Structured Settlement Factoring Terminology
Legal Terminology- Best Interest Standard
Internal Revenue Code Sec. 5891 and most state laws require that a court find that a proposed settlement factoring transaction be in the best interest of the seller, taking into account the welfare and support of any dependents. This provision leaves room for much flexibility when deciding best interests. The following list demostrates examples of best interest:
- purchasing a home
- paying medical expenses
- education
- pay off mounting debt
Keeping in mind that a judge also has to account for the proposed discount rate (described below) on the factoring transaction.
Structured Settlement Factoring Discount Rate
Discount rates are used in factoring transactions to describe more commonly known interest rates as applied to loans, credit cards, and other payment streams. Interest rates and discount rates are very similiar but are opposites. A mistake commonly made when calculating a discount rate in not including the time value of money into the equation.