Many people who have annuities and are going through financial problems often feel the urge to sell annuity payments. Although the promise of a large sum of liquid cash is almost irresistible, such a transaction is not without risks.
Although it may not initially be clear to you, long term payments such as annuities, structured settlements and lottery winnings are the best means to ensure that the best interests of their recipients are served. In fact, even US federal laws encourage the use of a long term payment scheme.
Selling Annuity Payments – What Are the Risks?
Even though lottery prize winners are still awarded a lump sum in many parts of the world, studies show that winners who are awarded in this manner lose most or all of their money after a few years due to:
• Financial mismanagement and unwise investments
• Overindulging family and friends
• Picking up expensive and addictive vices such as gambling
• Excessive donation to charitable institutions
• Getting suckered by scammers
Simply put, inflexible monthly payments are meant to save you from yourself. If you do not have a compelling enough reason, it’s probably not a good idea to sell annuity payments.
In addition, getting a lump sum means losing a lot of money that is tax free. In case you are unaware, selling annuity payments always means doing so at a discount. Injured and disabled people are especially discouraged from selling annuity payments because they risking losing funding for medical expenses and other bills.
