Valuation of Annuities 510-05-70-45-15

(Revised 11/1/06 ML #3047)

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  1. The value of a countable annuity is:

  1. If the annuity may be surrendered to its issuing entity for a refund or payment of a specified amount or provides an available lump-sum settlement option, an amount equal to the total available proceeds from that refund, surrender, or settlement; and

  2. For any other annuity, an amount equal to either:

  1. Its value as a contractual right to receive money payments (value of outstanding payments due); or

  2. Following a good faith effort to sell the annuity, an amount equal to the highest amount offered by a buyer ready and able to complete the purchase of the annuity or the right to receive a stream of income consisting of the payments yet to come due under the terms of the annuity. (An annuity in which a payment option was selected before August 1, 2005, may indicate that it is non-assignable and irrevocable, however, the income stream from the annuity may still be sold. An annuity in which a payment option is selected on or after August 1, 2005, is considered assignable by state law unless the annuity meets all of the requirements of (05-70-45-25(2)(c), or 05-70-45-30(3)(c). This state law provision applies even if the annuity indicates that it is non-assignable.)

  1. The owner of an annuity may demonstrate a good faith effort to sell the annuity or the right to receive the payments from the annuity by making an offer to sell to the regular market for such property.

  1. "Receivables" are the legal right to be paid money due under the terms of a contract. The income stream produced by an annuity is such a receivable. Any person may purchase the right to this income stream.

  2. A "factor" is someone who buys receivables at a discount.

  3. The "factors' market" is one place that an annuity's income stream may be sold. Companies and individuals nationwide will pay a lump sum in return for the right to receive the remaining annuity payments. This income stream may be sold regardless of whether the annuity is irrevocable or not assignable. Several offers must be sought in order to establish the fair market value of the annuity.

  1. A good faith effort to sell must include an honest effort to sell the annuity that is reasonably calculated to induce a willing buyer to believe the annuity or income stream offered for sale is actually for sale. An offer to sell an annuity or its payments includes making an offer to potential purchasers. The offer must include, at a minimum:

  1. That the annuity owner is willing to take all necessary steps to sell the annuity or relinquish the payments under it in exchange for a lump sum payment including but not limited to providing an irrevocable power of attorney, change of beneficiary, payee, or address;

  2. The amount of payments;

  3. A description of the term of the payments (how long they will last); and

  4. The name, address, and telephone number of a person who will answer inquiries and receive offers.

  1. An annuity may not be excluded from consideration as an asset on the basis that it is not saleable without working an undue hardship.