a DCF Income Payment as a “Yield To Maturity” investment. Devote only that portion of your assets that you can safely set aside in a fixed and long-term investment. Deal with liquidity with other assets. If you feel you may have a need to sell and can do so at a profit, having serviced payments may facilitate this sale and reassignment.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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Deferred Income DCF Payments

deferred income

Deferred Income and Deferred Lump Sum DCF Payments are possibly one of the best uses of this asset class. Whether it is deferred life contingent, or a deferred lottery, or a deferred fixed income deal, the economics are similar and powerful. Let’s have a look at several examples.

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DCF Income Payments, also known as secondary market annuities (SMAs), originate as structured settlements of personal injury cases that include defined future payment streams backed by annuities.   

Individuals who sell some or all of their future payments do so in a court-ordered assignment process whereby the annuity issuers and legal counsel comply with state-specific transfer laws and IRS statutes.  DCF Exchange is a buyer of these payments and distributes DCF Income Payments through a network of financial advisors nationwide, including this website.

Purchasers of DCF Income Payments become the new payee of these transferred, in-force payment streams backed by annuities.  At no time are transferred payment streams pooled, aggregated, managed by or subject to fees of a manager. 

All purchaser acquisition funds and assigned payments are handled by a state and federally regulated bank and trust company in a dedicated escrow account environment.  

DCF Income Payments come in three categories:

For Income Now, use Immediate Income DCF Payments

For Income Later, use Deferred Income DCF Payments

For Safe Growth, use Lump Sum DCF Payments

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Example Deferred Income DCF Payments

Case #1

Colin, a medical professional with a significant income, had searched for years for a safe, fixed income of around 6%. He wanted ‘set and forget’ safety with a reasonable yield. He used his accumulated IRA and cash savings to purchase long-term deferred lump sum and long-term deferred income stream contracts to secure his retirement.

Colin saw in these contracts an opportunity to achieve a reasonable rate of return, with unparalleled safety, and a set and forget structure. He knew he did not need income or access to the assets that he allocated to these contracts, because he held assets in reserve, and held a line of credit on his home in addition to his significant annual income.

Colin purchased seven contracts varying from 15 to 35 years in duration, with income and lump sums maturing throughout his planned retirement years. He was especially happy knowing that his wife and his children would be well taken care of if he were to pass away, and that his assets and income would always accrue to his family.

Colin, a medical professional with a significant income, had searched for years for a safe fixed income of around 6%. He wanted ‘set and forget’ safety with a reasonable yield.

Case #2

John is a diligent saver. He practices long-term buy-and-hold stock picking, long-term real estate investing, and discovered DCF Income Payments as an alternative, safe way to turn a relatively small amount of money into a large amount of money over time.

John purchased four small lump sums totaling less than $100,000, but maturing from 25 to 40 years in the future. These 4 deals pay out a total of over $750,000, and his blended rate of return is over 6%. By making four smart decisions, John used a portion of his savings to create a long-term legacy for his new family, or for his own retirement.

And most importantly, he faced no risk of loss of principal in the intervening years. Even with his diligent stock picking, he had endured losses in the past, and he saw that DCF Income Payments were a great way to avoid that in the future.

John purchased four small lump sums totaling less than $100,000, but maturing from 25 to 40 years in the future. These 4 deals pay out a total of over $750,000, and his blended rate of return is over 6%.

Case #3

Bill retired in his mid-50s. With two sons in high school, he faced the prospect of college education while simultaneously supporting his own retirement.

Bill used deferred DCF Income Payment contracts to shield his retirement assets during the time period when his kids would be applying for college and student loans. His analysis of student aid was that retirement assets were not subject to student loan and parental qualification calculations. (Do you own research- we can’t verify or offer advice on this strategy, so this is explicitly for example purposes only.)

Bill’s analysis was that if he put his money into annuities, they would not be part of his family assets for loan calculation purposes. He thought this would give his kids a better chance to get student loans, yet he would not lose control of his assets and his future income.

He calculated that when his kids graduated from college, his annuities would start paying out, and at that time he could decide if he wanted to help them pay off their college. He wanted to make the decision, and not have the decision made for him by the colleges that his kids chose to attend.

By picking good contracts, Bill turned $350,000 of savings into $700,000 of fixed future income, in a retirement vehicle that he believed would not be calculated for student loan purposes.

Again, please do your own research- we can’t verify or offer advice on this strategy, so this is explicitly for example purposes only.

By picking good contracts, Bill turned $350,000 of savings into $700,000 of fixed future income, in a retirement vehicle that he believed would not be calculated for student loan purposes.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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Understanding the Term “DCF Income Payments”

understanding dcf income payments

When it comes to DCF Income Payments, the marketplace suffers from a plethora of terms. This page should clear up any misunderstandings.

“Synonym:  A synonym is a word or phrase that means exactly or nearly the same as another word or phrase in the same language”

Wrong


  • Structured Settlement Derivative

  • Insurance Linked Derivative

  • Insurance Linked Securities

Right


  • DCF Income Payments

  • DCF Payments

  • Secondary Market Annuities

  • Secondary Market Annuity

  • Structured Settlement Annuity

  • In-Force Annuity

  • Factored Structured Settlement

  • Assigned Annuity

  • Discount Cash Flow (DCF) Annuity

In the “Right” column are all different names for the same underlying asset, namely, the right to receive payments backed by an annuity issued in conjunction with a structured settlement.

Unfortunately, in the “Wrong” column are several misleading ‘derivative’ words propagated by questionable industry participants who add only confusion and misinformation to the marketplace.

Understanding the Term ‘DCF Income Payments’

A ‘DCF Income Payment’ is a term used to describe the court-ordered right to receive payments backed by annuities issued in conjunction with structured settlements.

The term ‘DCF Income Payments’ may also be substituted with other commonly used terms such as factored structured settlement, structured settlement payment right, or assigned payments.

The term is not at all synonymous with or a relative of a derivative. “In finance, a derivative is a contract that derives its value from the performance of an underlying entity”.  Practically speaking, derivatives are usually securities contracts, and the underlying assets take a wide range of forms, from pork bellies to pesos.  Prices and values of derivatives can swing widely and are dependent on a number of market forces and factors.

By contrast, DCF Income Payments are relatively simple transactions in which a court-ordered procedure changes the payee of an in force and existing annuity contract.   The price of an SMA is a simple discounted cash flow calculation- it’s the present value of the future payments, at the stated discount rate.  It’s math that anyone can do with a little familiarity with basic financial concepts, and the price, payments, and values don’t fluctuate one penny.

Furthermore, most transactions are handled pursuant to IRC§5891(c)(2) and relevant state-specific structured settlement transfer protection act guidelines that give regulatory certainty and consumer protection. In these assignment proceedings, the right to receive payments due under a structured settlement annuity is transferred, but the ownership of the actual insurance contract does not change hands.

Origin of DCF Structured Settlement Payments

Initially, the transfer of structured settlement payment rights was the domain of larger institutions.  Transactions were packaged up by large buyers such as JG Wentworth, securitized,  and sold to institutional investors.

During financial crisis of 2007–2008 a number of intermediaries began marketing structured settlement payment rights to financial advisors and individual investors.  Various labels included the term “annuity”, such as in force annuities, secondary market annuity, secondary market income annuity and/or the acronym SMA or SMIA.

The industry has largely coalesced around the term ‘Secondary Market Annuity’ however none of the other terms using the word ‘annuity’ are incorrect or misleading, as “An annuity is a series of payments made at equal intervals.”

Given that what transacts is a series of payments (which by definition is itself an ‘annuity’ ), and those payments are backed by an annuity issued by a major life and annuity insurance company, and that the annuity company is a party to the transfer proceedings, the term ‘annuity’ is wholly appropriate.

And as the transfer occurs in a secondary market transaction among private parties, the term ‘Secondary Market Annuity’ becomes a totally accurate term for the asset.

How Do Regular Annuities Compare With a DCF Income Payment?

Primary annuities come in a wide range of configurations, from life only immediate income annuities to growth-oriented fixed and fixed index contracts.  Typically, structured settlements utilize period certain guaranteed and life contingent lifetime income annuities issued by highly rated carriers to make the payments due under the terms of the settlement.

In most cases, annuities are shielded from creditors in accordance with their statutory protections. Even in bankruptcy proceedings, they are usually considered an exempt asset and cannot be accessed by creditors.

However, once the right to receive payments due under a structured settlement annuity goes through the assignments and court proceedings to change the payee, it would lose this creditor protection and, like any other asset, be open to the claims of creditors.

In addition, the tax treatment of what we call a DCF Income Payment may vary from regular annuities, in that regular annuities are taxed using LIFO or ‘Last In, First Out’ accounting, and a DCF Income Payment is handled by the purchaser and their tax preparer typically as an amortizing receivable, or on an exclusion ratio basis.

Regulation of DCF Income Payment Sales Practices

Originators of structured settlement payments are typically factoring companies and attorneys.  Most factored structured settlement payment rights are acquired by special purpose vehicles and securitized in institutional asset-backed transactions.

However, a small percentage of the transactional flow on an annual basis may be offered for sale to individual investors, some of which may be labeled as a ‘DCF Income Payment.’  DCFAnnuities.com is a major retailer of DCF Income Payments from the nation’s premier source of payments, DCF Exchange.

DCF Income Payments Are Not Securities

Sales agents are currently not subject to state-based licensing requirements as the transaction does not change the ownership of the underlying annuity, which is an insurance licensed activity, nor does the assignment and sale of a payment stream backed by a structured settlement annuity constitute a securities transaction per the Howey Test.

Practically speaking, however, consumers typically encounter DCF Income Payments from licensed insurance agents and financial advisors who may be subject to various licensing requirements for their other lines of business.  Consumers should inquire as to the professional qualifications of the agent they are working with.

DCF Income Payments and State Guarantee Funds

However, be wary of agents who market the product using the State Insurance Guarantee Funds as a selling point.  Most states have, as part of their insurance laws, an advertising prohibition which specifies that insurance companies and insurance agents may not use the existence of the guaranty association for the purpose of sales, solicitation, or inducement to purchase insurance, including annuity contracts.

Even though it should not be a lead-in marketing point, it’s important to understand that state guarantee funds are a frequent question among those considering DCF Income Payments. The case of Executive Life of New York provides some guidance where all payees- both original annuitant and assigned payees- to this day receive restructured benefits under their structured settlement contracts. Insurance company failures are generally very rare, however, and by design, the carriers involved in the structured settlement market are among the strongest financial institutions in the world.

[av_one_full first min_height='' vertical_alignment='' space='' row_boxshadow='' row_boxshadow_color='' row_boxshadow_width='10' custom_margin='' margin='0px' mobile_breaking='' border='' border_color='' radius='0px' padding='0px' column_boxshadow='' column_boxshadow_color='' column_boxshadow_width='10' background='bg_color' background_color='' background_gradient_color1='' background_gradient_color2='' background_gradient_direction='vertical' src='' background_position='top left' background_repeat='no-repeat' highlight='' highlight_size='' animation='' link='' linktarget='' link_hover='' title_attr='' alt_attr='' mobile_display='' id='' custom_class='' aria_label='' av_uid='av-2nz60m'] [av_icon_box icon='ue82b' font='entypo-fontello' title='' position='left_content' icon_style='av-icon-style-no-border' boxed='' font_color='' custom_title='' custom_content='' color='custom' custom_bg='' custom_font='#2fa763' custom_border='' av-medium-font-size-title='' av-small-font-size-title='' av-mini-font-size-title='' av-medium-font-size='' av-small-font-size='' av-mini-font-size='' heading_tag='' heading_class='' link='' linktarget='' linkelement='' id='' custom_class='' av_uid='av-k8sbf3je' admin_preview_bg=''] Reach out to us if you'd like to:
  • Schedule a 1-on-1 video call to discuss your specific needs and situation
  • Ask questions about products, carriers, or DCF Income Payments
  • Discuss how a DCF Income Payments and annuities may (or may not) fit into your portfolio
nathaniel pulsifer of dcf annuities

Nathaniel M. Pulsifer, Owner of DCF Annuities (800) 246-1932 | [email protected] | Linkedin

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