Annuity Settlement Options

by Rob Phillips, CPA

What are Annuity settlement options?

Annuity settlement options refer to the various settlements and investment plans you can choose. There are many options; whichever method you choose will directly translate to the benefits you will enjoy in future.

Annuity settlement options can guarantee that one doesn’t outlive their money. The best plan will ensure you live through your old age without having money problems.

Annuity settlement options are mainly offered by structured settlement companies. Since these programs involve money, that is “Cash for structured settlement” you will be needed to sign certain vital documents that put the two of you into a solemn agreement.

Some of these essential documents are an annuity policy, an assignment, an annuity application and an agreement. Most companies dispatch money in form of installments and for an agreed period of time.

Cash for annuity payments are not taxed. Any company that allows such money to be taxed may not be the best option for you. However, you may be taxed if you request for cash advances since such an arrangement was not part of the initial planning.

Alternatively, you can sell your annuities to another person who will proceed to take your money according to the pre-agreed arrangement. Before you jump into the annuitization phase, make sure you know the ins and outs of your selected option and the company as well. This is a serious investment, and you need to get as much information as you can before inking the papers.

There are four most common annuity settlement options. These options are Straight Life, Straight Life Option with Refund, Joint and last survivor and Straight Life Option with Certain Period. Let’s jump in and see what each of the above annuity settlement options is made up of.

  1. Straight life

Straight life program offers you several merits like a lifetime income, large payment options or a particular payment option that suits your plan. This program issues you payments up to an agreed time or stops when you die. You are not allowed to designate a beneficiary who will take over after you die. You can pay for them in installments while you are working or pay up once in a lump sum figure.

2. Straight life with certain period

Here an annuitant receives proceeds from a company for a particular period of time. Through this settlement option, you will be able to live a peaceful life eating from your reserves. They only downside to this method is the low periodic payments it sends off.

3. Refund Straight Life

Refund straight life is one of the annuity settlement options where your beneficiary gets the proceeds (and the interest earned) in the event that you die early. The beneficiary picks up from where you left.

4. Joint and Last Survivor

One of the most cherished annuity settlement options is the Joint and Last Survivor plan. It allows to people to receive proceeds from a company while they are alive. When one of them dies, the proceeds are given to the remaining person.

Now that you have known some of the annuity settlement options, it is also essential that you do a thorough research on each of them before you make your final decision.

The process of selling your annuity or structured settlement involves you to take the relevant steps to sell, decide how much you want to sell and also going to court to approve your request before having access to your cash.

The Process

Decide that you want to sell: Make the decision to start selling your structured settlement with your valid reasons for doing so, such as funding college, paying of a debit and many more reasons. If you know the reasons the sale will not have any negative effects on your future financial needs.

Shop Around: It is important to find someone who will guide you and advice you with valuable and reliable advice. Someone that has your best interest in mind and uses their own money to fund, also making sure they are experienced in completing court ordered transfers and generally has a good rating.

Choose the Company: When you finally find the company that are in accordance with your requirements, begin the sales process. It’s important to fill in and complete all the necessary paperwork. When you submit your paperwork, which consists of: your annuity policy, settlement agreement, benefits letter, application form and ID, all will need to be reviewed to ensure they are accurate and complete.

Approve Your Sale: When the relevant documents you have signed in are returned to you and are fully signed and approved a local attorney files them to court, after which point a hearing will be scheduled for your attendance. In court you will be asked to justify the purpose of using the money. It is important to show that you’re in no way putting your and your family’s financial future is disarray. If all is well, the judge will approval your request there and then.

Receive Your Money: When the request is approved the judge will sign off the order which will approve your transaction. The order is then sent over to the insurance companies to collect funds. You will then be able to receive your money after 45 days, however every settlement agreement is different with companies, it may take longer or less time. Some companies release immediate cash payment to help with certain personal circumstances.


When you receive money from selling your structured settlement annuity you will be taxed the same amount of payment as you received from your structured settlement annuity. The law act, Periodic Payment Settlement Act of 1982 recognizes formally and encourages the use of structured settlement in physical injury cases by allocating payments from a structured settlement as tax free.

Paying Off Debit

If you wanted to pay off debit by selling your structured settlement annuity, as it is a serious issue it is recommending speaking with a professional attorney specialised in bankruptcy to determine whether the settlement is protected.

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