How to get cash for your structured settlement 

Before we discuss how, and where you can sell annuities we have to understand the nature of these annuities in regard to  being your "personal property”.  

Think of annuities as a form of debt that is owned to you. However rather than receiving the payment in one lump sum after a period of time, that debt is paid to you in small increments over several installments. Some common incurrence of such debts would be in the case of liabilities owned due to civil damages against your person, or if you purchased a particular type of insurance / pension plan option that pays you a regular dividend over several years.  Like all types of legally incurred debt, payment of annuities to your name are protected under law.  

In short, think of annuities as a type of personal asset that falls between cash and properties on a liquidity scale. This tells you that you can sell your annuities for cash- just like you can sell your car, or a house and lot. There would be legal/ processing fees involved in transferring the debt  Normally you will not have to worry about the process logistics, as these will be shouldered by the buyer of your annuity (lets call them debt buyer), who would have experience in these matters.

However, expect that the cost of such processing will be charged against your person.  The only instance when you won’t be able to do so, is if the annuity to be paid to you had a non-transferable clause in it  – but these are rare, and even on the strange occasion that you find yourself in such a contract can most likely be amended at an extra cost on your part and upon agreement of both parties involved.

While you can get spot-cash for your annuity, expect the amount to be much less than the total sum owed to you. There are more reasons for this aside from the processing fees mentioned above.  The short and easy answer to why this is so, is because since a collectible annuity is a form of debt, you effectively transfer all risk of owning such debt to the buyer. For that buyer to then have enough incentive to purchase your annuity for cash you have to give him a discount.

How much discount?

Theoretically, at the minimum you will have to give them an interest discount equivalent to what they would get should they invest their cash in a bank deposit. However as an investor, they will not be interested in such a small discount. That is because you still have to account for the second property of annuities: the risk and inconvenience of collection involved. But then remember that giving a discount to cover risk is still not sufficient incentive. Buyers of debt still have to cover for their own cost of operation plus their profit margin to consider – which they will then pass on to you.

So for example, if you are owed $100 to be paid after ten months, you will probably be paid 11 dollars a month (assuming bank rate of 6-8% and in the case of a personal investment, you will put on an extra profit 2-4%). When you sell this to a debt buyer, you would most likely sell it to him for $90-$95, single payment to you on the day of sale. Hence the debt buyer collects the entire $10 profit that you should have collected PLUS the $5-$10 extra profit!.

NEXT ARTICLE >>