Structured Settlement Annuities Review
To find our lineup of structured settlement companies we looked at a variety of factors, including customer sentiment, company visibility and whether the company belongs to industry groups such as the National Association of Settlement Purchasers (NASP). In order to be a member of NASP, a structured settlement company must abide by a code of ethics and a consumer bill of rights as well as participating in anti-fraud initiatives.
We were not able to evaluate rates and fees, since they depend so much on the specific details of each settlement. Before you sign the dotted line, check with the settlement companies you're considering to determine what the exact rates and fees are if you decide to convert all or some of your structured settlement to a lump sum payout.
Structured settlement annuity companies
Best for partial cash payout
J.G Wentworth is one of the largest structured settlement buyers. (It also owns Peachtree Financial, another large and well-known brand.) If you have an annuity from a legal settlement, accident or lottery award, J.G. Wentworth can purchase a portion of your settlement. The advantage of this is that you can leverage your settlement in multiple ways, preserving future monthly payments while getting some short-term cash. You can also sell your entire settlement to J.G Wentworth.
There are many ways to sell partial payments to J.G. Wentworth. For example, you could sell a 5-year section of a 15-year settlement. Or you could sell a portion of each settlement payment, such as $100 of each $500 payment.
J.G. Wentworth also provides other financial services, including advances on settlements. If you’re involved in current litigation, you may be able to access some of your settlement before it's finalized. This isn’t a loan, but is an advance on your settlement.
Best for selling retirement annuities
If you’ve purchased an annuity for your retirement or received one through an inheritance or by some other means, you can sell it to Peachtree Financial. One advantage of selling an annuity is that you don’t need to go through the court process of a structured settlement, which can be time-consuming and logistically challenging. Depending on individual circumstances, it may be possible to sell in as little as three days, though the average is 30 to 60 days. Keep in mind that Peachtree doesn’t buy pensions or other employer-sponsored plans.
In addition to retirement annuities, Peachtree also purchases lottery winnings and structured settlements. The process is similar to the retirement annuity process.
Best for Lottery Winnings
If you've won a lottery and are receiving the payout in monthly installments, you may be able to sell it for a single payout to Fairfield Funding. Fairfield is a structured settlement company that purchases lottery rewards, but the state you won in can determine whether you are eligible to sell a lottery payment at all. One factor in this company's favor: Fairfield offers to match the rate offered by other structured settlement companies to purchase your lottery annuity.
Selling your lottery winnings or settlement through Fairfield can take between 45 to 90 days. You have to get approval from a judge for the sale to be complete. Fairfield does offer an advance on some of your funds while you wait for approval.
Fairfield also has a guarantee in which it offers $500 if it cannot match or beat a competitor’s settlement offer. The guarantee also promises a quick resolution to the process and no interest on any advances.
Best for quick payments
Typically it takes months to receive payouts from selling your structured settlements, but some companies claim to accelerate the process. Strategic Capital has streamlined the process and can deliver payments to you in as little as 18 days. However, this timeline varies depending on the state you live in and the particular details of your settlement. Strategic Capital is also admirably transparent about the sales process, with a wide variety of articles on its website.
Strategic Capital’s settlement purchases follow the typical structure of the industry. You can sell all or partial payments. Settlements require court approval, and Strategic Capital will help you through that process.
Best for annuity loans
If you want to get immediate cash from your structured settlement, SenecaOne offers an annuity loan that gives you upfront money, with a limit of $2,500. With the loan, you don’t have to wait the weeks or months it can take for a sale to go through the courts. The annuity loan has an interest rate of around 9%, which is a little high but comparable to some personal loans. And the annuity loan doesn’t require a credit check. So if you have a structured settlement but need access to some money before the next payment, this loan isn’t a terrible option.
In addition to the loans, SenecaOne buys settlements. The process is similar to the rest of the industry: The company can buy partial payments or the entire settlement, and the sale will need to be approved by a court.
What is a structured settlement?
If you've been in an accident, won or settled a lawsuit, or received a payout from a lottery, you may receive a structured settlement annuity. What this means is that you receive your settlement in monthly payments rather than a single lump sum. A structured annuity can last for a set period of time, 30 years for example, or until the death of the beneficiary.
If you have debts, medical bills or a significant expense looming, you may want your cash up front. There are many services that buy structured annuities in exchange for a single cash payout. In fact, you may have seen a commercial or even been contacted by one of these companies since they market their services aggressively. Many brokers will offer different types of structured settlement loans as well. In these situations, you can borrow cash against your structured settlement, just like you can with a loan for any other asset.
You can sell the entirety of your structured settlement or a portion of it. Many factors affect the amount you'll ultimately receive, including the total amount of the settlement, the number of payments you're selling and how often these payments are made.
What is the process for selling my annuity?
The process for selling a structured settlement is lengthy and needs to be approved by a court. Usually it takes two to three months to complete a sale.
Selling a structured annuity should not be undertaken lightly. Since a court must approve the sale, the entire process can take several months. The process differs widely depending on the state you live in. Most structured settlement companies will aid you in the process.
If you're considering selling a structured settlement annuity, you'll want to follow these important steps:
First, shop around to find the best quote. Structured settlement companies apply what's called a discount rate to the future payments you receive, so the lump sum payment is smaller than the total amount of your settlement.
Second, you'll need to provide documents to the company you are selling the structured settlement to. This includes the documentation from the insurance company responsible for the annuity, the settlement and release agreement from a lawsuit, and the application for selling the settlement. If you're divorced or have declared bankruptcy since receiving your annuity, you may need to provide additional documentation.
Third, depending on the state you live in, you may be required to consult an attorney or a financial advisor before selling your structured annuity. You can find a list of the state-by-state requirements here.
Fourth, a judge will need to approve the sale of your structured settlement. The judge will take steps to determine whether you understand the terms of the sale. You'll also need to demonstrate that you have a convincing need to sell your annuity. Most structured settlement sales are approved, but reasons for denial include a failure to demonstrate adequate financial need, improper documentation or a poor discount rate from the company.
Pros of selling a structured settlement
You get immediate access to your money instead of receiving it monthly over several years.
Lump sum tax
The lump sum of your settlement retains the same tax status as your initial settlement. An insurance settlement is tax free – so, too, are the proceeds from selling one.
You can sell a portion of your settlement without depleting the entire annuity.
Cons of selling a structured settlement
Loss of future gains
When you sell your structured annuity, you give up future value for present gains. Structured settlement companies take into account the depreciation of future earnings and apply a discount rate to your settlement (more on that below). What this means is for a $100,000 settlement, you can expect to receive anywhere from $30,000 to $50,000.
Long time to process
It can sometimes take months for the paperwork to be completed and for a judge to approve the sale. If you need money immediately, you may want to look into alternate ways to get it.
Compromised income stream
If you rely on your structured settlement to pay bills, selling is unwise. You can compromise your income stream and leave yourself at risk for dire financial consequences.
What is a discount rate?
The discount rate represents the amount the company deducts from the total of your structured settlement. While it may sound like a simple percentage, it is much more complicated than that. The discount rate assumes that a dollar today is worth more than a dollar in the future and applies that principle to the payments you're selling.
Take the example above of a $100,000 settlement that is sold for between $30,000 and $50,000. This implies a discount rate of 50 to 70 percent. But discount rates typically range from 8 to 18 percent and can sometimes be as high as 30 percent.
The math doesn't seem to add up, and this is because the structured settlement company applies a different discount rate to each payment depending on how far into the future the payment is. Therefore, next month's payment has a different discount rate than a payment five years from now.
When you receive a quote from a structured settlement provider, just be aware that it will usually reflect an average of all the discount rates on all the payments you plan to sell rather than it being a certain percentage applied to the total of your structured annuity.
There is a benefit to selling just a portion of your settlement. By selling some of your forthcoming monthly payments, they have a lower discount rate than payments that are further out in the future, which means you'll be able to get more money and still have access to future payments.
Here are few more things to keep in mind when selling a structured annuity:
Explore your options. Get multiple quotes from different structured settlement companies. You're not obligated to go with the first offer you receive.
Haggle. Once you get an offer, don't feel like you need to accept it. You can negotiate the rate and try to find a middle ground with the buyer.
Understand what you're getting into. Most states require some kind of consultation with an attorney or financial advisor. We recommend taking advantage of that service so you fully understand the impact of selling your annuity.
As mentioned earlier, when you sell your structured settlement, the payout is not taxed. The exception, though, is from lottery winnings, which are taxed, and the funds from selling a lottery annuity are taxed as well. And if you invest the money from your lump sum payout, earnings from those investments will be taxed.
If you've received a structured settlement annuity through a lawsuit, an accident or winning the lottery, selling it to a structured settlement company can let you take advantage of that money more quickly. We've assembled a lineup of the 10 best structured settlement companies so you can explore your options and find the best deal for you. You can read more about these companies and what they offer in our buying guide.
Avoid structured settlement scams
Structured settlements are complicated, and the industry isn’t very transparent. Unfortunately, that means it’s easy for scammers to find people to prey on. Here are some things to watch out for as you sell your structured settlement or annuity:
One simple way to avoid scams is to do a little research before calling. Check to see if the company has had any lawsuits brought against it and if any complaints have been brought to the BBB or the CFPB. You should also make sure the company has a physical location. Further, find out how long the company has been in business – you’re less likely to be dealing with scammers if the company has been operating for several years. Long-standing companies are also more likely to be in compliance with the various rules and regulations that govern the selling of structured settlements and annuities.
Another way to avoid scams is to contact the settlement companies yourself. If you get cold called by a structured settlement company, it’s likely it found you through court records or it paid someone for a referral. If you want to sell your settlement or annuity, you should be in the driver’s seat and initiate the contact yourself.
Be wary of any company that tells you it doesn’t charge fees – it's likely it has hidden some of the costs in the discount rate it applies to your settlement. If a company claims there are no fees, you’ll likely pay a higher percentage and recoup less on your settlement payments.