Frequently Asked Questions – How do Secondary Market Annuities Work?
What are Secondary Market Annuities?
Secondary Market Annuities also known as Structured Settlement Investments, are fixed payment streams that are transferred from preexisting fixed annuities and paid by top rated US Insurance Carriers. They are purchased at substantial discounts from selling annuitants looking to achieve cash up front.
The source of Secondary Market Annuities or Structured Settlement Investments are court awarded streams of payments, paid by an Insurance Carrier, to a plaintiff who won a personal injury, wrongful death, or workers compensation lawsuit. The original plaintiff then sells these scheduled payments for a lump sum to a purchaser. By court order, the payments are reassigned to a new purchaser.
Typical payors are MetLife, Prudential, NY Life, John Hancock, Transamerica, and a host of other major insurance carriers as well as many Fortune 500 companies.
The yields can be many times higher than other products of comparable safety because they are purchased at significant discounts.
Yields on Secondary Market Annuities and Structured Settlement Investments typically range from 4% – 8% .
Why Do Secondary Market Annuities Come at Above Market Rates of Return?
Secondary Market Annuities or Structured Settlement Investments offer exceptional yield because they are purchased and reassigned at significant discounts (remember, the original plaintiff chooses to sell their stream of payments at a discount for a lump sum payment).
How Are Secondary Market Annuity Payments transferred?
Structured Settlements are methods of payment used to settle a civil lawsuit. Typically a plaintiff in a personal injury or workers compensation case will settle his or her claim with an insurance carrier in exchange for future sums of money over a period of years.
In July 2002, the United States Congress passed 26 USC § 5891.
In sum, Section 5891 allows recipients of structured settlements to sell and assign part, or all, of the future payment stream in exchange for a lump sum if the entity acquiring the payment stream procures a court order in accordance with a qualified state statute.
Secondary Market Annuities are court ordered reassignments of Structured Settlement Annuities.
The Purchase of a Structured Settlement Investment or Secondary Market Annuity.
Altium Group, LLC acquires the payment rights to structured settlement payments from an existing annuitant and transfers the payment rights to you, the buyer through a court ordered transfer process.
Your name and assignee information will be stated in the executed court order, which is generally obtained in the state where the existing plaintiff resides.
The court will direct the Insurance Company to update the annuity and begin issuing the underlying payments to you.
As the buyer, you may change the address for payment or bank account information designation at any time by informing the Insurance Company directly.
Are Structured Settlement Investments Risky?
Like other financial products, Altium SSI’s and SMA’s are not risk-free. As a buyer, you must determine whether an SSI or SMA meets your risk tolerance and purchase objectives, and are suitable investments for you. You must fully understand what you are purchasing, and take the time to learn about SSI’s or SMA’s and their features, benefits and risks, and conduct your own due diligence.
The following are risks associated with structured settlement investments and secondary market annuities:
- The security of structured settlement investments and secondary market annuities are directly related to the financial health of the Insurance Company ordered to make the payments and its ability to pay claims as well as the terms of the court order that accompanies each transaction.
- Structured settlement investments, SSI’s, or Secondary Market Annuities, SMA’s are not deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other federal government agency. They may be partially guaranteed by State Guaranty Associations but Altium Group, LLC makes no representations or warranties in this regard.
- Structured settlement investments and Secondary market annuities are subject to interest rate risk. Market interest rates may rise or fall while the rates of return on structured settlement investments are locked in. Fixed income purchases with longer terms to maturity are usually more sensitive to changes in interest rates. One method of hedging interest rate risk during a volatile rate period is to build an SSI or SMA Cash Flow ladder by buying a series of structured settlement investments over an extended period of time, thereby averaging the rates of return.
- Structured settlement investments are monetized in U.S. Dollars. Foreign buyers may be subject to currency exchange risk.
- Structured settlement investments and Secondary market
annuities typically must be held to term and therefore are not liquid purchases.
Who Buys Structured Settlement Investments or Secondary Market Annuities?
Purchasers of SSI’s and SMA’s are usually conservative investors who are no longer tolerant of the low interest rates on their CDs and corporate and government bonds, but who want a similar level of safety and credit quality..
The products have become very popular among purchasers seeking above average returns with the similar safety to principal and interest normally associated with insurance products.
SSI’s and SMA’s are used by purchasers seeking additional solutions to retirement planning, college funding, estate planning, and/or daily living cash requirement needs.
What is the Typical Term and Purchase Amount on Structured Settlement Investments and Secondary Market Annuities?
The purchase price of structured settlement investments can range from as low as $15,000 to as high as in the millions.
Terms can range from 1 to 35 years and cash-flow can take the form of annual payments, monthly payments, quarterly payments and/or one lump sum.
How is the Rate of Return Determined?
The yield or rates for SSI’s and SMA’s are determined by the current market at the time of purchase.
The duration of the payout and the Insurance Company’s financial rating play a key role in determining the yield to the purchaser.
How Do I Buy Structured Settlement Investments or Secondary Market Annuities?
To buy structured settlement investments or secondary market annuities, you must:
- Provide all relevant information that is required for the court reassignment. This includes but is not limited to: Name, Address, Phone Number, Date of Birth, Social Security or Tax ID Number
- Provide a $5,000 deposit at the time the existing original plaintiff executes a sale and assignment agreement with Altium Group, LLC.
- Pay the balance of the purchase price upon court transfer order naming you, the buyer, as the new payee.
Click here to review our current structured settlement investment or secondary market annuity offers and begin the purchase process.
Can Buyers Sell Their Structured Settlement Investments or Secondary Market Annuities?
Altium can position your Structured Settlement Investments and Secondary Market Annuities to be sellable.
What are the Income Tax Considerations For Me as a Buyer?
Altium Group, LLC expresses no opinion on buyers’ tax obligations and recommends that you consult your tax advisor accordingly.
In addition, Altium does not provide any legal, accounting, financial or other advice or guidance of any kind to the buyer of a structured settlement investment or secondary market annuity, and does not give any opinion on the creditworthiness of any Insurance Carrier or obligor of the structured settlement investment or secondary market annuity payment.
Who Supplies the Guarantee?
The guarantee of the payments of a structured settlement investment or secondary market annuity are typically provided directly from well-capitalized Insurance Carriers with AM Best credit ratings of excellent (A or better).
Altium Group does not give any opinion nor represent or warrant the creditworthiness of any insurance company providing such payment guaranty.
Can I Buy a Structured Settlement Investment or Secondary Market Annuity in an IRA or ROTH IRA?
Yes, both structured settlement investments and secondary market annuities are eligible for self-directed IRA’s and self-directed Roth IRA’s.
Can I Buy This in My 401(k)?
Yes. Structured settlement investments and Secondary market annuities are eligible for a 401k as long as the employers’ plan includes a self-directed platform option.
As a Small Business Owner, Can I purchase this in My Profit Sharing Plan?
Yes, structured settlement investments and secondary market annuities can be purchased in a “profit sharing plan” as long as the plan is trustee directed.
Can I Do a 1035 Tax-Free Exchange From My Deferred Annuities, Fixed Annuities, or Life Insurance?
No. Structured Settlement Investments and Secondary Market Annuities are not eligible for a 1035 tax free exchange.
What Happens To My Money When I Die?
Structured Settlement Investments and SMA’s are typically guaranteed, period certain obligations. If the assignee (purchaser) dies, payments will continue to the estate of the assignee (purchaser).
Are there any additional fees above the annuities purchase price?
Do I Have to Appear in Court for Payments To Be Transferred To Me?
What Documentation Will I Receive?
Shortly after the approval of the transfer, Altium Group, LLC will provide the purchaser an Investor Closing Book.