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Sell My Annuity

As structured settlements and annuities become a more prevalent way of settling lawsuits involving insurance companies, the selling of structured settlements and annuities has also risen.  More and more people are selling their settlements, leaving behind the guaranteed income of their structured settlement for a large lump sum.  While the selling of settlements is on the rise, it’s important to take a look at the industry, and the pros and cons of selling an annuity.

As of 2007, there were over 35 million annuity contracts in the United States.  These annuities exceed $2 trillion, with over $6 billion of new settlements are written per year.  This is an enormous industry.  JG Wentworth, which buys structured settlements and annuities, has been involved in $2 billion worth of transactions in the last 15 years.  As the third party buying of structured settlements and annuities has grown, more and more people continue to sell their settlements and annuities. 


Why Sell?

As stated above, the regular payments from a structured settlement or annuity may be small.  The payments may not be enough to cover the immediate expenses of the person holding the settlement or annuity.  Or, perhaps, the person has outgrown the payments.  They may not need the steady stream of payments, and could want to do something else with the money, but it is wrapped up in the settlement or annuity.  In cases like this, the person may decide to sell.


How Does This Work?

Selling a structured settlement or annuity is a multi-step process that is not necessarily quick or easy.  First, a seller will want to receive quotes from various buyers, looking for the best deal to get.  Not all sellers will offer all the same deals.  Some may give cash advances while others won’t.  Once the buyer is settled on, the process moves to the court system.  Most companies that buy settlements and annuities will provide legal representation, so those fees and payments do not come out of the final lump sum received from selling the settlement or annuity.  At these court proceedings, the judge will then decide if the reason for selling is in the best interests of the seller.  These reasons can be anything from home renovations or repair to a vacation.  Any court costs from this process ill come out of the final lump sum that the seller will receive.  The whole thing can take up to three months.

What Does The Seller Get?

The person selling a settlement or annuity will not receive every penny that the settlement is worth.  It is important for the seller to remember that everyone in the deal is out to make a profit.  The company that is buying the settlement or annuity will receive a cut of the amount, and the seller will receive their own sizable lump sum.  The seller of the annuity or settlement does not have to sell the entire thing.  In fact, they can sell only a portion of it if they choose, allowing themselves to continue to receive ongoing payments.

Pros of Selling an Annuity

Selling a structured settlement or annuity can have many benefits.  If a family has outgrown the small payments they are getting, then selling their settlement or annuity can add more to their lives than the payments.  On the other hand, perhaps the payments aren’t enough.  Large costs and expenses that the person with the annuity or settlement needs to take care of just can’t be taken care of with the small payments.  By selling part of their settlement, they can use the lump sum to take care of those problems.  Sometimes these settlements or annuities are earmarked for specific expenses.  A person has to sell in order to use that money for what they really need it.

Cons of Selling an Annuity

Of course, selling a settlement isn’t always wine and roses.  Selling a settlement or annuity can remove a guaranteed income stream for a family.  Structured settlements and annuities are also tax free, so people don’t lose money on them.  The lump sum received is subject to income tax, so sellers will want to keep an eye on that.  Unfortunately, another mark against selling is the human factor.  Some people will simply waste the money they receive from the lump sum, and then have nothing to fall back on when the structured settlement is gone.  Along with this is the idea that people can sell the portions of their settlement or annuity more than once.  As the amount in the settlement or annuity is depleted, so is the amount that the seller can get in the lump sum.

Selling a structured settlement or annuity is a decision that deserves much thought and consideration.  There is good and bad associated with the decision, and these things should be discussed with a financial planner.  By fully understanding what comes with selling a structured settlement or annuity, a person can be prepared to make the decision.

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