A structured settlement annuity is a financial arrangement that provides regular payments to a person who has won or settled a lawsuit. These payments are designed to offer long-term financial security, but sometimes recipients may consider selling their structured settlement annuity for various reasons.
Faqs On Selling Settlement Annuity
How does selling annuity payments work?
To sell your structured settlement annuity payments, you need to work with a company that specializes in purchasing these payments, also called a “Factoring Company”. The company will offer you a lump sum in exchange for some or all of your future payments. The amount you’ll receive will depend on factors such as the total value of your payments, the number of payments you want to sell, and the discount rate applied by the buyer.
How long does the selling process take?
The process of selling your structured settlement annuity payments typically takes several weeks to a few months. This includes the time needed for the buying company to review your case, for you to accept their offer, and for a court to approve the sale.
Why do I have to wait to sign my contract?
It is important to note that each state has determined a minimum required number of days that must pass before we are able to send your contract with a notary to be signed. After we have spoken with you and determined a purchase price, we will send you a disclosure.
Disclosure is simply our written offer to you that shows the net lump sum you will receive in exchange for the exact monthly payments that we are purchasing. After you have acknowledged that you received the disclosure, we can start the countdown for the required wait period established by your state. This can take between three and fourteen days.
What happens after I sign my selling contract?
Once we have all of the necessary paperwork and legal documents, a petition is then filed at your county courthouse. After your case is reviewed, you will receive a court date where a judge will approve the settlement and grant your cash settlement.
Why do I have to go to court?
As per the Structured Settlement Protection Act, each case must go to a judge and be approved before we are able to proceed and fund you your lump sum. When you go into court, the judge will determine if selling your structured settlement payment(s) is in your best interest. In order to determine this, a judge will examine your reasons for cashing out. Many of the clients of Fairfield Funding intend to use their lump sum to pay for medical bills, and school tuition, put a down payment on a house, or start a new business.
After a judge approves my case, how long will it take to get my money?
This part of the process depends heavily on the insurance company- some companies work faster than others. After we receive an acknowledgment from your insurance company stating that the transfer has been completed and approved, we can then send you a check or wire your lump sum directly into your account within 24-48 hours.
Can I sell my structured settlement if I receive government benefits?
If you receive government benefits like Medicaid or Supplemental Security Income (SSI), selling your structured settlement payments could affect your eligibility for those benefits. This is because the lump sum payment you receive from selling your structured settlement may be counted as an asset or income for purposes of determining benefit eligibility.
Types of Annuities and Payments
What types of annuities can be sold?
Most types of annuities can be sold, including structured settlement annuities, lottery payments, and fixed annuities. However, some annuities, such as those related to divorce settlements or child support, may not be eligible for sale.
Can I sell just a portion of annuity payments?
Yes, you can choose to sell just a portion of your structured settlement annuity payments. For example, you might decide to sell structured settlement payment rights of a specific period, such as of the next five years, while retaining the right to receive payments after that period.
Pros and Cons of Selling Annuity Payments
What are the benefits of selling my annuity payments?
Selling your structured settlement annuity payments can provide you with a lump sum of cash that you can use to pay off debts, make a large purchase, or invest in your future. This can be helpful if you face unexpected expenses or opportunities that require more funds.
Will I get the full value by selling?
When you sell your structured settlement annuity payments, you will receive less than the total value of your remaining income payment. This is because the buying company applies a discount rate to account for the time value of money and the risk they assume by purchasing your payments. The discount rate can vary widely, so it’s essential to shop around and compare offers from multiple buyers.
What are the disadvantages of selling my annuity payments?
The main drawback of selling your structured settlement annuity payments is that you will no longer receive the steady, long-term income that the annuity provides. This can be a major disadvantage if you rely on the monthly annuity payment for your daily expenses or long-term financial security.
FAQs on Choosing an Annuity Buyer
How do I choose an annuity buyer?
When choosing a company to sell your structured settlement annuity payments to, look for one that is reputable, experienced, and transparent about its process and fees. You can research companies online, read customer reviews, and ask for referrals from trusted sources like financial advisors or attorneys.
What should I look for in an annuity buyer?
A good annuity buyer should offer competitive rates, responsive customer service, and a clear explanation of the selling process and associated costs. They should also be willing to answer your questions and provide guidance on whether selling your payments is the right choice for your unique situation.
How can I avoid scams when selling my annuity payments?
To avoid scams when selling your structured settlement annuity payments, work only with reputable companies that are licensed and bonded in your state. Be wary of companies that pressure you to make a decision quickly or offer deals that seem too good to be true. Always read the fine print and consult with a trusted financial advisor or attorney before signing any agreements.
What is the role of the insurance company in a structured settlement transfer?
When you sell your structured settlement payments, the insurance company that issued the annuity will typically need to be involved in the transfer process. The specific role of the insurance company may vary depending on the terms of your annuity contract and the laws of your state, but in general, the insurer will need to:
- Confirm the details of your annuity contract and payment stream
- Approve the transfer of payment rights to the buying company
- Redirect future payments to the buyer once the transfer is approved by the court
- Provide documentation and support throughout the transfer process
It’s important to work with a reputable buyer who has experience navigating the insurance company’s requirements and can ensure a smooth transfer process.
Can I sell my structured settlement if I have already borrowed a lawsuit loan against it?
If you have previously borrowed money using your structured settlement, you may still be able to sell your remaining payments. However, the process may be more complicated and will depend on the terms of your loan agreement and the amount of money you still owe.
Taxes, Fees, and Calculations When Selling Settlement Annuity
Is selling my annuity payments taxable?
The lump sum cash you receive from selling your structured settlement annuity payments may be subject to income taxes in the year you receive it. However, the tax implications can vary depending on your specific situation, so consult with a tax professional before making a decision.
What fees are associated with selling annuity payments?
When you sell your structured settlement annuity payments, the buying company will typically charge a discount rate that reduces the lump sum payment you receive. This rate can vary widely, so compare offers from multiple companies. Some companies may also charge additional fees for services like document preparation or court appearances.
How is the lump sum purchase price calculated?
The lump sum you receive for selling structured settlement annuity payments is calculated based on the present value of your future payments. This value is determined using a discount rate that accounts for the time value of money and the risk assumed by the buyer. The discount rate can vary based on factors like market conditions and the length of your payment stream.
Should I consult with a financial advisor before selling?
Yes, it’s highly recommended that you consult with a financial advisor before selling your structured settlement annuity payments. An advisor can evaluate your current financial situation, assess your long-term needs and goals, and determine whether selling your payments is the best choice in your situation.
Conclusion
Selling your structured settlement annuity payments can be a complex decision with significant financial implications. While it can provide you with a lump sum of cash to meet your immediate needs, it also means sacrificing the long-term financial security that your annuity provides.
Before deciding to sell your payments, carefully consider your options, weigh the pros and cons, and seek guidance from financial advisors and attorneys.
