There comes a time in our lives when we are in urgent need of a huge sum of money. Such needs arise when we are faced by financial crisis. Such crises include large debts and family emergencies. The need for large amounts of money may also stem from the desire to start a business or build your own house.

During these times, we worry about where to get such a large sum of money. First of all, we have to reflect and consider what resources are available to us. The first resource people consider is the savings put away in the bank. If our savings come up short, we then resort to selling some of our possessions, such as furniture, jewelry and other valuables. Aside from material things, we can also sell annuity payments.

An annuity is a form of a payment which is given at a specific date at certain time intervals. It can be given weekly, monthly, quarterly or annually. Immediate annuity payments can result from a lot of things.

Prizes in lottery and game shows are not given immediately in whole but rather are given at intervals. Another scenario where money is not given in bulk is from cashing in your share in insurance companies or getting hold of your inheritance. But if you would rather receive a lump sum over future payments, you have the option to sell annuity payments to companies that specialize in buying them.

The Whole Amount of Future Payments vs. a Discounted Lump Sum

The concept of selling such payments is to get hold of the needed money immediately. The disadvantage to this is that companies that buy annuity payments would cut a certain percentage on the whole sum that you are supposed to receive.

However, you do benefit from getting your money immediately and would not suffer the crippling inflexibility of a payment schedule. When you sell annuity payments, the money you receive can then save you from any pending debts or help put your plans of starting a business into action.

Before you sell annuity payments, seek the advice of legal experts in order to avoid being penniless in the end. It is also your responsibility to thoroughly scrutinize the companies interested in buying annuity payments from you to avoid agreeing to any deal that does not give you the best value.

Then there’s the tax-deferred annuity. Here you put away money with the hope of having it available to help fund your retirement or some need in the distant future. Yet, if you want to get out of it completely or remove a lot of money early on, you could face steep surrender charges.

So, how can you get your hands on your cash? Sell annuity payments! Annuity owners can use the secondary market to create liquidity from an asset that usually isn’t considered as liquid as, let’s say, a money market fund.

Caution: Not All Annuities Qualify

Just because you own an annuity doesn’t mean you can always sell annuity payments for cash to help you save for the future, invest in a new company or spend it on your kids.

Annuities that are in a tax-qualified retirement plan are ineligible; so, too, are life-only immediate annuities, since the payments are based solely on your life expectancy and are, therefore, not guaranteed.

Before selling annuity payments on the secondary market, take these four cautionary steps:

1.    Contact the company that sold you the annuity. As the industry continues to add more options, you might discover that your annuity has a payout feature you never knew about.

2.    Contact your financial advisory or insurance agent. He or she should be able to explain your options and help you get the best offer on the secondary market.

3.    Think about how much cash you need. You might only have to sell off a portion of your annuity. Then you could let the balance grow tax-deferred or even delay the payments.

4.    Find out how much you will owe in income taxes if you sell annuity payments. Don’t wait until you get the check in hand. By then, it’s too late, and you might end up sending a big chunk of what you just received to the IRS.