Structured Settlements The Factoring Transaction

structured settlement factoring transaction be in the best interest of the seller, taking into account the welfare and support of any dependents. “Best interest” is generally not defined, which gives judges flexibility to make a subjective determination on a case-by-case basis. Some state laws may require that the judge look at factors such as the “purpose of the intended use of the funds,” the payee’s mental and physical capacity, and the seller’s potential need for future medical treatment. One Minnesota court described the “best interest standard” as a determination involving “a global consideration of the facts, circumstances, and means of support available to the payee and his or her dependents.”
Courts have consistently found that the “best interest standard” is not limited to financial hardship cases. Hence, a transfer may be in a seller’s best interest because it allows him to take advantage of an opportunity (i.e., buy a new home, start a business, attend college, etc.) or to avoid disaster (i.e., pay for a family member’s unexpected medical care, pay off mounting debt, etc.). For example, a New Jersey court found that a transaction was in a seller’s best interest where the funds were used to “pay off bills…and to buy a home and get married.”
Although sometimes criticized for being vague, the best interest standard’s lack of precise definition allows considerable latitude in judicial review.