In a traditional installment sale of a qualified business or property, the Seller agrees to take a series of periodic payments over a fixed term from the Buyer. These types of transactions are defined by Federal tax regulations and provide considerable tax advantage as long as specific conditions are met. Now, an annuity policy can be used to fund the installment sale and transfer the obligation to an Assignment Company to make payments on behalf of the Buyer. This product has great appeal for a Seller, particularly if the seller may have concerns about the Buyer's creditworthiness over time. This product provides sellers with peace of mind and ensures a predictable stream of income from the sale.
An Assignment Company funds its payment obligation by buying an annuity from a highly-rated Life Insurance Company and becomes the policy owner. The process is easy. The purchase transaction documentation outlining the terms of the sale is prepared as usual, along with the simple preparation of the structure documents. The Buyer pays the Assignment Company a single sum to purchase the annuity and the Assignment Company starts making the payments as directed. As in a traditional structured settlement, payments cannot be altered, pledged or used as security.
Please contact an EPS Consultant for more details.