Selling an annuity can be a complex financial decision that requires careful consideration of your long-term financial goals, current needs, and various market factors. Let’s walk you through the entire process, from initial evaluation to final sale…

Understanding your annuity

Before beginning the sales process, it’s crucial to understand exactly what type of annuity you own and its specific terms. Different types of annuities have varying rules and restrictions that affect their sale:

• Fixed annuities: These provide guaranteed payment streams based on a fixed interest rate. They’re typically easier to value and sell due to their predictable nature.
• Variable annuities: These investments are tied to market performance and can be more complex to sell due to their fluctuating values and potential surrender charges.
• Immediate annuities: These begin paying out immediately after purchase and may have different sale restrictions than deferred annuities.

Evaluating whether to sell

Consider these key factors before proceeding with a sale:

Financial need assessment

• Immediate cash requirements versus long-term security.
• Alternative sources of income.
• Tax implications of the sale.
• Current financial obligations and goals.

Cost analysis 

• Surrender charges and fees.
• Tax penalties for early withdrawal.
• Loss of guaranteed income.
• Impact on retirement planning.

The selling process

These are the basic steps involved with selling an annuity:

1. Initial research

Start by gathering all relevant documentation about your annuity:

• Original contract.
• Current statement.
• Schedule of payments.
• Any riders or modifications.
• Current surrender charge schedule.

2. Market evaluation

Research current market conditions and factors that affect your annuity’s value:

• Interest rates.
• Economic conditions.
• Life expectancy tables.
• Current annuity rates.

3. Choosing a sale method

• Full sale: Selling your entire annuity for a lump sum. This option provides the most immediate cash but also the largest loss of future income.
• Partial sale: Selling only a portion of your future payments, allowing you to maintain some long-term income while accessing immediate cash.
• Split sale: Dividing your annuity into segments and selling them to different buyers to potentially maximize value.

4. Finding buyers

• Direct buyers: Companies that specialize in purchasing annuities directly from owners. They typically offer lower prices but faster transactions.
• Secondary market: Brokers and financial institutions that may offer better prices but require more time and documentation
• Online marketplaces: Digital platforms that connect sellers with multiple potential buyers, potentially leading to better offers through competition.

5. Obtaining quotes

When requesting quotes:

• Contact multiple buyers for comparison.
• Get all offers in writing.
• Ask about fees and timeline.
• Understand the discount rate applied.
• Request a breakdown of calculations.

6. Court approval

State and Federal laws require court approval of structured settlement annuity payment sales. This is meant to protect sellers from unfair deals and to ensure that the transaction is in the seller’s best interest. This process typically involves:

• Filing a petition.
• Attending a hearing.
• Demonstrating the sale is in your best interest.
• Obtaining judicial approval.

7. Documentation Requirements

Make sure you have the following:

• Proof of ownership
• Identity verification
• Financial disclosures.
• Tax records.
• Proof of alternative income sources.

8. Professional Fees

Keep in mind that you will have to spend some money to make money when you sell an annuity:

• Legal fees for court approval.
• Financial advisory fees.
• Tax preparation costs.
• Transaction fees.