How can I sell my structured settlement annuity?
This article takes you through the process of selling a structured settlement annuity and what you need to consider before making such a big financial decision.
Summary
A structured settlement annuity is a regular, tax-free payment awarded by the court following a lawsuit.
You need approval from a judge before you can sell your structured settlement annuity.
While structured settlement annuities are not usually taxed, if you sell your annuity, you may owe taxes.
It’s wise to speak to a financial advisor before deciding to sell your structured settlement annuity. They can advise you on whether it’s the right decision for your circumstances or if there are other options you should consider.
What is a structured settlement annuity?
A structured settlement annuity is a regular, tax-free payment awarded by the court following a lawsuit.
It is an alternative to a lump sum payment. Instead of receiving one overall payment, the money is set up as structured payouts provided to the recipient at regular intervals over time.
The logic behind this is to provide the recipient with a regular income aimed at providing long-term financial security.
Structured settlements are typically mutually agreed upon by the defendant and the plaintiff.
The plaintiff can either request the terms they believe are appropriate, or the defendant can make an offer.
When both parties agree on the amount and associated terms, such as when the money will be paid, how long the plaintiff will receive payments, and how the money is to be paid, the settlement is submitted to the court for approval.
Once a judge signs the agreement, the plaintiff can start receiving their regular payments.
Why would I sell my structured settlement annuity?
As a structured settlement annuity provides regular payments, one of the biggest reasons you would sell your annuity is to receive a one-off lump sum payment.
This will be higher than your regular smaller payouts.
You might require this for multiple reasons, such as to pay an unexpected bill, clear your debt, or make an investment.
Selling your structured settlement annuity is a big financial decision and one that should not be made lightly.
If you’re considering selling your structured settlement annuity, it’s best to first speak to a financial advisor. They can help you weigh up your options and decide if selling is the right option or if there are alternatives you should consider.
If you do decide to sell, they can help you choose the company to sell your structured settlement annuity to and ensure you get the best deal.
How do I sell my structured settlement annuity?
There are five key steps you need to go through when selling a structured settlement annuity:
Speak to an expert
Decide if you will sell and your reasons for doing so
Choose the best company to sell your annuity to
Go to court
Get approval and finalize your agreement
Let’s look at each in more detail.
1. Speak to your lawyer
The first step is to speak to your lawyer. They will be able to tell you if you can sell your structured settlement annuity. In some cases, an annuity cannot be sold for a lump sum.
Your lawyer will be able to clarify this. If it can be sold, they can also advise you on if you should sell part or all of your settlement.
2. Decide if you will sell and your reasons for doing so
Once you have determined if you can sell or not, the next step is to decide if you should.
Here, you will need to weigh up your options and determine if selling is the right option for you.
If it is, you will also need a compelling reason why you’re selling, as the judge will consider this when making their final decision on whether they can grant your request.
3. Choose the best company to sell your annuity to
You next need to choose a company to sell your structured settlement annuity to – this type of company is known as a “factoring company.”
It’s wise to get multiple quotes and shop around for the best company to suit your needs. It’s also best to do a background check on your chosen factoring company to make sure they’re legitimate.
Depending on which state you live in, there are different laws surrounding selling your structured settlement annuity. These laws can also impact the factoring company and the regulations it must abide by. For complete information, you should refer to the full text of your state’s Structured Settlement Protection Act.
4. Go to court
Next, you need to attend a court date to go in front of a judge and formally request to transfer your structured settlement annuity.
A qualified attorney can help you navigate the hearing process.
The judge will review your proposal and make a final decision. It’s worth noting that getting a court date can take up to two months.
5. Get approval and finalize your agreement
If the judge grants you approval, you can then go ahead and finalize your transfer agreement with your chosen factoring company.
You will then receive your lump sum and will no longer receive your regular payouts.
What are the pros and cons of selling my structured settlement annuity?
When deciding whether to sell your structured settlement annuity, it’s wise to weigh up the advantages and disadvantages.
Here are just some of the pros and cons you should consider.
The pros of selling your structured settlement annuity:
Access to a larger sum of money: Selling your structured settlement annuity provides you with a one-off payment, which will be bigger than your usual regular payments. This lump sum can be used for whatever you wish and, depending on your situation could provide some financial reassurance or security.
The cons of selling your structured settlement annuity:
It’s a long, restrictive process: Cashing out your settlement is not a quick or straightforward process. You must get court approval before you can sell; this can take time, and your request could be denied. It will also take time for your lump sum to be paid.
You receive less money overall: The lump sum payment you receive will be smaller than the sum of your regular payments. Companies who buy settlements will do so at a lower rate, meaning you will lose out on money overall.
You’ll lose a regular income: If you choose to sell your structured settlement annuity, you will no longer receive regular payouts. The loss of a regular income can have a detrimental effect, so it’s worth doing the calculations beforehand to ensure you can cope with this.
Get expert financial advice
Selling a structured settlement annuity is a complicated process with multiple factors to consider before you make a decision.
To make informed decisions tailored to your unique circumstances and goals, you should always seek expert advice.
A financial advisor can work with you to develop the right financial strategy to help you meet your goals.
Unbiased can match you with an SEC-regulated financial advisor in as little as 48 hours. Answer a few simple questions about what you’re looking for, and we’ll find an advisor suited to your unique needs.
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