How to Sell Structured Settlement Payments
Based on recent article on the secondary market for structured settlements, you already know that selling your future annuity payments is perfectly legal. But, understanding why you are able to sell your future annuity payments actually doesn’t mean you ought to. There’s a good reason why a large portion of your future annuity has been set aside for you in the first place, and that reason is because it makes economic sense for both parties involved. Let me explain.
In order to understand why you are able to sell structured settlement annuity payments, it’s important to have an understanding of what the process entails. Essentially, when you enter into a settlement buyout transaction with a major life insurance provider, you are entering into a contract with them. This contract typically gives you a right, but never an obligation, to receive a lump sum amount of money, usually in the form of a tax deferred annuity payment for a number of years, upon the success of some initial financial projections made by the life insurance company.
At one point during this agreement, it is assumed that a number of years down the road, there will probably be a large amount of money remaining on your annuity. At that point, the life insurance company will calculate its potential gain on the money by taking a look at what you might be entitled to based on your present value of the annuity. At that point, it’s time to sell Structured Settlement payments to realize your capital gain. What is present value?
In order to explain what exactly “present value” means, it’s necessary to understand a bit about why structured settlements are structured in the first place. Ordinarily, you would lose all of your future annuity payments if you were to die within a certain period of time after signing a settlement agreement. That means you must take a very difficult step back and allow current and future buyers of your settlement payments to purchase them from you. However, under the terms of the settlement itself, you do not actually lose any of your future annuity payments. Instead, the companies buy them from you so they have the best interest of their investors in mind.
When you sell Structured Settlement payments, what you are actually doing is selling future stream of income to a private investor. You must understand that this is not actually a traditional investment, and that you must adhere to a number of different rules in order to make it worth your while. First of all, you must be able to attract a very high percentage of the total market of buyers for your structured settlements and annuities. In order to do that, you must be doing things right with your current accounts. Otherwise, there may be too many risks to investing in personal injury cases, as well as the huge potential returns just aren’t there.
Another thing you need to consider when trying to assess the value of a settlement payment is the amount of time left on the contract. Usually, it will take about seven years or more for the buyer to pay you the full value of your annuity, depending on the severity of your injuries. While it is perfectly acceptable to have payments coming in over a decade, it is better to try and get as much value for your payments as possible before the contract expires. If you are able to buyout the contract before the contract expires, then you will have locked in the full value of the settlement.