When an insurance company or other party agrees to pay you a predetermined amount in installment payments as your award for a settlement, you are entering into a structured settlement annuity agreement. Structured settlement annuities can be made for any duration of time and are a tax-free source of funds for the recipient. A structured settlement annuity is designed to provide long-term financial security, and is guaranteed by a contract. Some people choose to sell their structured settlement annuities because they prefer a lump sum payment. However, this can have some tax implications and the transaction can only take place when it has been approved by the court.

How Structured Settlement Annuities Work

Structured settlement annuities are granted after a settlement agreement is reached in a court case. Most people receive this type of payment when they are receiving money from an insurance company. The agreement includes information on the periodicity of the payment, the full award amount with interest, and the date each payment will be made. The payments will stay tax-free until changes are made to the initial agreement, and any changes will need to be approved by the court.

Selling a Structured Settlement Annuity

If you do want to cash out your structured settlement annuities, you will need to seek out a financial company that can coordinate the transaction and offer the lowest fees for their service. Keep in mind that these companies will take out a percentage of your sale amount for acting as a third-party. You can get quotes from several different companies to ensure that you are getting the best rates on fees so you can make the most of the sale. Companies will be willing to give you a lump sum payment up front if you decide you want to proceed with the sale. This lump sum is calculated based on several factors, and will typically be a much smaller percentage of the total settlement amount you were going to receive over the course of the agreement.

Since this type of arrangement needs to be approved by a judge, you will need to provide a strong reason why you want to sell your structured settlement annuity in the first place. You will need to explain to the judge that you need the money to finance you child's education, pay for emergency expenses or medical care, or to pay off some large debts. The judge will need a solid reason for the sale, so be prepared to provide as many details as possible, and any forms of proof. Once the sale has been approved, the company you are working with for the sale of the structured settlement annuities will be able to authorize a wire transfer directly to your bank account as a lump sum payment, and they will now "own" the annuity.