Thursday, 15 August 2013

Basics Of Annuity Payment Plans

Annuity payment refers to income derived through structured settlements or annuity investing practices. Structured settlements are used to provide monetary compensation to individuals who have been injured due to negligence of another, as well as paying mega jackpot lottery winnings.
Annuity payment plans are governed under the Structured Settlement Protect Act. Currently, 46 of the 50 U.S. states comply with SSPA guidelines which include factoring transaction rules. These rules regulate the transfer or sale of future annuity payments.
Structured settlement annuities are guaranteed by life insurance companies. Payments can be arranged to provide Annuitants with adequate income to cover healthcare expenses, along with basic living expenses.
Annuity payments can be arranged to provide income for a few years to a lifetime. Payments received for injury compensation are exempt from income tax. Payments provided for lottery winnings may be taxable at both state and federal levels. Annuitants can assign beneficiaries to receive remaining payments upon their death.
This type of payment arrangement can be a good choice for jackpot lottery winners. Lottery winners can elect to receive the jackpot as lump sum payment or deferred payments which typically extend over 20 years. Those who opt for lump sum cash do not receive the full amount of winnings because state and federal taxes are deducted before the prize is distributed.
Lottery winners who elect deferred payments will receive more money in the long run. Smaller payments usually do not alter tax brackets the way lump sum cash payments do. Therefore, deferred payment amounts are taxed at the lower rate and provide more income. Anyone fortunate to win Lotto or Powerball lotteries should consult with a tax accountant before deciding which payment plan to accept.
Individuals entering into structured settlements can arrange the plan to suit their financial needs. Once structured settlements are in place they cannot be altered without court authorization. Annuitants are prohibited from obtaining early distribution of benefits. They cannot withdraw funds from their account or use future payments as collateral to secure financing.
Annuitants might be allowed to sell future payments to a funding source for lump sum cash. However, this type of transaction requires court authorization. In most cases, courts do not allow individuals who receive annuities due to injury to sell future payments. They may be more lenient when payments are received for lottery winnings.
Annuitants must provide the court with evidence as to how the sale will improve their life. Upon approval rights to future payments are assigned to the funding source. Transferring future payments to factoring companies is a complicated matter that is best handled by a qualified lawyer.
The majority of states prohibit the sale of future annuity payments. Therefore, the first thing Annuitants must do is determine if selling structured settlements is allowable in their state of residence. If so, it is imperative to conduct due diligence and ensure they are working with a reputable annuity broker or funding source who is well-versed in structured settlement law. About the Author
Simon Volkov is a real estate and cash flow note investor who shares strategies for investing in annuity payment plans. He offers an extensive investing article library covering topics of structured settlements , annuities , cash flow notes, and real estate at www.SimonVolkov.com.

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