Structured Settlement Annuity

[bts]

[SMinGA]

Not sure how to apply CA exemptions - but as for the value I believe you'd look at the present day value. Receiving $X in 30 years does not mean its worth $X now. That's where the time value of money reasoning comes in, based on current interest rates and such. If you were to 'sell' this annuity, you'd get much less than $62k but then you'd have access to a lump sum now that you could use or invest.

Ask about this in your atty consultations - you don't want to accidentally give away thousands of $'s if you don't have to.

[bts]

Good point, I remember 7 years ago or so, I called a company that buys structured settlements and they only offered me approx. 20% of the initial investment to liquidate it and it had been in the annuity for 3 or 4 years at that time....

I'll look into it.

Thanks SMinGA

[SMinGA]

If you're not into economics or finances, then the TVM can be a headache.

For an annuity payable for another 30-35 years, you won't get anything close to the ultimate cash sum if you convert it to a lump sum now. Basically your money is sitting somewhere, growing from interest and paying you in bits & pieces. If you take it now - you cancel all that interest. Interest over 30-35 years really adds up. It doesn't help any that current rates are low.

If you were to sell/convert it when rates were high you'd do a lot better of course.

[bts]

Not too big on economics or finances per se........but yeah, reason I stretched it over such a long period was to get the most of it (assuming I'm alive, lol) since I knew I'd just blow it quickly if I didn't keep it in the annuity for an extended period.

The interest not being much of a factor when I initially sought to sell it, I was still suprised that their offer to purchase my annuity was so far below the initial investment.

[SMinGA]

If $62k is the sum of what you'll collect (though would have been more ~7 years ago since you have collected some since) then think of that as the ultimate value. Not an initial investment. That might help it make more sense. Like if you're due to get $1000 in a year, and 3% is the going rate then its only worth $970.87 right now. If you're due to get $1,000 in 10 years and 3% is the going rate, its now worth $744.09. If you're due to get $1,000 in 30 years, with 3% as the rate, its only worth $411.99 right now.

For the 30 year example, $411.99 is the investment. If you had it now - and invested it at 3% and left it alone then it would be $1,000 in 30 years.

But right now, I don't know of a guaranteed investment @ 3% long term, so those #s are higher than what you could really do given the current economy.

The interest not being much of a factor when I initially sought to sell it, I was still suprised that their offer to purchase my annuity was so far below the initial investment.

[bts]

If $62k is the sum of what you'll collect (though would have been more ~7 years ago since you have collected some since) then think of that as the ultimate value. Not an initial investment. That might help it make more sense. Like if you're due to get $1000 in a year, and 3% is the going rate then its only worth $970.87 right now. If you're due to get $1,000 in 10 years and 3% is the going rate, its now worth $744.09. If you're due to get $1,000 in 30 years, with 3% as the rate, its only worth $411.99 right now.

For the 30 year example, $411.99 is the investment. If you had it now - and invested it at 3% and left it alone then it would be $1,000 in 30 years.

But right now, I don't know of a guaranteed investment @ 3% long term, so those #s are higher than what you could really do given the current economy.

Ok, that makes sense!....thanks for breaking it down.....

I just spoke with a company which purchases structured settlements and I'm expecting to hear back from them shortly.

[SMinGA]

Try to get something in writing... Even if you don't take the offer, it might help in putting a value to this asset. For the trustee to take it, he/she would need to sell it the same sort of way to cash it out. Not like the trustee is going to pay you for it, and then sit on it for 30+ years to collect.

[bts]

Yeah I was thinking of getting two offers and copies of them to show the trustee. Then I'll exempt the annuity with the highest offer I get.

The one company I have spoken with thus far has informed that me that he has offers in the $5500 range, which seems about right based on what you've just told me and the offers I received 7/8 years ago. So, the $5500 is much more do-able in terms of exempting the annuity.