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Secondary Market
FIXED TERM ANNUITY
SECONDARY MARKET
BUYER'S GUIDE

Featuring Higher Yield Returns • AAA to A Ratings • Choice of Terms

Secondary Market Fixed Term Annuities offer a simple and affordable way for buyers to meet goals such as saving for retirement or a child's education or improving overall returns on a balanced portfolio.

Lance Insurance and Marketing Services
602-795-6270 602-795-6270 (888-939-0135 888-939-0135)

Define of Terms

  • All amounts are expressed in U.S. Dollars
  • Credit Rating refers to the credit rating of the insurance company paying the IN-FORCE Fixed Term Annuity as determined by Standard & Poor's (S&P).
  • Existing Annuitant refers to a person who sells the payment rights to an annuity to us in return for a present value, lump sum cash payment. This person is usually a personal injury victim who was awarded annuity payment rights as part of a structured settlement of his or her injury claim. This person may also be a lottery prizewinner of the recipient of another kind of annuity; e.g., lottery winner.
  • Secondary Market Annuity is the name given to these types of investments: payments paid over a fixed term by an insurance company arising from a structured settlement, lottery prize-winning payment or other similar type of annuity.
  • Present Value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.
  • Secondary Market refers to the organized trading of Securities (stocks, bonds) or annuities through various exchanges and over-the-counter markets where these types of investments are bought and "re-sold.” This reselling has created a secondary market for these kinds of assets.
  • Structured Settlement is a financial or insurance arrangement in which an individual accepts payments over a period of years to resolve a legal claim that often involves a personal injury. This type of payment plan is often in the form of a structured settlement annuity.
  • Term refers to the length of time before all principal and interest are paid.
  • We, us, and Lance Insurance & Marketing Services refers to Lance Insurance, our affiliates, partners, brokers or agents.
  • You and your, my, mine and me refer to the Buyer of an Secondary Market Annuity.

What is a Secondary Market Annuity?

When you purchase a Secondary Market Fixed Term Annuity, you, the Buyer, receive the rights to fixed payments in exchange for a lump sum payment to an individual who is the original Existing Annuitant. By purchasing an individual's right to receive payments, you receiver high yield returns while the Existing Annuitant enjoys the benefits of having cash now.

What are the benefits of purchasing a Secondary Market Fixed Term Annuity?

A Secondary Market Fixed Term Annuity can provide above average returns for the fixed income portion of a balanced portfolio. Since they provide you a payment stream over a fixed period for time at a fixed rate of return, this purchase is generally considered to be a solid vehicle for conservative saving. Insurance companies invest the funds primarily in government securities and high-grade corporate bonds which provide fixed interest rates. Lance Insurance only offers Secondary Market Annuities from insurance companies with among the highest Standard & Poor's credit ratings: A or higher making them one of the safer forms of fixed term purchases available today.

Where do these annuities originate?

Individuals involved in legal calms for personal injury often accept a structured settlement in which they receive regular, fixed payments over several years and / or lump sums at stipulated times from an annuity. Lottery prizewinners and other individuals may also have the right to receive regular, fixed payments over a period of time. As circumstances change, these Individuals, called Existing Annuitants, sometimes need to convert a portion of their fixed income into cash now to meet personal needs or settle an estate. They decide to assign their right to their future annuity payment at a discount. Lance Insurance & Marketing Services, in turn, offers the payments rights to these annuities, called Secondary Market Annuities to Buyers like you. Typically these payments are made regardless of whether or not the Existing Annuitant or the Buyer is alive, meaning these payments are not contingent on an individual's life. In circumstances where life contingent payment are being offered, and unless otherwise indicated, there shall be in place a prepaid life insurance policy that will pay to the Buyer their lump sum investment at the rate of returned contracted for, less any payments received, until the time of death.

Who makes the payments to me?

Secondary Market Annuity payments may be paid directly to you by a U.S. based insurance company or if the payments are split between parties, a third party servicing company. In all situations the U.S. based insurance company is backing the payments and they have a credit rating that is A to AAA rated by Standard & Poor's.

How is the rate of return determined?

The rate of return for each Secondary Market Annuity is determined by the current market at the time which includes what a Buyer is prepared to accept as a return on his or her purchase, the number of years for the payout and the insurance company's financial rating. The rate of return for each Secondary Market Annuity is represented as an "effective rate,” meaning it is compounded monthly to generate an annual effective rate based on a 365-day year. This is standard practice in the annuity industry. Interest rates are recorded an accuracy of two decimal places, for example 7.00%

Why are rates of return on Secondary Market annuities higher than those offered on annuities purchased directly from insurance companies today?

The rate of return on a Secondary Market Annuity is typically higher (3 to 5 times) than the rate available on annuities newly purchased directly from insurance companies today because a Secondary Market annuity has been "previously owned” with attributes such as payment term and payment amounts that cannot be changed. Additionally, a Secondary Market Annuity is transferred for the present value of future income payments. The present value is determined by what the Existing Annuitant, or the Seller, will accept and what a Buyer will pay.

Why do I need Lance Insurance & Marketing Services to arrange the purchase of a Secondary Market Annuity?

The purchase and sale of structured settlement annuity payments is governed by state law and must be approved by a court which issues an order redirecting payments to you, the Buyer. A judge will review the prosed transfer to determine if it in the best interests of the Existing Annuitant and then issue the court order.

Do I have to appear in court for payments to be transferred to me by court order?

No, the Buyer does have to appear in court. Lance Insurance & Marketing Services will arrange for the legal expertise to transfer the payment rights. We arrange a court order in your name at no additional cost to you. All of the court cost, transfers fees, lien search fees and legal cost are paid by us. Also we acquire structured settlement annuities through a number of channels, including an extensive broker network. Our experience and due diligence insure the quality of the Secondary Market Annuities that we offer for sale to you.

What is the typical Secondary Market Annuity term and purchase amount?

The present value of a Secondary Market annuity is generally between $50,000 and $200,000 but can by higher or lower. Terms range between 5 and 35 years but typically are 7 to 20 years.

Exclusivity?

  • Secondary Market fixed term annuities are not widely known to the generally public nor are they widely available to individual Buyers. As such, they provide a unique opportunity for Buyers to purchase safe, fixed returns at superior rates.

What is the legal structure of the purchase?

  • Lance Insurance & Marketing Services arranges for the purchase from an Existing Annuitant and transfers the payment rights to you, the Buyer, through a court transfer process. This process is available in all states through a state-sanctioned transfer statute. Your name, IRA name, intermediate transferor or nominee or payment assignment trust name will be stated in the transfer court order, which is generally obtained in the state where the Existing Annuitant resides. The court will direct the insurance company that issued the Fixed Term Annuity to pay to the designed payee all of the annuity payments when they are due and as further assigned. The court order assumes that the Existing Annuitant has relinquished title to his or her payment rights as well as securely effecting the reassignment. Payments are made whether the Existing Annuitant lives or dies during the period that the payments are due. Upon the death of the Buyer, the payments continue to the joint owner(s) or the estate of the Buyer, as designated. Payments are typically made by check mailed to your designated address or by direct deposit into your account. The insurance company usually determines the method of payment. As the Buyer, you may change the address for payment of bank account designation at any time by informing the insurance company directly.

What documentation will I receive at closing?

  • Receivable Purchase Agreement
  • Disclosure Statement
  • Sale and Assignment Agreement
  • Authorization Letter
  • Change of Beneficiary Designation
  • Existing Annuitant's Identification
  • Duplicate Annuity Policy or Benefits Letter or Issuer Acknowledgement Letter
  • Certificate of Marital Status/Spousal Consent, Divorce Decree, or Property Settlement Agreement
  • Court Order permitting the assignment of the annuity payments and naming Buyer as new Payee
  • Statement of Independent Professional Advice or Waiver, where applicable
  • Satisfactory Results of Uniform Commercial Code (UCC) (within 30 days of closing), Judgments (within 90 days of closing), Lien (within 90 days of closing), Bankruptcy (within 30 days of closing), and Evidence of Lien Resolution, as applicable
  • Closing Book (containing documents such as those listed above)

What are the risks?

Like other financial products, Secondary Market Annuities are not risk-free. As a Buyer, you must determine whether a Secondary Market Annuity meets your risk tolerance and purchase objectives. The following are risks associated with a Secondary Market Annuity (SMA):

  • The security of the SMA is directly related to the financial health of the insurance company that issued the annuity and its ability to pay claims as well as the terms of the court order that accompanies each transaction.
  • SMA's are not deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other federal government agency.
  • SMA's are monetized in U.S. Dollars. Foreign Buyers may be subject to currency exchange risk.
  • Reasons Why You Should Not Buy A Secondary Market Annuity (SMA)

    1. No Liquidity - Once you purchase a SMA, you are bound by the terms and conditions of the court order. Once the judge assigns you the payments, that's what you are going to get. You can't withdraw cash if you need to, so make sure you have other assets for liquidity.
    2. Interest Rates Go Up - If interest rates go up, and that is a BIG IF, there is the potential that if you had waited, you might have been able to get higher yields down the road.
    3. You don't play it safe with your money - If you like the dramatic up's and down's of the stock market, the volatility of commodities or futures markets, or if you are a risk taker, this is not going to be a good fit for you. Call your broker immediately and tell him you thought about playing it safe for once, but realized it just isn't in you.
    4. You can't find a SMA that meets your needs - Like snowflakes, each SMA is different. The payments, the initial investment, and the terms for each SMA are unique and no two are alike. You may have to ladder several SMA's to achieve your financial goals. Please share with us you goals and objectives, so we are able to put together a plan that completely satisfies your needs.
    5. There is a risk of the judges order getting vacated. This is highly unlikely, and you can purchase insurance to prevent it at a cost. Please do some research before you purchase someone else's structured settlement. If this were to happen to you, and you didn't purchase the insurance against such an occurrence,  there is a chance you would not receive all of the payments you purchased.
    6. What the SEC says about SMA's
    7. SEC Investors Bulletin

What information will you need as a Buyer?

Customer Identification Program for Buyer Accounts

To comply with all federal laws and regulations and to help fight the funding of terrorism and money laundering activities.

Individual Buyers

  • Name
  • Date of birth
  • Address
  • Driver's license
  • Citizenship (If dual citizen, all citizenships are required.)
  • U.S. Citizen: Taxpayer ID (Social Security Number)
  • Non-U.S. Citizen: U.S. taxpayer identification number, passport number and country of issuance, alien identification card number or government-issued identification showing nationality, residence and your photograph.

Corporations, Partnerships, Trusts or Other Legal Entities

  • Name of corporation or entity ● Address ● Name of principal officer or trustee
  • Employer Identification Number (EIN) ● Principal place of business
  • Articles of Incorporation, Partnership or Trust Agreement

Information for Foreign Buyers

Nothing in this document shall be considered a solicitation to buy or an offer to sell an In-Force Term Annuity, or any other product or service, to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful. To be eligible to buy a Secondary Market Annuity, a foreign Buyer must have a U.S. address, U.S. Tax ID, and U.S. bank account.

How do I become a Buyer?

To become a Buyer, you must:

  1. Execute a Receivable Purchase Agreement (RPA). The RPA sets out the terms of the relationship between you, the Buyer, and Lance Insurance and Marketing Services and the transaction process.
  2. Provide the information in the Customer Identification Program outlined above.
  3. Fund and close transactions in accordance with the terms of the RPA.

How do I pay for a Secondary Market Annuity?

Individuals:

Individuals remit payment for a Secondary Market Annuity in two stages:

  1. A 5% deposit at the time the Existing Annuitant executes a Sale and Assignment Agreement with Lance Insurance & Marketing Services.
  2. The balance of the purchase price upon receipt of the court transfer order naming you, the Buyer, as the new Payee. All funds are held in a segregated account until closing. The closing of each SMA transaction will occur in accordance with the Receivable Purchase Agreement and only after all conditions precedent have been met, including but not limited to the court order that directs the insurance company to pay the annuity payments to you, the Buyer, as and when due.

Institutions:

Institutions remit payment for In-Force Fixed Term Annuities at closing by paying the Existing Annuitant directly in accordance with the indicated instructions.

Can Buyers sell their In-Force Fixed Term Annuity?

Once you purchase a Secondary Market Annuity (SMA), you must hold it to the completion of its term. SMA's are generally not liquid or marketable. The transfer court order states that there are no further assignment rights.

How are fees, expenses and sales commissions paid?

The Buyer is not charged any additional fees or expenses when acquiring a Secondary Market Annuityy. Lance Insurance & Marketing Services earns a fee based on the net difference between the price at which it buys annuities from Existing Annuitants and the price at which it sells them to Buyers.

Sales Commission

The broker of record generally receives a sales commission upon the closing of each Secondary Market Annuity. The amount of commission is negotiated between the broker and Lance Insurance & Marketing Services. The price you pay for each Secondary Market Annuity and the agreed upon rate of return constitute the net price and actual rate of return you will earn. The sales commission is an extra expense paid by Lance Insurance & Marketing Services.

What are the income tax considerations for me as a Buyer?

The tax a Buyer pays on a Secondary Market Annuity depends on the Buyer's jurisdiction of citizenship and jurisdiction of residency, as well as U.S. tax laws. Lance Insurance & Marketing Services expresses no opinion on Buyer's tax obligations and recommends that you consult your tax advisor according.

For More Information Contact:
Lance Insurance & Marketing Services, LLC
3033 N Central Ave, Suite 435
Phoenix, AZ 85012
888-939-0135 or 602-795-6270
Or visit us on the web at:
www.LanceMarketing.com
www.AskMrAnnuity.com
888-939-0135 602-795-6270