Mike Green, an attorney based out of Philadelphia who represents several structured settlement factoring companies published an informative article on the Settlement Capital blog late last week. There are a couple of points that were mentioned in the article that I would like to discuss.
In the article published by Mr. Green, he explained the concept of an annuity’s present value. I would like to provide a few examples on the concept.
The lump sum you receive from the sale of your structured settlement payments will have the same tax treatment as your structured settlement annuity. In other words if your structured settlement payments were tax free then the lump sum you would receive from the sale would be tax free as well.
Most structured settlement annuities qualify for tax free treatment under section 130 of the Internal Revenue Code. The U.S Governement has taken several steps to protect tort victims and other parties from unfair taxes that resulted from personal injury settlements.
Thousands of annuitants sell the rights to their annuity payments every year, but what can each of these individuals due to secure their financial future? The simple answer is to plan ahead for both the certain and uncertain events that will happen.
Annuitants sell the rights to their payments for a multitude of reasons, most caused by a financial situation such as debt. Once a lump sum of money is received for selling their structured settlement, the last thing these individuals need is to be placed in the same exact position a few years later. If this situation were to occur again, the annuitant will either have to sell more payments or may have to file bankruptcy.
The confidence of AIG’s structured settlement annuity policy holders has been shaken, but should these policy holders sell the rights to their annuity payments?
Due to the circumstances surrounding the recent events of AIG’s financial difficulties the media has spawned a frenzy among policy holders. This author believes annuitants should be cautious about selling the rights to their annuity payments. Here is why:
Many annuity policies and settlement agreements usually include anti-assignment or anti-sale language. Even though this language is included within your settlement documents, you are still able to sell your future structured settlement payments!
Here is an example of the language that may be contained inside your annuity policy or settlement agreement: