Once you have decided that you want to sell your structured settlement annuity and have found a good funding company, the next thing you will need to consider is the cash that you will get for your structured settlement. Annuities are complex legal documents and unless you are aware of the details of your investment you may be taken for a ride with respect to its value. When you sell your settlement, you will obviously not get the full worth in your cash payout, but what you need to be aware of is the difference between the settlement amount and the discounted amount you’ll be receiving. Its worth will depend on your skills as and when you negotiate for it. For knowing this you must calculate its total worth which depends on various factors, such as market conditions and institutional interest rates set by the Federal Reserve. The worth of your annuities can be decided upon by considering the following factors:
Initial settlement value:
There is a set value for every structured settlement annuity. This value is decided when a personal injury lawsuit is being set after negotiation between the plaintiffs and the defendants and can also be decided by a judge. The annuities can fall under two major categories. One type of annuity offers payment for a couple of years while the other one offers life-time payments. During the negotiation process, it is necessary that you set a value such that your future needs are met. if you settle for a value which is too low, you may find yourself in a serious financial fix. Hence ensure that you consider the time value of money when you calculate your medical treatment expenses.
Choosing the right payment plans
While negotiating for the money, you will have to choose from among the varying payment plans available. Whatever your requirements, you can choose to be paid on a quarterly basis or a yearly basis. You can also negotiate for a monthly payment system though it may not be a very lucrative option. The discount rates on monthly payments are much higher and there are other charges as well. One of the most popular payment plans is the quarterly payout. For life time payments, yearly compensations remain the most common method of payments.
The value of the settlement after sale
While negotiating, ensure that your annuity plan enables you to sell your annuity without additional charges and minimal deduction. This enables you to get the maximum value for your annuity during a cash sell out. There are discount rates and additional charges levied in most jurisdictions that you will need to take care of. The value that you will get will depend upon the interest rates, the inflation rates as well as the demand. The received amount is also dependent upon the amount you want to sell. It depends on whether you want to sell all your payments, several years of payments or future annuity payments. The money in an annuity grows tax deferred but when you sell it, you will have to pay taxes on it.