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Apex Web DirectoryArticle Details
Lump Sum for Annuity May Help with Financial Problems
|Date Added: March 27, 2012 03:21:19 AM|
|Author: Jeff Myron|
|Category: Business: Financial Services|
An annuity is a sum of money paid to someone each year, either for a fixed number of years or for the rest of the payee's life. Insurance settlements may be paid out as annuity, for example. Lottery winnings may be paid out as an annuity. For example, a person who wins a million dollars may be paid the sum of $50,000 per year for 20 years. Annuities may be for a fixed amount, or for variable amounts. Additionally, annuities may be immediate (with payments starting right away) or deferred. With deferred annuities, payouts begin when a person reaches a certain age, or the payouts may begin in a particular calendar year. Why People Choose Annuities Many people choose annuities for certain investments to ensure that they can count on a given amount of money every year. Some people receive annuities as part of a court case, in which case the court may specify that a settlement is to be paid out as an annuity rather than a lump sum. These types of settlements are called structured settlements. However, sometimes people who are awarded an annuity would rather have a lump sum for structured settlement payments than to receive the money over the course of many years. Sometimes people who have been the recipient of an annuity have a sudden financial need for a large sum of cash. Many choose to sell annuities in exchange for a lump sum. Why People Sell Annuities for a Lump Sum Receiving a lump sum for annuity payments can help people who find themselves facing financial difficulty, such as a foreclosure or high medical bills. Sometimes people would rather receive a lump sum for structured settlement payments so that they may buy a house, start a family, or start their own business. How Selling an Annuity Works Selling an annuity is a straightforward process. Some companies are in the business of buying structured settlements and annuities, and they generally need documentation of the settlement agreement and the annuity contract. Companies specializing in purchasing structured settlements are often able to help clients locate or replace these documents so that the sale may take place. The sale of certain annuity types does not require court approval, and in these cases, cash may be ready in a couple of weeks. For sales of structured settlements or annuities requiring court approval, the process generally takes four to eight weeks. Is a Lump Sum Better than an Annuity? Each individual must decide whether continuing to receive an annuity is preferable to obtaining a lump sum of cash. Selling a settlement or annuity involves giving up a percentage of the overall sum that would be received over the lifetime of the annuity. But many people feel that it's worth paying that cost to have cash on hand to pay bills, buy a house, invest, or start a business. Selling an annuity or a structured settlement is a big decision, and if you are making that decision, be certain that you understand the terms offered by companies that buy these settlements.
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