Selling a Structured Settlement

cash hands
Photo courtesy of J R

You’re seventeen years old.  Driving around in your first car, not a care in the world.  Then, BAM!  You’re in a car accident.  It’s the other guy’s fault.  You and the insurance company settle on a structured settlement, or annuity, which are payments received on a scheduled basis.

As a kid, and then a college student, it’s a pretty good deal.  A certain amount of money drops in your lap every so often, you’re not blowing the rest of the amount on the stuff that kids blow their money settlements on, and you’re not paying a whole lot of taxes on the amount.  But now you’re out of college.  Priorities run to starting a family, a business, buying a home.  What can you do?

There are companies in business that buy annuities, or even portions of annuities.  You do not have to sell the whole thing.  These companies offer the insurance companies a percentage of the remaining balance of the structured settlement and then offer the original annuitant a large lump sum.  The factors involved with deciding the worth of the annuity include inflation rates and the amount of expenses the transfer will incur, so it’s always a good idea to keep an eye on current market rates when looking to sell your annuity.

The process for selling an annuity involves getting quotes from financial institutions that buy annuities, filling out the legal paperwork involved, and appearing before a judge, who will then decide if selling the annuity is in the best interests of the annuitant.  The financial institution will factor in any costs brought on through the filing into their offer to the annuitant.

There is no question that a guaranteed amount of money over time is a good thing. Especially if   this money is tax free. But a structured settlement doesn’t allow for the freedom that a large sum of money can.  Everyone needs to fix a car sometime.  And when you’re ready to buy a home, the amount received from selling a structured settlement can be just what the doctor ordered.

Selling all or a portion of your structured settlement can be a good idea.  There are many legitimate companies out there that buy annuities from insurance companies and then provide the original annuity holder with a lump sum.  This can be a process that takes anywhere from 45-90 days and is for the security and safety of the annuity seller in most jurisdictions, but could end up worth it in the long run.  A small monthly payment could do less good than a down payment on a house could or the money used to start a business that ends up being more lucrative then the previous payments received.

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