Selling Annuity FAQs

Selling a structured settlement or annuity is a legal process and can be intimidating. Learn the answers to commonly asked questions about selling your structured settlement below.

What is an annuity?

An annuity is a financial contract meant to protect financial assets. It is also used as an alternative form of income after retirement. In exchange for a one-time lump sum or periodic payments — typically monthly payments — an insurance company will disburse gradual payments over a designated period of time — or until an annuitant’s death — specified in the contract terms.

Annuity savings have the unique ability to accrue interest over time, allowing for the initial value to increase. Savings or annuity contributions are also tax-deferred until distribution.

Can I sell my annuity?

Yes, you can sell your annuity payments for cash. In the event your financial needs change and an annuity is no longer meeting your needs, you can sell your current or future payments for a lump sum of cash.

Annuities can be sold in portions or in an entirety. If sold all at once, you forfeit receiving all future periodic payments. However if you sell a portion of your payments, you will receive a lump sum of cash up front, and at a later time will be able to resume receiving periodic payments.

Selling your annuity is a legal process, so a judge must approve the sale.

How does selling my annuity work?

Before proceeding with the decision to sell your annuity payments, it is highly recommended that you consult with a financial advisor to evaluate whether this transaction is in your financial best interest.

Selling your annuity is a thorough legal process that involves a number of steps:

  • Research annuity buyers for best service
  • Receive a quote
  • Consider legal representation
  • Complete and submit required transactional paperwork
  • Present case before a judge for court approval
  • Receive payment

For an in-depth view of the annuity selling process, visit our page on how to cash in on your annuity.

How long does it take to receive a quote?

Typically, receiving a quote — free of charge — takes only a few minutes but can be completed within a day for more complex sales. Beginning the selling process is simple, and receiving a quote is the first step. Be sure to shop around to a few different annuity buyers for the best quote.

Do I have to sell all of my annuity?

While it is a common decision to sell an entire annuity contract, emptying your entire investment is not the only option. Selling your annuity contract in full provides you with a large one-time lump sum. However, if you need immediate access to cash for a down payment on a house or for unexpected debt, you can choose to sell a portion of your payments. This will guarantee you a lump sum payout, but will still provide you with periodic payments at a later date.

Can I sell a portion of my annuity?

Yes, you can choose to sell a portion of your annuity in the event you have unexpected financial emergencies. A partial annuity sale allows you to sell a portion of your payments by dollar amount or by time period — such as years in distribution.

If you have a 20-year annuity but you need immediate cash, you can choose to sell years three through five or any other time period of payments. During those designated years, you will receive no payment in exchange because you will have already received cash up front. Instead, the company you sold your annuity payments to will receive the money. After that period has passed, periodic payments will resume.

Is it legal to sell my annuity payments?

An annuity sale transaction is legal, and is in fact a legal process that requires court approval prior to receiving a lump sum payout. Judges want to ensure that selling an annuity is in your best interest and will not put you or your family in financial jeopardy.

Once your transaction has been approved by the court, you will be eligible for an annuity payout.

How soon is money disbursed after selling my annuity?

The selling process can take anywhere between 45-60 days before disbursing payment. An annuity sale is a legal process that requires court approval, signed documents and proper representation to ensure the transaction is in your best interest.

If you need immediate cash but are still waiting for your annuity sale payout, some annuity buyers may offer immediate cash advances that can help with outlying expenses.

What if I received an annuity through an inheritance?

While an annuity may have been a profitable financial option for someone else, regular annuity payments may not be the best decision for you. Inheriting an annuity also requires you to inherit the tax implications. It is possible to sell an inherited annuity in exchange for a lump sum of cash. Selling your future payments can provide you with the option of investing in another profitable venture that better suits your financial needs.

What are the benefits of selling my annuity?

Selling your annuity provides you with an influx of cash that can help to build a better quality of life for you and your family. A lump sum of cash comes with a newfound freedom to invest in other financial options, alleviate debt, and even travel. For more information on ways to maximize on your savings, visit our Investing in Yourself page.

Are there taxes involved when selling an annuity?

Selling your annuity payment does have tax implications. First and foremost, selling your annuity does not guarantee a full payout equal to the initial value of the contract. In exchange for quick turnaround on cash, annuity buyers will charge a fee and sell your annuity at a discounted rate for profit. The lower the rate, the more money you will receive in a lump sum payout.

If you are considering selling your annuity to invest in another financial vehicle, you can essentially rollover your funds into another account in a tax-free exchange. This option bypasses money touching your hands and sets the foundation for another investment account. Be sure to consult your financial advisor to evaluate the best option for you and all corresponding tax liabilities.

What fees are associated with selling an annuity?

The primary fee associated with selling an annuity is the discount rate provided by the annuity buyer. In exchange for upfront cash, buyers charge a fee in order to profit from the transaction. The discount rate is determined largely by predicted future interest rates, in addition to other factors. The lower the rate, the more you as the seller will profit from your lump sum payout. The higher the rate, the more you will stray away from your initial contract value. Be sure to consult with your financial advisor prior to making this transaction, and consider shopping around for buyers that will provide with the best bang for your buck.

I’ve sold my annuity payments. What now?

Selling your annuity provides you a lump sum of cash. That leaves you freedom to invest in other financial vehicles, put a down payment on a house, alleviate larger debt, and even pay for school tuition fees.

It is also important to remember that selling your entire annuity does not guarantee a full reimbursement of the initial contract value. Annuity buyers will purchase your annuity contract at a discounted rate that can be as low as 50 percent of your initial value. Be sure to discuss all your financial options with a lawyer or financial advisor prior to proceeding with the decision to sell.

If I sell my annuity, will I still have to pay premiums?

Should you decide to sell your entire annuity contract, you are no longer responsible for paying monthly premiums. All responsibilities will be assumed by the new annuitant. However, if you decide to sell a portion of your annuity, you are still responsible for making payments on the contract.

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