Many of us watch commercials on cable television from companies offering to purchase structured settlement annuity policies for a lump sum of cash. However, locating the ideal buyer that offers the most cash on the best terms is often challenging. Sourcing the best deal is important because the beneficiary of the policy will only receive a certain percentage of the total remaining payments due on the policy, based on the bid or quote offered from reputable third parties.
The Original Structure
More than likely the beneficiary of the annuity accepted a structured settlement as a way to close a legal case or lawsuit. Others accept annuity payments as a result of lottery winnings. Both types of scenarios typically set up a structured settlement in the same way.
For the beneficiary that receives structured settlements as a result of a court case, the judge likely accepted an agreement from the defendant to pay an insurance company a lump sum to purchase an annuity that would pay monthly installments to the beneficiary. For the individual that won the lottery, the state likely paid a lump sum to an annuity company to payout annual installments based on the money owed.
In all likelihood, the insurance company took the total lump sum and made investments that could generate enough money to pay off monthly installments. Over the lifespan of the policy, the beneficiary will receive the total amount of money due to them. However, it might not be enough to cover their ongoing expenses.
Selling the Annuity
When the beneficiary of the annuity makes the determination that it is time to sell the policy, he or she seeks out reputable third-party companies that offer bids or quotes on structured settlements. The companies will calculate the current value of all the remaining payments based on a variety of factors before offering a quote or bid.
One of the factors often not consider by beneficiaries is that these companies are purchasing structured settlements as a way to generate profits for their business. They need to make an offer at a discounted price. The amount is usually significantly lower than the expectations of the beneficiary. This is why it is so important to shop around.
Locating a Reputable Company
Converting an existing structured settlement annuity into cash is not the same as selling a home or a car. The entire process will always involve the judge in a court of law. They are the only ones who can give the final approval, which will allow the third-party structured settlement company to offer a check to purchase part or a portion of the annuity.
This is why it is important to seek out reputable companies that will offer a fair amount, and move the process swiftly through the court system.
Additionally, it is important to understand any tax ramifications that might be a result of converting an annuity into cash. It might require a tax attorney or an accountant, once the beneficiary has located a reputable company to purchase the structured annuity.