Difference Between Annuity and Structured Settlement | Product sales processes are also significantly different.
A major difference between annuity and structured settlements is how they are obtained. Generally, individuals purchase annuities to secure a future stream of payments. In contrast, an orderly settlement arises out of a statutory settlement.
Difference Between Annuity and Structured Settlement | Product sales processes are also significantly different.
If you bought an annuity with your own money, you may eventually decide you want to withdraw the money early. Doing so usually incurs fees and penalties. You will also face a 10% tax penalty on withdrawals from the retirement annuity before age 59 ½.
Selling structured settlement payments is a different story. Given that structured settlements are designed to provide financial support for the future of defaulters, strict state and federal laws govern the sale of payments to third parties known as factoring companies. These companies offer immediate cash in exchange for future settlement payments.
To sell a structured settlement, you must appear in front of a judge and make a valid case as to why you need immediate access to your settlement money. You may need an attorney present at the hearing.
In contrast, selling a traditional annuity is not a legal process. Selling is more straightforward and faster because an annuity is essentially a contract between you and the insurance company.
Taxes are also different when selling structured settlement payments compared to an annuity. Sales of personal injury settlements are tax-exempt. However, you will owe income tax when you sell other types of annuity.
