Annuity Transfer - What Are the Risks

Many people who know in the back of their minds that they got thepossibility to transform a monthly payment or annuity long termpayments into a big lump sum and by that to relieve sometemporarily financial problems, or need to buy a new car or a houseor help their children and so forth are tempted to exercise thisprocess into action.Although it is a very natural feeling and sometimes even a real lifeneed or deep inner quest for power and control, it is not in their bestfinancial interest to say the least.

It is no wonder that the U.S federal laws encourage long termpayments in both cases like Structured settlements and lotterywinnings. There are many good reasons for that and I'm going to spell them out as clear as I can.

- In some countries around the world it is legal to pay for lottery winning in one lump sum. Experience showsmany of these people lose most orall of their money in a few yearsTime, due to the following reasons:

- Ordinary people who get into their possession a very large sum of money don't really know how to manage their treasure or how to invest it wisely, they are not prepared for it and they areoverwhelmed with a delusion of over abundance of wealth, theybecome totally careless on how and on what they spend their money.

- Even if they invest their money, they go to high risk speculativeinvestments as they try to get high yields. Instead of going fora much solid and safer, "widows & orphans" type of investmentportfolio. Neither do they go for the golden middle way in betweenof a mixed portfolio. They don't use investments advisers orfinancial consultants.

- They become over generous with their family and friends, theybuy their children homes, cars or any other materialistic requests,they "lend " money to a friend in need...

- They listen to shrewd business people who talk them into investinginto all kinds of business adventures that seems to them veryprofitable but in a short while turn into total failures and the moneyis gone.

- All kind of addictive behaviors like betting horse races or going toplay the roulette in the casino are now intensified with the feelingof power and wealth, it might drive the person to gamble high sumsof money as if there is no tomorrow.

- Believe it or not but criminal elements might engage in puttingpressure to extort monies from the overnight rich poor guy.They might threaten to harm his family etc'

- Charity institutions start to call all day and night asking fordonations to a very noble causes, they even send some slickreps to convince him to donate money.

- His own children, some times his spouse becomes very greedyand exert emotional pressure to give them more and more money.In some cases the sudden riches literally ruined the families.

As I have shown you above, getting a large lump sum of moneymight be a risky thing, this is In addition to the fact that you areloosing a lot of money which was Tax free, that alone might bea difference of anywhere between 35% - 65% , add to it the profitsof the fund who bought the annuity from you and you are loosingbig time. It is not recommended for an injured or a disabled person,to transform the whole Structured Settlement long term paymentsinto one big lump sum or you might find yourself one day without themoney and facing high medical expenses and other bills you cannot afford.

MBA - International Trade & Finance - Heriot-Watt University. Bsc. Computers and Information Systems - Long Island University - C.W Post Campus. Married with two Children.

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