Make a Deal to Sell Your Annuity

Even though an annuity is often purchased to ensure a constant stream of income in retirement, there are times when selling the annuity may make more sense. Your annuity could be liquidated for a variety of reasons, including the purchase of a property, the funding of a business venture, or the satisfaction of unexpected financial obligations.

You may have done the arithmetic and determined that your annuity is not the most profitable option for you, and you now wish to reinvest the money. Find an annuity purchaser who agrees to the terms you provide. Instead of accepting the first deal you receive, shop around if possible.

Planning for Retirement: Assessing Your Annuity

Verify the annuity's transferability. Your inability to sell your annuity is absolute if it is not transferable. Find out if you can give your contract to someone else by checking its terms. To get your hands on cash quickly, you might apply for a bank loan and list your nontransferable annuity as an asset or source of income.

Find out if the annuity you're considering is a structured settlement. Check your contract or visit your accountant to learn about the laws in your state. There are legal safeguards in place for structured annuity sellers in most jurisdictions. There may be a need for judicial approval of your transaction under the Structured Settlement Protection Act in states that have adopted such legislation.

The purpose of the Periodic Payment Settlement Act is to prevent people who have won monetary awards in personal injury and wrongful death lawsuits from spending the money too soon and thereby becoming eligible for government assistance.

Don’t try to sell a structured annuity by yourself, especially if you are living in a state that does not have a structured annuity protection statute. Get the advice of a reliable broker and lawyer before moving forward.

Examine your annuity. Before you look around for annuity buyers, figure out what the resale value of your annuity is. If you need help understanding the finer points of your investment and how much it is worth, see a professional accountant. Always remember that selling your annuity will decrease the amount of money you will receive from the annuity. A discount rate will be applied to the lump sum payment you receive, reducing the amount you receive by 8–14% compared to what you would receive if you waited to receive the instalments over time.

Find out what your tax liability will be if you decide to sell your annuity. In the beginning, your investment in an annuity will grow tax-free. Distributions are taxable as income to you. The accumulation portion of your annuity grows tax-free, but the payments you get are subject to income tax. Taxes are paid at the regular rate on these sums.

You must pay ordinary income tax on any profits you make from selling your annuity before it matures. However, the sale losses cannot be deducted as investment losses.

There is a 10% tax penalty for taking money out of an annuity before you are 59.5. Some circumstances, such as the annuitant's death or incapacity, warrant an exception to this rule.

You can roll over your annuity into a new qualified annuity contract without having to pay taxes on the money you received from your previous annuity. Seek the advice of a tax expert or financial advisor before attempting a "1035" transaction.

Locating a Purchaser

Determine where your prospective annuity purchasers might be hiding. The insurance agent who originally sold you the annuity is the ideal person to ask about finding a buyer. They have a deep familiarity with the marketplace and perhaps know people who can facilitate this sort of deal. Since you previously paid them a commission when you bought the annuity, they may also charge you a lower commission for finding a buyer. You might also try looking for an annuity buyer online. Verify the following about each firm before engaging with them:

have received high marks from unbiased reviewers for the quality of their services.
Maintain a high standard of client service.
have the ability to provide you with a competitive offer for your annuity.
possess valid business licenses and comply with all applicable laws and rules.
Show your numbers and timelines in an honest light.

A conversation with a financial advisor before making any sales is strongly suggested.

If you want to know if a firm is trustworthy, you can do so by consulting the BBB. Businesses with low Better Business Bureau ratings should be avoided.

JG Wentworth, Catalina Structured Funding, Peachtree Financial, and Stone Street Capital are just a few of the dependable annuity purchasers out there. It is possible to reach these businesses via phone or online.

Work with a broker. You should use a broker if you are having problems locating purchasers or if you are unable to negotiate a price that you find acceptable. The broker's knowledge of negotiations is worth the money, but it's not free. Carefully select your broker. Verify their credentials to be sure they are authorized to negotiate the type of sale you are interested in.

Obtain a price range from the broker you're considering hiring. Be sure to do the math before you commit to any percentages that have been quoted to you.

Find an unfamiliar broker's contact information and give them a try. It's possible that any complaints or records of violations may be posted online.

Compare annuity offers to see what you can save. Get bids from at least five firms before making a final decision. Get free quotes from businesses you find online by filling out their quote forms. The amount quoted may differ from the final amount you receive due to fees that may be deducted before a settlement is finalized.

Don't offer them anything except the basics while filling out the form for a free quote. Only your name, email address, and the title of your annuity should be required information.

Never give out personal information such as SSNs or banking details, and never pay for a quote that should be free.

Make sure you give yourself plenty of time to close the deal. You're less likely to strike a nice bargain in a hasty sale.

Choose the best deal. An acceptable offer would be around 80% of your annuity's value. Do not enter into a transaction if the buyer requires you to pay their costs before a settlement is reached. All agreed-upon court costs, attorney fees, and commissions should be subtracted from the final settlement amount once the agreement is finalized.

Get your documents together. You will need a copy of your original annuity application and your annuity policy in order to sell your annuity. If you have already begun receiving payments from your annuity, please bring your most recent tax return and distribution check. A copy of the settlement agreement, if one was reached, is required. Bring a government-issued ID (a passport or driver's license, for example) and a signed statement stating that you are selling the annuity voluntarily.

Gather any other paperwork that your buyer may need from you, such as a copy of a judgment for a structured annuity or release agreements.

Choice of Sale Type

Make a decision as to how much money you hope to make from the transaction. Find out how annuity buyouts are made and what options you have. Always keep in mind that the buyer will ultimately come out ahead in any transaction. Sixty percent to eighty-five percent of your annuity's value is what you may expect to be offered. Because of this, you should look into other options before selling your annuity.

A loan could be more suitable than selling your annuity if all you want is some more income.

Think of the sale as a simple purchase. A direct purchase results in a single payment for your annuity from the buyer. You may forget about getting any more money from them. If you need cash quickly and have decided that an annuity isn't the best option for you, a straight purchase sale may be the best option for you.

Earnings from an annuity contract will be subject to ordinary income tax if the contract is sold.

Think of a sale as an opportunity to save money on a larger purchase. Your immediate annuity payments will be purchased by the buyer for a certain period of time. After that period of time has elapsed, you will resume receiving your annuity payments as usual. Take a look at this alternative if you're experiencing a short-term cash crunch but still want to save for the future.

Think of the transaction as a reverse purchase when selling. You can sell off a few years of your annuity. If you are receiving $1,000 per month for the next 15 years, you may sell the payments you have already received for years 5, 7, and 10. In addition to the lump sum payment, you will continue to receive your regular installments through year 4. After year 10, your monthly payments will stop, but they'll start up again in years 11–15.

Be aware that this will decrease your annuity's total payout. The upfront payment for the years you've sold will be less than the total amount of the payments for those years.

Before making any transactions, you should also know for sure how much the future payments will be worth.

If you are in immediate need of funds but are confident in your ability to provide for yourself in the near future, this may be an excellent choice to consider.

If you're thinking about making a purchase, you might want to consider splitting it up. Your purchaser will share in your regular payments with you if they make a split purchase. When receiving an annuity payment of $1,000, if you find that you only need $500 per month, you can sell half of the annuity and receive a lump sum payment plus the same amount of money each month.

Ordinary income taxes on the deferred earnings and any gains from the sale will still be due, even though you've only sold a portion of the annuity.