What Our Customers Ask Before Buying DCF Income Payments
Transferred structured settlement payments form an important part of the financial landscape. By acquiring future payments from recipients of structured settlements, we provide liquidity and options to individuals with otherwise inflexible and locked in financial arrangements. And in so doing, we provide 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:
How Do DCF Income Payments Fit Into My Financial Plan?
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:
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.
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.
Why Are DCF Income Payments Higher Yield Than Fixed Annuities?
The yield on DCF Income Payments is higher simply because the seller of structured settlement payment rights 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.
Why Would The Insurance Company Issue A Contract Yielding 6% In This Market?
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 payment rights and in some cases 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.
Who Are The Parties in a Structured Settlement Transaction?
In a typical structured settlement 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 assigned structured settlement payment rights, you become the new assignee of the original payments. Your payments are issued by the annuity issuer, and in many cases additionally backstopped also by the annuity owner, who may either be an assignment company or the original losing party in the lawsuit.
How Safe Are Structured Settlement Income Streams?
Very safe. DCF only buys streams funded by highly rated life insurance companies, partners with an FDIC member bank to manage all payments, engages expert legal counsel to perform due diligence on all assets, and sells after confirming all details.
Buying a structured settlement income stream is like buying any other investment.
Buy from professionals who you can trust.
How Do I Know DCF Income Payments Are Safe?
In typical DCF Income Payment transactions, we facilitate you receiving the payments due under an existing annuity or structured settlement 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:
- Benefits letter from the issuer to the payee, which establishes that the Payee has the payments to sell.
- Court order changing the payee name to you or an entity that benefits you, such as our Business Trust.
- 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.
- Legal Review reviewing all documents, notices, filings, UCC statements, and procedures in each case and every jurisdiction the case is subject to.
- Absolute 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.
What Are The Costs And Fees of a DCF Income Payment Purchase?
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.
What About DCF Income Payments With Qualified Funds?
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.
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 refer all customers to GoldStar Trust for self directed IRA purchases. See This Page for more info.
Who Is The Typical DCF Income Payment Buyer?
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.
What Happens When an Owner of DCF Payments Pass Away?
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
For IRAs and Payment Servicing
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 newly-issued annuities may (or may not) fit into your portfolio