Cash for Structured Settlement: Tips for Selling Annuity Payments

Entering into cash for structured settlement agreements is a complex process that normally takes 2 to 3 months to complete. Annuitants must determine if their state allows the sale of future annuity payments. The majority of states prohibit this practice and those that do require Annuitants to obtain authorization through the court.

Obtaining cash for structured settlement payments could present Annuitants with unexpected tax consequences. When individuals receive annuity payments as compensation for injury, the payments are tax-exempt. However, when Annuitants sell payments for lump sum cash, the funds may be subject to both state and federal taxation.

There are several different uses for structured settlements. The most common use is to provide compensation to individuals who have been injured due to a car accident, medical malpractice, workplace injury, or negligence of another person. Injury settlements are structured to ensure injured parties receive adequate compensation for lost wages, medical expenses, and living expenses.

Courts rarely authorize the sale of injury-related structured settlements because annuity payments are intended to allow Annuitants to maintain their normal standard of living. If Annuitants require lump sum cash for items that will improve their standard of living, courts might allow them to sell a portion of future annuity payments.

Annuitants have many reasons for selling structured settlement payments. The most common reasons are to pay off debts, make home improvements, college tuition, and investment purposes. Although selling annuity payments can be a good option for obtaining lump sum cash, Annuitants must take time to calculate the true costs.

Obtaining cash for structured settlement normally involves court fees, attorney fees, funding source fees, and potential taxation. It is usually less costly to take out a personal loan through a lender.

To sell partial payments, Annuitants assign payment rights for future payments to a funding source. Once the funding source is repaid, payments revert back to the Annuitant. For example, an Annuitant requires ,000 to purchase a handicap-accessible van. They receive quarterly structured settlement installments of ,000 and would need to assign payment rights for two years’ of annuity payments.

Another consideration of selling structured settlement payments is annuities are underwritten by life insurance companies. In order to assign future payments, Annuitants must obtain permission from the underwriter. Insurance companies are not required to engage in this type of transaction. Even if Annuitants obtain court authorization, life insurance companies can block the sale and refuse to assign future payments to the funding source.

If the court and life insurance company authorizes the sale of future annuity payments, Annuitants must find a trustworthy funding source. This is usually a private investor, investment group, or cash advance provider. Banks and credit unions generally do not provide cash for annuity payments. Some financial institutions might allow Annuitants to take out a personal loan using the structured settlement as collateral.

Annuitants should consider consulting with an annuity broker to obtain the highest offer. Funding sources charge fees when presenting advanced funds. Cash advance fees typically range between 10- and 40-percent of advanced funds.

Annuitants that elect to sell structured settlement payments should comparison shop funding sources to obtain the best rate. Once Annuitants accept an offer from a funding source, they must enter into a contract and file legal documents through the court. Afterward, funds can be distributed to the Annuitant. The overall process of obtaining cash for structured settlement is about 3 months.

Are you considering obtaining cash for structured settlement payments? Learn more about the process before selling future annuity payments from real estate investor and author, Simon Volkov. He has published a structured settlement article library to help Annuitants make informed choices at

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