What Is an Annuity Payment?

Annuity payment refers to a fixed amount of money paid in installments over a specific timeframe. Annuities are used when individuals enter into structured settlements. This type of arrangement is often used to provide monetary awards through lawsuits or to pay jackpot lottery winnings.

Annuity payment plans are governed by the Structured Settlement Protection Act of 2002. At present 46 U.S. states adhere to established guidelines, including factoring transaction rules which regulate the sale or transfer of future annuity payments.

Annuities paid through structured settlements are guaranteed by insurance companies. Payments can be structured to provide sufficient funds to injured parties for living expenses and medical care.

Annuity payments can extend for a few years to a lifetime. Some structured settlements are arranged to provide payments to Annuitants' beneficiaries such as their surviving spouse or children. Annuities paid for injury compensation are exempt from state and federal taxation.

Annuity payments can be a smart financial option for jackpot lottery winners. When individuals win mega-million lotteries they can choose to take the winnings as lump sum cash or annual installments. Winners that choose lump sum cash do not receive the full amount of winnings and are subject to taxation at state and federal levels.

Winners that choose to accept lottery winnings in the form of annuity payments will receive more money in the long run. Smaller payouts over the course of 20 years place Annuitants into a different tax bracket than those who accept lump sum cash.

Those fortunate enough to win Powerball and state Lotto drawings should consult with a tax attorney to determine which payout is best suited for their long term financial goals.

There is substantial flexibility when structured settlements are established, but once in place they cannot be altered without court approval. Annuitants cannot request early distribution of benefits, withdraw funds from their account, or use annuity payments as collateral to obtain a secured loan.

Annuitants might be allowed to sell future annuity payments to a funding source by assigning payment rights. The sale of structured settlements must be authorized through court and Annuitants must provide evidence as to how the sale will improve their life.

Since settlements are often established to provide financial aid to individuals who have sustained serious injury, courts frown on allowing the sale of future payments. Transferring structured payments to factoring companies is a complex matter that should be handled a qualified attorney.

Many states prohibit the sale of annuity payments. Therefore, Annuitants must determine if selling structured settlements is legal before scouting out a funding source. Those who are allowed to sell future annuities must conduct due diligence to ensure they are working with a reputable funding source or annuity broker who is well-versed in structured settlement law.

Learn more about the advantages and disadvantages of entering into structured settlement annuity payment plans from real estate investor and author, Simon Volkov. His website includes a structured settlement article library which offers information and resources to help visitors make informed decisions available at www.SimonVolkov.com.

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