To sell or not to sell – what is in the best interests of the annuitant?
Recently, Strategic Capital purchased structured settlement payments from an annuitant who was going through bankruptcy proceedings.
This annuitant is one of many Americans who experienced a financial crisis during the Great Recession of the last 3 years. Unfortunately for the annuitant, time ran out for him to put his financial house in order. And even more unfortunately, the expense of the bankruptcy means that he will see none of the sale proceeds of his annuity payments. On the other hand, his creditors got all the money from the sale – maybe they were even made whole!
We were surprised to see copies of letters between the annuitant’s lawyer and the annuity issuer. The lawyer had asked the annuity issuer whether there was any way for the annuitant to access money from the structured settlement annuity before the next payment came due in 2020. This question was asked three years ago, at which time IRC Section 5891 as well as the annuitant’s state’s Structured Settlement Protection Act already allowed the sale of structured settlement annuity payments, provided the state court found that the sale was in the “best interests” of the annuitant. Surely, this was a very good case where the “best interests” of the annuitant would be to sell a future payment in order to avoid the emotional, mental and financial cost of a bankruptcy filing!
BUT, the annuity issuer wrote a reply to the lawyer advising him that the future structured settlement payment could not be accelerated or sold! Which was wrong! And adding insult to injury, the annuitant’s lawyer accepted this advice without independently verifying if it was true – which it wasn’t! So, the annuitant was let down by two parties, all to his detriment. Now, his payment is being sold, but he’s not getting any benefit of it. Was it in his best interest not to sell or would it rather have been better to sell??
Sometimes, we all need some ready cash in order to get out of a financial bind. And having all the future assets in the world doesn’t help at all. Remember, during the financial crisis in 2008 and 2009, when the biggest banks in the country were desperate for cash to meet their obligations? And the federal government, through the Federal Reserve, provided them with cash by way of emergency loans. Without this emergency cash, all those banks would have collapsed. And now, 2 or 3 years later, the crisis has passed, the banks have been able to stabilize and many of them are in good shape and have been able to repay all of their emergency loans. All because they were able to access cash when they needed it.
We individuals are the same. Sometimes, through no fault of our own, we need to access cash from our assets for an emergency. And with that cash, we can deal with the emergency, and we can get through our problems. BUT, without the emergency cash, we may suffer irreversible consequences that will impact us for the rest of our lives. So, what is in our best interests – to sell or not to sell?
If this annuitant had been better informed about his rights with respect to his structured settlement payments, he may not have had to file for bankruptcy. He could have raised cash by selling his structured settlement payments. And he could have avoided the emotional, mental and financial cost of bankruptcy now, and the consequences that has for his future.
It is important for lawyers, and settlement brokers to keep their annuitants well informed about their options. Selling structured settlement payments should be used as a last resort, but in reality, things change and in today’s economy many people have to access cash – and annuitants can do that by selling a part of their structure. If annuitants need money, they will do whatever they have to in order to raise the money required, including selling structured settlement payments, even if it’s a bad deal at a low price.
If you are looking to sell your structured settlement payments, make sure to always ask as many questions as you can from your lawyer, settlement broker, or your financial advisor. And talk to experts to discuss your options. You can contact us at Strategic Capital for FREE no obligation options. Our structured settlement experts will answer any questions you may have about selling your structured settlement payments and the process involved –