Obtaining cash for structured settlement plans is a rather complicated process which often takes several months to complete. Annuitants must first determine if selling structured settlements is allowed in their state of residence. At present, less than 20 states allow this practice and the majority of those states require Annuitants to obtain court authorization.
Another consideration of obtaining cash for structured settlement payments is potential tax consequences. Annuity payments received as compensation for injury are tax exempt. When future payments are sold for lump sum cash the received funds are subject to taxation at both state and federal levels.
Several types of structured settlements exist. The most common is used to compensate individuals that have been injured due to an automobile accident, workplace injury, medical malpractice, or due to negligence of another person or organization. Injury settlements are orchestrated to provide funds for living expenses, medical care, and disability income.
Since annuity payments are provided to help Annuitants maintain the standard of living they enjoyed prior to the accident, courts rarely allow Annuitants to sell their entire structured settlement. Instead, they might be allowed to sell a portion of upcoming payments.
When partial annuities are sold, Annuitants assign future payment rights to a funding source. Once restitution is made, payment rights revert back to the Annuitant. For example, an Annuitant requires $10,000 to make their home handicap accessible. They receive quarterly structured settlement payments in the amount of $2500. In order to receive the $10,000 they would need to assign one year’s worth of installments.
Annuity payments are underwritten by life insurance companies. In addition to obtaining court authorization, Annuitants must also obtain approval from the underwriter. Insurance companies do not have to enter into this type of transaction, so even if Annuitants are granted approval for the sale, the life insurance company can block the sale.
In order to sell future annuities, Annuitants must locate a funding source. Some of the more common funding sources include private investors, investment groups, and cash advance providers. Financial institutions such as banks and credit unions typically do not provide cash for annuity payments . However, a few will allow Annuitants to obtain a personal loan using the structured settlement as collateral.
Individuals may want to use the services of an annuity broker to help them obtain the best offer. Funding sources typically assess fees for providing advanced funds. These fees can range between 10- and 40-percent of advanced funds.
There are many reasons people need to sell future annuity payments. Some of the more common reasons are to pay for college tuition, make home improvements, pay off outstanding debts, or for investment purposes. While selling future payments may appear to be a good solution for obtaining lump sum cash, Annuitants must carefully calculate the true cost. Between the legal fees, funding source fees and tax ramifications it is usually less costly to obtain a loan from a conventional lender or through friends or family.
Should you decide selling structured settlement payments is the best option, it is wise to shop around and compare funding sources. Once the funding source reviews the structured settlement, an offer will be presented. If accepted, a contract is executed and legal documents filed through the court. Afterward, funds are distributed. Overall the process to obtain cash for structured settlement normally takes three months or longer to complete.
StructuredSettlements.org – Structured Settlement Basics