The words annuity and structured settlement are sometimes used interchangeably. A structured settlement is a defined schedule of payments granted to the injured person of a suit in the form of a single premium immediate annuity (SPIA). Understanding the idea of the time value of money really should help clear any doubts as to the reason you would get less money than your insurance policy is planned to pay out if you choose to exchange structured settlement annuity. When you want to sell structured settlement payments, you should know that the current value is the present worth of a future sum of money or source of cash flows paid in one lump sum once being discounted at a specific rate. Future cash flows are discounted based on the periods they are expected to be paid and whichever rate is being incurred on the transfer. A payment of $100,000 payable in 2 years is obviously going to be worth more than that same $100,000 lump sum payment due in 20 years supposing the exact discount rate is employed in both examples. It's a rather simple concept to understand. The more time it takes for an investor to recoup his or her investment, the less money that future payment will be worth now.
Discount Rates Applied to Structured Settlement Annuity Transfers
Anyone that is thinking about whether to sell structured settlement payments should know whatever discount rate the factoring company will be applying. As an example (as of the date of this article) if you have got a $200,000 payment due on January 1, 2015 which you would like to cash in you'd be given $89,763.55 applying a 19% discount rate. However, that same lump sum due on exactly the same date implementing a 15% discount rate would pay $105,072.08. Differences in the discount rate can have a huge influence on what you could be given in a lump sum. In this prior illustration only a 4% gap meant $15,308.53! So know what your discount rate is before you cash in your structured settlement annuity and look for the best rate.
Try a Present Value Calculator to Assess the Value of Your Annuity or Structured Settlement
You may want to use a present value calculator to verify what your lump sum payout would be at varied discount rates. For structured settlement annuity transfers, rates can be anywhere from 10-25% therefore it's good to browse around. You will find a lot of organizations that buy structured settlements, however quite a few impose very high discount rates. Attain the highest offer you can prior to cashing in. You may want to consult with your attorney and/or financial advisor prior to signing any contract to ensure you are perfectly knowledgeable of the terms and conditions of the financial transaction.
Time it Takes to Complete Structured Settlement Annuity Transfer
Structured Settlement Annuity transfers take around 2 months to complete. In a nut-shell the process is: seller agrees to the price for his or her structured settlement annuity payments, customer executes the contract, attorney files the petition for the approval of transfer of structured settlement payment rights, court hearing is scheduled, court hearing occurs, and the seller is funded with a lump sum assuming the judge approves the exchange. A handful of states may be better than others but the entire process is the exact same no matter what structured settlement factoring service you use. Single premium immediate annuities that are not the outcome of a lawsuit typically don't have to be approved by a judge. Ordinarily these transactions can be done in as little as a couple of weeks. Typically these annuities were acquired as an investment or inherited. The annuitant may decide to trade in their policy at some period and prefer a lump sum. The sum offered could be marginally greater than with structured settlement annuities considering that there are normally no legal fees or legal work associated with the transaction.
Discount Rates Applied to Structured Settlement Annuity Transfers
Anyone that is thinking about whether to sell structured settlement payments should know whatever discount rate the factoring company will be applying. As an example (as of the date of this article) if you have got a $200,000 payment due on January 1, 2015 which you would like to cash in you'd be given $89,763.55 applying a 19% discount rate. However, that same lump sum due on exactly the same date implementing a 15% discount rate would pay $105,072.08. Differences in the discount rate can have a huge influence on what you could be given in a lump sum. In this prior illustration only a 4% gap meant $15,308.53! So know what your discount rate is before you cash in your structured settlement annuity and look for the best rate.
Try a Present Value Calculator to Assess the Value of Your Annuity or Structured Settlement
You may want to use a present value calculator to verify what your lump sum payout would be at varied discount rates. For structured settlement annuity transfers, rates can be anywhere from 10-25% therefore it's good to browse around. You will find a lot of organizations that buy structured settlements, however quite a few impose very high discount rates. Attain the highest offer you can prior to cashing in. You may want to consult with your attorney and/or financial advisor prior to signing any contract to ensure you are perfectly knowledgeable of the terms and conditions of the financial transaction.
Time it Takes to Complete Structured Settlement Annuity Transfer
Structured Settlement Annuity transfers take around 2 months to complete. In a nut-shell the process is: seller agrees to the price for his or her structured settlement annuity payments, customer executes the contract, attorney files the petition for the approval of transfer of structured settlement payment rights, court hearing is scheduled, court hearing occurs, and the seller is funded with a lump sum assuming the judge approves the exchange. A handful of states may be better than others but the entire process is the exact same no matter what structured settlement factoring service you use. Single premium immediate annuities that are not the outcome of a lawsuit typically don't have to be approved by a judge. Ordinarily these transactions can be done in as little as a couple of weeks. Typically these annuities were acquired as an investment or inherited. The annuitant may decide to trade in their policy at some period and prefer a lump sum. The sum offered could be marginally greater than with structured settlement annuities considering that there are normally no legal fees or legal work associated with the transaction.
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