Annuity Buyouts Generate Quick Cash

Individuals who are plaintiffs in a civil case often receive settlements as a result of workers compensation, wrongful death, defective products or services and many other types of civil wrongs.  Large sums of money are usually paid out in a structured settlement arrangement; however, in order to protect the plaintiff, these amounts are usually transferred to an annuity whereby the total amount is disbursed in the form of payments over a predetermined period of time.  This court facilitate system works well for protecting plaintiffs from depleting funds that are needed for medical care or otherwise losing the money to poor management.  Over the years however an individual’s circumstances can change making an annuity a less effective and convenient form of payment.

Annuity buyouts and the companies or attorneys that promote them have become very popular in recent years.  In essence, these groups or companies will purchase the remaining payments of an annuity in exchange for a lump sum to the person currently receiving compensation.  While this is possible in many areas, it is not uncommon for the terms of an annuity to prohibit its sale or borrowing against future payments.  Two thirds of states have enacted laws to discourage this type of transaction and if an annuity has a qualified tax status, it cannot be sold, borrowed against or otherwise traded for other forms of compensation.

In areas where this type of transaction is legal, there are requirements of your annuity.  The contract must have a non-qualified tax status, which means that it cannot be privy to certain tax privileges, or be tax exempt.  The annuity can also not be of the variable type and the contract must be valid in a state that allows the sale of annuity payments.  If your annuity does not meet one or more of these basic requirements, it can usually not be sold.

Individuals sell annuity payments for a variety of reasons.  Whether the annuity was inherited or granted to an original payee in a court of law, payments may have been logical in the beginning yet circumstances change over time.  People use lump sum buyouts to pay for school, pay off debt, buy a home, start a business or anything else they need the money for. Annuity buyout companies as well as attorneys usually give free consultations about what your options are if you are legally allowed to sell off future payments.  Although selling these payments can bring more useful lump sums of cash, it is important to remember that businesses that will buy an annuity are in business to make a profit.  Carefully review any agreement to make sure selling is the best option for your particular situation.