Understanding annuity contracts can be confusing when it comes down to selling payments, going to court for approval, and knowing how much you'll get. Here are some answers to questions you may have when deciding to sell your annuity payments.
Annuities and structured settlements can be complex financial instruments, and even though the process of selling them is regulated fully by a court-ordered process there can be many questions about what to do and how to do it. We put together a list of the most frequently asked questions we hear from our customers. We’re happy to pass those along.
People sell their payments for many reasons, but the overriding reason is this: they need the money as soon as possible. Most of the time, some type of major life change impacted their financial situation. Perhaps they are getting married, buying a house or having a baby. They may need to purchase a better vehicle to get to and from work, or perhaps pay for a college education. Sometimes the reason is divorce, a death in the family, or some type of health emergency requiring immediate funds. When traditional lending institutions fail to provide the necessary loan and no other cash is accessible, the choice to sell one’s structured payments may be the last, best available option.
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Absolutely. Transferring your structured settlement annuity payment rights for a lump-sum buyout is perfectly legal, and your rights to do so are protected by both federal and state law – even if the annuity contract issued by your insurance company includes language prohibiting the transfer of those future payments.
No. You can sell all of your payments, but you don’t have to. Most of the time, we don’t advise it. The objective is to sell only enough of your payments necessary to raise the amount you need in a lump sum while also preserving the portion of your payment stream that is intended to cover your future needs.
For example, we can purchase a portion of each payment for eight years, 10 years, 15 years or more. We can also purchase a combination of present and future payments. Because each case is different, we work with you to craft an individual plan that serves your best interests now and in the years to come.
Generally, the minimum amount of payments we will buy is $15,000. Our average settlement is around $35,000 to $40,000 per transaction. Of course, there are always exceptions.
It’s the law. Both the federal government and 48 states have statutes that provide for the selling of structured settlements. All require court approval. While one of our own lawyers will handle the details of your case, your chances of approval are greatly enhanced when you explain your own circumstances to the judge.
The process can generally be completed in 45 to 60 days. Much depends on where you live and how quickly you can get us your information and all necessary documents. Every state has built-in waiting periods, which differ from state to state.
We use a financial program that takes into consideration several factors: the rating of the insurance company making your payments; the payment stream duration (length of the term you are selling); the amount of money you are selling; and the amount of money you are looking to raise. The net result of this calculation is called the discount rate. We use that rate to apply to your future payments. The discount rate is similar to that of an APR on a conventional loan, and it can range from the single digits up to the low teens.
This is an important question. The answer lies in understanding the time value of money: simply put, money loses value over time. For example, $1,000 today is going to be worth less than $1,000 20 years from now – and also worth less in 15 years, 10 years and even 5 years, because of inflation and the rising cost of living. Basically, $1,000 will simply not buy as much in the future as it will today.
In other words, that $1,000 you have coming in 20 years may be only worth $500 in today’s dollars. That is why your lump sum will always be less than the dollar amount of payments you are selling. The variance in amount is actually the difference in value between your future payments compared to their present worth.
Also, future money cannot be invested in the present and thus cannot earn interest, which would increase its value. The result is that the dollar amount of your future payments is actually worth less in real terms, when you sell it to us now.
Yes. We can purchase your non-qualified, single-premium annuity that wasn’t part of a structured settlement. Also the process is faster because we can buy your payments without having to go through the court approval process.
Guaranteed certain payments means that the payment will be paid if you are living or not. If you should pass away before all your guaranteed payments are made, they will go to your designated beneficiary or to your estate. Life-contingent payments are those that you will receive as long as you are living, even if you live past 100 years. But once you pass away, the payments will stop.
We can purchase both guaranteed certain and life-contingent payments should you need to get access to ready cash.
It depends on where you live. In some states you might be able to sell your workers’ compensation payments, but the approval process is complex. In addition, the laws are not as defined for workers’ compensation payments as they are for personal injury claims. We can help you determine if you qualify.
No. We cannot purchase pensions or any other kind of retirement account sponsored by an employer.
The process of selling your payments is straight-forward once you decide to reach out and learn about the value of your annuity. You can get a free quote from us and from any of our competitors. (We feel confident we can match or beat their quote.)
If you are in a position of needing some of your money immediately — as in right now, weeks before your sale is finalized — we’ll discuss that, too. We often provide people with up to $1,000 as an advance against their lump-sum payment.
Once you get our bid and accept it verbally, we’ll send you a disclosure statement that puts everything in writing. That includes the number of payments you’re selling and the amount of money you’ll receive.
Next, we’ll send you a contract. Depending on where you live — what state — you may be required to wait three days to 10 days after you get your disclosure statement to sign it. (This mandated waiting period gives you more time to consider what you’re and gives you time to get professional advice about the upcoming sale. In some states, seeking that advice is also mandatory.)
If you’re still good with the decision to sell, once you sign the contract and return it along with a copy of your original settlement contract and other financial information, we’ll review your submission for accuracy. After approval, we’ll file your contract with the appropriate court near you and obtain a court date. In most states, the court date will normally be set no sooner than 20 days after receipt of the filing. In most cases, you’ll need attend your hearing.
In court, as required by law, the judge must consider whether your proposed sale is in your best interests and in those of any family members or dependents. You’ll affirm for the judge your reasons for your sale — why you want your money. You’ll also need to convince the court that you understand all the ramifications of this transaction.
The judge probably will give your family members or other interested parties a chance to discuss the sale in open court. Structured settlement attorneys say that judges approve about 90 percent of the sales that reach this point, and they approve them the same day as the hearing.
Once a judge signs off on your sale, should get your money within five to 10 working days. While you wait, we’ll work with your insurance company to make sure that it complies with the court order and ensures that the payments you have agreed to sell are sent to the proper place.
Annuity has partnered with CBC Settlement Funding to provide you the best annuity selling experience available. Working together we have the experience and resources to offer competitive prices and handle many types of annuity and structured settlement contracts.
We try not to buy payments beyond 20 years in the future because the longer out you sell, the less value you may get back (again, it’s the principle of the time value of money). We usually work within a 10-year time frame, because this has proven to result in the best value for both our customers and our company. However, we can purchase payments over 30 years out if that is in your best interest.
There are fees, but they are not hidden. These include legal fees, insurance processing fees and program fees, some of which we will cover and others which we will apply to the cost of processing your transaction. When we quote you the amount of money you will receive from your annuity or structured settlement, that quote already factors in all other costs and fees. In other words, the number that we tell you is exactly the amount of money you will receive — not that amount minus fees.
We are a direct-funding source, and we will be the ones buying your payments. Because we are not a middleman for someone else, we are able to offer you the most money for your payments.
Yes, you can. Because the process of selling your payments can take a little bit of time, we should be able to provide you with an advanced payment on your lump-sum amount while your case is pending court approval. We have an advanced-cash program that gives you some up-front money. How much can you get? It depends on the size and duration of your payment schedule, but we’ve sent out a lot of $1,000 checks to clients who needed money now.
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No. When you sell your payments, you cannot buy them back.
All annuity payments that fall under section 104(a) (2) of the tax code are tax-free. So if you follow the state and federal laws that cover the selling of these payments, you will not be taxed on any proceeds. That said, we all know that annuities are complicated. Our advice is to always consult your accountant or a tax professional before making the final decision about your sale. Make sure that your cash will come to you tax-free or, if not, that you understand you will be taxed and that you will have the money to pay the tax.