Texas Structured Settlements Law

Yes, you can trade Texas structured settlement payments for upfront cash.

Statute and Bill #: Tex. Civ. Prac. & Rem. Code § 141.002
(TX H.B. 1666)
Enacted 6/20/2003 Effective 9/1/2003
Summary: Permits the sale or assignment of Texas structured settlement payment rights, subject to a court's review and approval based on showing that the proposed transfer is in the consumer's "best interests," taking into account the welfare of the consumer's dependents (if any). Requires certain disclosures and other consumer protections.


Full Text Of Bill:

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 6, Civil Practice and Remedies Code, is 1-6 amended by adding Chapter 141 to read as follows: CHAPTER 141. STRUCTURED SETTLEMENT PROTECTION ACT Sec. 141.001. SHORT TITLE. This chapter may be cited as the 1-9 Structured Settlement Protection Act.

Sec. 141.002. DEFINITIONS. In this chapter:

"Annuity issuer" means an insurer that has issued a contract to fund periodic payments under a structured settlement.
"Court" means:

the court of original jurisdiction that authorized or approved a structured settlement; or

if the court that authorized or approved the structured settlement no longer has jurisdiction to approve a transfer of payment rights under the structured settlement under this chapter, a statutory county court or a district court located in the county in which the payee resides.

(3) "Dependents" includes a payee's spouse, minor children, and all other persons for whom the payee is legally obligated to provide support, including alimony.

(4) "Discounted present value" means the present value of future payments determined by discounting the payments to the present using the most recently published Applicable Federal Rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service.

(5) "Gross advance amount" means the sum payable to the payee or for the payee's account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions to be made from the consideration.

(6) "Independent professional advice" means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser.

(7) "Interested party" means, with respect to any structured settlement: (A) the payee; (B) any beneficiary irrevocably designated under the annuity contract to receive payments following the payee's death; (C) the annuity issuer; (D) the structured settlement obligor; and (E) any other party that has continuing rights or obligations under the structured settlement. 2-22

(8) "Net advance amount" means the gross advance 2-23 amount less the aggregate amount of the actual and estimated 2-24 transfer expenses required to be disclosed under Section 2-25 141.003(5). 2-26

(9) "Payee" means an individual who is receiving 3-1 tax-free payments under a structured settlement and proposes to 3-2 transfer payment rights under the structured settlement. 3-3

(10) "Periodic payments" includes both recurring 3-4 payments and scheduled future lump-sum payments. 3-5

(11) "Qualified assignment agreement" means an 3-6 agreement providing for a qualified assignment within the meaning 3-7 of Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section 3-8 130), as amended. 3-9

(12) "Settled claim" means the original tort claim or 3-10 workers' compensation claim resolved by a structured settlement. 3-11

(13) "Structured settlement" means an arrangement for 3-12 periodic payment of damages for personal injuries or sickness 3-13 established by settlement or judgment in resolution of a tort claim 3-14 or for periodic payments in settlement of a workers' compensation 3-15 claim. 3-16

(14) "Structured settlement agreement" means the 3-17 agreement, judgment, stipulation, or release embodying the terms of 3-18 a structured settlement. 3-19

(15) "Structured settlement obligor" means, with 3-20 respect to any structured settlement, the party that has the 3-21 continuing obligation to make periodic payments to the payee under 3-22 a structured settlement agreement or a qualified assignment 3-23 agreement. 3-24

(16) "Structured settlement payment rights" means 3-25 rights to receive periodic payments under a structured settlement, 3-26 whether from the structured settlement obligor or the annuity 4-1 issuer, if: 4-2 (A) the payee is domiciled in or the domicile or 4-3 principal place of business of the structured settlement obligor or 4-4 the annuity issuer is located in this state; 4-5 (B) the structured settlement agreement was 4-6 authorized or approved by a court located in this state; or 4-7 (C) the structured settlement agreement is 4-8 expressly governed by the laws of this state. 4-9

(17) "Terms of the structured settlement" include, 4-10 with respect to any structured settlement, the terms of the 4-11 structured settlement agreement, the annuity contract, any 4-12 qualified assignment agreement, and any order or other approval of 4-13 the court. 4-14

(18) "Transfer" means any sale, assignment, pledge, 4-15 hypothecation, or other alienation or encumbrance of structured 4-16 settlement payment rights made by a payee for consideration, except 4-17 that the term does not include the creation or perfection of a 4-18 security interest in structured settlement payment rights under a 4-19 blanket security agreement entered into with an insured depository 4-20 institution, in the absence of any action to redirect the 4-21 structured settlement payments to the insured depository 4-22 institution, or its agent or successor in interest, or to enforce 4-23 the blanket security interest against the structured settlement 4-24 payment rights. 4-25 (19) "Transfer agreement" means the agreement 4-26 providing for a transfer of structured settlement payment rights. 5-1

(20) "Transfer expenses" means all the expenses of a 5-2 transfer that are required under the transfer agreement to be paid 5-3 by the payee or deducted from the gross advance amount, including 5-4 court filing fees, attorney's fees, escrow fees, lien recording 5-5 fees, judgment and lien search fees, finders' fees, commissions, 5-6 and other payments to a broker or other intermediary, except that 5-7 the term does not include preexisting obligations of the payee 5-8 payable for the payee's account from the proceeds of a transfer. 5-9

(21) "Transferee" means a party acquiring or proposing 5-10 to acquire structured settlement payment rights through a transfer. 5-11

Sec. 141.003. REQUIRED DISCLOSURES TO PAYEE. At least three 5-12 days before the date on which the payee signs a transfer agreement, 5-13 the transferee shall provide to the payee a separate disclosure 5-14 statement, in bold type at least 14 points in size, that states: 5-15

the amounts and due dates of the structured 5-16 settlement payments to be transferred; 5-17

the aggregate amount of the payments; 5-18

the discounted present value of the payments to be 5-19 transferred, which shall be identified as the "calculation of 5-20 current value of the transferred structured settlement payments 5-21 under federal standards for valuing annuities," and the amount of 5-22 the Applicable Federal Rate used in calculating the discounted 5-23 present value; 5-24

the gross advance amount; 5-25

an itemized listing of all applicable transfer 5-26 expenses, other than attorney's fees and related disbursements 6-1 payable in connection with the transferee's application for 6-2 approval of the transfer, and the transferee's best estimate of the 6-3 amount of those expenses; 6-4

the net advance amount; 6-5 (7) the amount of any penalties or liquidated damages 6-6 payable by the payee in the event of any breach of the transfer 6-7 agreement by the payee; and 6-8 (8) a statement that the payee has the right to cancel 6-9 the transfer agreement, without penalty or further obligation, not 6-10 later than the third business day after the date the agreement is 6-11 signed by the payee.

6-12 Sec. 141.004. APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT 6-13 PAYMENT RIGHTS. No direct or indirect transfer of structured 6-14 settlement payment rights shall be effective and no structured 6-15 settlement obligor or annuity issuer shall be required to make any 6-16 payment directly or indirectly to any transferee of structured 6-17 settlement payment rights unless the transfer has been approved in 6-18 advance in a final court order based on express findings by the 6-19 court that: 6-20

the transfer is in the best interest of the payee, 6-21 taking into account the welfare and support of the payee's 6-22 dependents; 6-23

the payee has been advised in writing by the 6-24 transferee to seek independent professional advice regarding the 6-25 transfer and has either received the advice or knowingly waived the 6-26 advice in writing; and 7-1

the transfer does not contravene any applicable 7-2 statute or an order of any court or other governmental authority.

7-3 Sec. 141.005. EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT 7-4 PAYMENT RIGHTS. Following a transfer of structured settlement 7-5 payment rights under this chapter: 7-6

the structured settlement obligor and the annuity 7-7 issuer shall, as to all parties except the transferee, be 7-8 discharged and released from any and all liability for the 7-9 transferred payments; 7-10

the transferee shall be liable to the structured 7-11 settlement obligor and the annuity issuer: 7-12

if the transfer contravenes the terms of the 7-13 structured settlement, for any taxes incurred by the parties as a 7-14 consequence of the transfer; and 7-15

for any other liabilities or costs, 7-16 including reasonable costs and attorney's fees, arising from 7-17 compliance by the parties with the order of the court or arising as 7-18 a consequence of the transferee's failure to comply with this 7-19 chapter; 7-20

the transferee shall be liable to the payee: 7-21

if the transfer contravenes the terms of the 7-22 structured settlement, for any taxes incurred by the payee as a 7-23 consequence of the transfer; and 7-24

for any other liabilities or costs, 7-25 including reasonable costs and attorney's fees, arising as a 7-26 consequence of the transferee's failure to comply with this 8-1 chapter; 8-2 (4) neither the structured settlement obligor nor the 8-3 annuity issuer may be required to divide any periodic payment 8-4 between the payee and any transferee or assignee or between two or 8-5 more transferees or assignees; and 8-6 (5) any further transfer of structured settlement 8-7 payment rights by the payee may be made only after compliance with 8-8 all of the requirements of this chapter. 8-9

Sec. 141.006. PROCEDURE FOR APPROVAL OF TRANSFERS.

An 8-10 application under this chapter for approval of a transfer of 8-11 structured settlement payment rights shall be made by the 8-12 transferee and shall be brought in the court. 8-13

At least 20 days before the date of the scheduled 8-14 hearing on any application for approval of a transfer of structured 8-15 settlement payment rights under Section 141.004, the transferee 8-16 shall file with the court and serve on all interested parties a 8-17 notice of the proposed transfer and the application for 8-18 authorization, including with the notice: 8-19

a copy of the transferee's application; 8-20

a copy of the transfer agreement; 8-21

a copy of the disclosure statement required under 8-22 Section 141.003; 8-23

a listing of each of the payee's dependents, 8-24 together with each dependent's age; 8-25

notice that any interested party is entitled to 8-26 support, oppose, or otherwise respond to the transferee's 9-1 application, either in person or by counsel, by submitting written 9-2 comments to the court or by participating in the hearing; and 9-3

notice of the time and place of the hearing and 9-4 notification of the manner in which and the time by which written 9-5 responses to the application must be filed to be considered by the 9-6 court. 9-7

Written responses to the application under Subsection 9-8 (b)(6) must be filed on or after the 15th day after the date the 9-9 transferee's notice is served. 9-10

Sec. 141.007. GENERAL PROVISIONS; CONSTRUCTION. (a) The 9-11 provisions of this chapter may not be waived by any payee. 9-12 (b) Any transfer agreement entered into by a payee who 9-13 resides in this state must provide that disputes under the transfer 9-14 agreement, including any claim that the payee has breached the 9-15 agreement, shall be determined in and under the laws of this state. 9-16 The transfer agreement may not authorize the transferee or any 9-17 other party to confess judgment or consent to entry of judgment 9-18 against the payee. 9-19 (c) Transfer of structured settlement payment rights may not 9-20 extend to any payments that are life-contingent unless, prior to 9-21 the date on which the payee signs the transfer agreement, the 9-22 transferee has established and agreed to maintain procedures 9-23 reasonably satisfactory to the structured settlement obligor and 9-24 the annuity issuer for: 9-25 (1) periodically confirming the payee's survival; and 9-26 (2) giving the structured settlement obligor and the 10-1 annuity issuer prompt written notice in the event of the payee's 10-2 death. 10-3 (d) A payee who proposes to make a transfer of structured 10-4 settlement payment rights may not incur any penalty, forfeit any 10-5 application fee or other payment, or otherwise incur any liability 10-6 to the proposed transferee or any assignee based on any failure of 10-7 the transfer to satisfy the conditions of this chapter. 10-8 (e) Nothing contained in this chapter may be construed to 10-9 authorize any transfer of structured settlement payment rights in 10-10 contravention of any law or to imply that any transfer under a 10-11 transfer agreement entered into before the effective date of this 10-12 chapter is valid or invalid. 10-13 (f) Compliance with the requirements in Section 141.003 and 10-14 fulfillment of the conditions in Section 141.004 are solely the 10-15 responsibility of the transferee in any transfer of structured 10-16 settlement payment rights, and neither the structured settlement 10-17 obligor nor the annuity issuer bear any responsibility for, or any 10-18 liability arising from, noncompliance with the requirements or 10-19 failure to fulfill the conditions. 10-20 SECTION 2. Section 142.009, Property Code, is amended to 10-21 read as follows: 10-22

Sec. 142.009. ANNUITY CONTRACT REQUIREMENTS FOR STRUCTURED 10-23 SETTLEMENT. (a) [An annuity contract that funds a structured 10-24 settlement as provided by Section 142.008 must be provided by an 10-25 insurance company that is not:] 10-26 [(1) an affiliate, as that term is defined by Article 11-1 21.49-1, Insurance Code, of a liability insurance carrier involved 11-2 in the suit for which the structured settlement is created; or] 11-3 [(2) connected in any way to a person obligated to 11-4 fund the structured settlement.] 11-5 [(b)] An insurance company providing an annuity contract for 11-6 a structured settlement as provided by Section 142.008 must: 11-7 (1) be licensed to write annuity contracts in this 11-8 state; 11-9 (2) have a minimum of $1 million of capital and 11-10 surplus; and 11-11 (3) be approved by the court and comply with any 11-12 requirements imposed by the court to ensure funding to satisfy 11-13 periodic settlement payments. 11-14 (b) [(c)] In approving an insurance company under Subsection 11-15 (a)(3) [(b)(3)], the court may consider whether the company: 11-16 (1) holds an industry rating equivalent to at least 11-17 two of the following rating organizations: 11-18 (A) [(1)] A. M. Best Company: A++ or A+; 11-19 (B) [(2)] Duff & Phelps Credit Rating Company 11-20 Insurance Company Claims Paying Ability Rating: AA-, AA, AA+, or 11-21 AAA; 11-22 (C) [(3)] Moody's Investors Service Claims 11-23 Paying Ability Rating: Aa3, Aa2, Aa1, or aaa; or 11-24 (D) [(4)] Standard & Poor's Corporation Insurer 11-25 Claims-Paying Ability Rating: AA-, AA, AA+, or AAA; 11-26 (2) is an affiliate, as that term is defined by 12-1 Article 21.49-1, Insurance Code, of a liability insurance carrier 12-2 involved in the suit for which the structured settlement is 12-3 created; or 12-4 (3) is connected in any way to a person obligated to 12-5 fund the structured settlement. 12-6 SECTION 3. This Act takes effect September 1, 2001, and 12-7 applies only to a transfer of structured settlement payment rights 12-8 under a transfer agreement entered into on or after that date.