If you find yourself needing to access money that’s tied up in an annuity or structured settlement, it is possible but will require you to follow a process. In both instances, the least punitive way to do so is to sell your payments to a third-party company.
The legal status of a structured settlement may make this more complicated than an ordinary annuity. A structured settlement is usually managed by a structured settlement broker who puts the money into an annuity or other funding asset on the plaintiff’s behalf. A straightforward annuity is a contract between the individual and an insurance company.
Five steps to sell your annuity payments:
Have the facts and figures at your disposal
Research the third-party companies that buy annuity payments to see what deals you can expect. They differ from one organization to another. However, don’t be tempted to give in to the company offering a seemingly great deal without first ensuring that they have a high Better Business Bureau rating and positive online reviews. If it seems to good to be true, it might be.
Become as knowledgeable as you can about the sale of annuity payments by doing the research online or asking a financial adviser for advice on the matter. The more you know, the less likely you are to be caught up in a deal that doesn’t favor you.
Consult selected companies
Choose a couple of companies that buy annuity payments and contact them to speak to customer service representatives. They can explain your options and their implications clearly and answer any questions you might have.
Ask for a quote from each company so that you can make a thorough comparison. Preferably, show them to a financial adviser before choosing which one to accept.
One of the most important things to do when selling annuity payments is to understand how they affect the worth of the annuity or structured settlement. Check out the impact of this action by using a structured settlement calculator.
Decide which offer to accept
The nature of offered deals will relate to the discounted rate at which you’ll be selling your payments to the company. A lower discount rate is in your favor and should be one of the primary determining factors in your choice between quotes.
While many third-party annuity payment companies might have fixed discount rates, it’s worth trying to negotiate before you commit. On average, discount rates range between 9-18%.
Weigh the discount rate against the penalties you would incur in surrender charges and potential tax implications if you were to withdraw the money from the annuity. This will give you the clarity you need before reaching a final decision.
Complete the paperwork
The company you’ve chosen will issue you with an application form to complete. You will also need to attach supplementary documentation, including proof of identity. If you’re selling payments on a structured settlement, make sure you submit a copy of the original agreement.
Once the company is happy that it has received everything it needs, you will receive a transfer document to sign and take to a notary. The payment is dependent on you returning these documents.
Get the approval you need
Before you get your money, the final step is approval from the insurance company that issued the annuity contract. The insurer will investigate the deal to ensure its legitimacy before granting its approval.
For a structured settlement, you will also need judicial approval during which a judge reviews the sale and evaluates it against your best interests. The need for a court appearance can delay the payout.