Introduction
It’s common for some clients to ask their attorneys if it is possible to sell their structured settlement annuities which have been established years prior. Annuity holders are legally allowed to sell their annuities. However, Internal Revenue Code section 5891 and state Structured Settlement Protection Acts govern the process for people who want to sell all or a portion of a structured settlement annuity.
What Happens When a Client Decides to Sell Their Annuities?
As outlined by IRC 5891, in order to sell a structured settlement annuity, clients have to get court approval. The intended goal of IRC 5891 is to help protect annuitants from predatory factoring companies. The court is instructed to make sure that the sale of that annuity is in the best interest of the client.
In cases where annuity factoring companies go through the proper steps of petitioning the court for approval, the company will send out information sheets to all parties involved in the transaction. The goal of these information sheets is to educate the annuitant on what happens during and after a structured settlement annuity is sold.
All of this information must be included for the court to determine whether or not a factoring transaction is in the best interest of a client. The courts will then decide whether or not to approve the sale.
And while the intent of the code section process is for the benefit of the client, the problem is courts get many of these requests and generally rubber-stamp these petitions or applications to factor annuities for lump-sum settlements. Only a few judges that we've worked with will take the time to hire either an ad litem or an outside counsel to review the details of the transaction and make sure that it is in the best interest of the client. Even with IRC 5891 and state Structured Settlement Protection acts in place, annuitants are often taken advantage of by factoring companies offering "settlement cash now."
A Solution to Ensure Clients Get the Best Deal When Selling Their Annuity
If you have a client who is thinking of factoring in an annuity because they need cash, we're more than happy to meet with those clients, look at their situation, and determine if there are other assets or resources that they can tap instead of selling their annuity. We'd be happy to do that at no charge.
If we determine that they do need to factor their annuity for cash, we can help them get illustrations from a variety of companies that will give them a more fair deal. We can also play these companies off each other into a competition so that the client gets the best possible deal on the sale of their annuity. That way, rather than getting a quote from one company, taking it to court, and having it stamped on without being checked, we can at least make sure that they're getting a good deal.
If a past client contacts you saying he or she wants to sell their annuity payments (they want “cash now”), we're happy to chat with them, explore alternatives, and ultimately help them make the best financial decision.
What we do: We, at Amicus, takes the complexity out of settlement planning. Whether it’s structured settlements, settlement tax planning, or trusts and asset management, we’ve got you covered. Call us today to see how we can support your case.
