Alternatives to Keeping an Annuity or Structured Settlement

annuity plansAnnuities and structured settlements come into our lives in a variety of ways, not just those that are within our control. Structured settlements are usually awarded to plaintiffs before a case is taken to court. If the two parties are able to come to an agreement (and you are the plaintiff), you may find yourself with a structured settlement, a financial package awarded at intervals, to act as income and steady restitution for a wrong. Some plaintiffs receive funds in a lump sum, but most get a structured reward model. While many prefer this, others find that the small amount of funds released monthly is not enough to cover the sometimes-accelerated living expenses that accompany the time periods surrounding lawsuits. For instance, you may have sued the other party in the first place because you were injured or unable to work. You may have hospital bills and lawyer fees to consider. Just because you were awarded a settlement doesn’t mean you’re “out of the woods” yet.

Annuities are similar, but are organized with intention, long before they ever go into effect. You or a loved one will have made monthly payments for many years in order to have a lot of funds reserved for a day when you won’t be working or at least not as much. You’ll need funds to be released on a monthly basis to act like income and meet your material needs, often during retirement.

Both of these products are great, as long as your material needs are predictable and steady, and as long as they put out funds in sufficient amounts that you can at least make ends meet. But oftentimes, a need or goal will emerge in your life that costs more than you are able to afford with an annuity or structured settlement. Because you don’t want to take on expensive debt or borrow through other means, the most convenient way to finance your goal may be by selling your structured settlement or annuity.

Structured Settlement and Annuity information is available from many companies who would love to buy your product. They do this by offering you a quote that is less than the real value of your settlement or annuity. You get the convenience of a lump sum payment, and the flexibility that it offers you in your financial life. The company gets the benefit of having received a financial product worth more than they paid for it. Because they buy many, they have the further benefit of time, always able to wait for more payments to emerge.

There are obvious pros and cons to this arrangement, as well as regulations for how the transaction may occur. You are not allowed to sell a structured settlement or annuity for just any reason. The sale has to benefit your financial life in specific ways, like increasing your earning potential by allowing you to further your education, funding the down payment on a new house, or paying off a high interest debt. You’ll want to talk to your financial professional about alternatives to the sale of your structured settlement or annuity, and to see if this model is right for you. But if it is, the sale should be able to benefit your life in meaningful ways.