The Top Five Misconceptions About Structured Settlements
The sale of a structured settlement or annuity is a complex transaction. Confusion about the actual terms of these deals has led to some incorrect assumptions about selling a structured settlement or annuity. Those who hold these assets can be intimidated by what they have heard about a structured settlement or annuity sale, and sometimes the warnings they get from others involve misunderstandings about how these financial deals work. Here are some of the most common misconceptions about what structured settlement and annuity sellers face in the financial marketplace.
MISCONCEPTION #1: STRUCTURED SETTLEMENT AND ANNUITY SALES ARE ILLEGAL
Some consumers believe that structured settlement and annuity sales are illegal, partly because a court review is required in most states. However, the court review does not mean that a structured settlement or annuity deal is inherently illegal. Courts review each case to make sure that selling a structured settlement annuity does not violate general finance rules and that the seller is getting an equitable deal and has been properly informed about the transaction terms.
MISCONCEPTION #2: LEAVING MONEY IN A STRUCTURED SETTLEMENT OR ANNUITY ALWAYS PROVIDES A BETTER RATE OF RETURN
It is true that many fees and costs can be involved in a structured settlement or annuity sale, but this fact has led many to believe that selling all or part of a structured settlement or annuity always leaves the asset holder with much less in the long run. The reality is that, in some cases, holders who pursue structured settlement and annuity sales are freeing up money for investments that will generate more returns than the existing asset setup. Additionally selling payments to pay down credit card debt accruing interest at a higher rate is an obvious way to save money.
MISCONCEPTION #3: IN ORDER TO SELL A STRUCTURED SETTLEMENT OR ANNUITY, SELLERS HAVE TO QUALIFY
Another major misconception about structured settlement and annuity sales is that the lump sum payments from these assets are like loans. A structured settlement or annuity payment is not a loan, and the seller does not have to provide the same qualifying income. When courts review the sale, they are looking at the seller’s ability to provide for dependents, not the seller’s credit or other elements in lending deals.
MISCONCEPTION #4: ALL STRUCTURED SETTLEMENT AND ANNUITY PAYMENTS ARE TAX-FREE
The fact that many structured settlement payments are tax-free has led consumers to believe that all of these scheduled payments carry no tax liability. The fact is that tax liability depends on various factors in an asset holder’s overall tax situation, and many annuities do carry deferred tax burdens. For more information, ask a tax professional about the details of your case.
MISCONCEPTION #5: STRUCTURED SETTLEMENT AND ANNUITY SELLERS CANNOT DEAL DIRECTLY WITH BUYERS
Some people think that a structured settlement or annuity seller cannot seek price information directly from the firms that buy these asset payments. In fact, actively seeking information in the marketplace is often an excellent way to get the best deal. Many professionals recommend shopping around for a good bid on a sale.
Sell Your Structured Settlement or Annuity with CBC
At CBC, we can help you make the most of a structured settlement or annuity sale. Ask us about our excellent track record on these kinds of transactions, and how we value each customer—let us help you with your financial goals.
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