Having an annuity is a great financial asset, and one that provides security and stability for your future. But perhaps you have hit a rough patch, are in the midst of a life change, or are trying to avoid going into debt. The option to sell annuity payments is an attractive one if you need money quickly, but you should understand how this process works before making any quick decisions.
Here are five things to consider before selling annuity payments for cash:
Understand Your Reason for Selling
It might sound obvious, but the first thing to consider is why you want to sell annuity payments and if your reason is a sound one. Talk with someone you trust about the reasons that you want to sell an annuity and what got you into this financial situation. If you are in this place due to poor financial management, then perhaps keeping it in the annuity is the best option. However, there are many valid reasons for selling annuity payments, such as putting a down payment on a home, paying medical bills, or investing wisely.
Your Overall Financial Plan
Since annuities help many people plan for their financial future, you will need to devise an alternate plan if you choose to sell an annuity. Your current financial needs may cloud your judgment about future needs that you may have, which is understandable. But before selling, take stock of all your other income, savings, investments, and assets.
State Laws for Selling Annuities
The laws and regulations for selling annuity payments for cash can vary from state to state, so make sure to talk with an attorney or financial advisor in your area so that you understand this process. You may need to go before a judge to hear your case before selling your payments, and the process can take a few weeks or more from start to finish.
Taxes and Fees
Unfortunately, there is a price to pay for getting your periodic future payments all at once right now, and that price typically comes in the form of taxes and fees. The lump sum you receive will be considered earnings for the year and could be taxable if it exceeds your personal allowance. Also make sure to ask the structured settlement purchaser if you will incur any fees or penalties.
You can Sell Just Some of Your Annuity Payments
Many people don’t realize that you don’t have to sell all your annuity payments to receive cash now. Instead, you can choose to sell some of your settlement payments and let the remaining balance stay in the annuity for the future. With partial purpose options, you can determine how many payments to sell. Or establish a split disbursement partial purchase, in which the buying company receives part of your regular payments and you get the rest.
To go over your specific situation and the options available to you, call the specialists at Novation today at
*Novation is not a financial advisor or consultant and strongly recommends that you speak to a lawyer or accountant before making any significant financial decisions.