Factors to consider before buying a structured settlement

Individuals that are receiving periodic payments from claiming structured settlements at time maybe faced with the desire to sell them. This is usually done in lump sum at a discounted rate. The manner in which the payments stream to the seller is the same used in benefiting the seller.

Factors to consider before buying a structured settlement

Transaction process

This enables the buyer get full rights and ownership to the annuity. Brokers are required to oversee the entire process but not to receive any rights like the owner. Therefore, this transaction remains between the insurer and buyer.

Security of the annuity

This is directly related to the value of the annuity.  Depending on the present financial performance of securities, past performance of the annuity in question does not offer much guarantee to positive or negative results in the future. This is as a result of the inability of financial experts to predict the future.

Exchange rates for foreign currencies

In countries like the United States of America, annuities are issued in dollars. One is therefore required to evaluate the impact on the present exchange rates on the value of a security. There are other considerations such as withholding taxes for investments.

Liquidity of other investment options

Claimant’s rights are fully transferred to a third party buyer by a court order. In case of a future buyer, additional court sanctions may be required hence complicating other buying processes. Remember, no secondary market is allowed to dispose any annuity in the hands of a third party.

Potion of the structured settlement being purchased

Recall that rights on the annuity are either transferred wholly or partly depending on the portion purchased. In some countries, there are regulations on the amount of annuity being purchased in respect to life assurance. Buyers should therefore beware of these restrictions.

Tax considerations

Most transactions in any state are liable to taxation. For annuities, the purchasing, collection and disposal of securities requires buyers to pay tax. However, this is only applicable when transferring annuity rights to a third party. Remember to hedge against risk involved by for example negotiating for a lower discounting rate.