Structured Sales. Secured installment sales are now available.


The best way to sell your business or real property for an Assured stream of income is through a "structured sale".

There is almost no doubt you are here looking at this web entry wondering what in the world a "structured sale" annuity is. This brand new, secured method of selling your real estate, business or other qualified real property is one of the least known and poorly understood financial tools in the tax and investment community. What I'll try to do in this section as we build it out, is give you a greater understanding of the product, it's use and most importantly, how you can begin to take advantage of it in your own business or personal planning situation. 

What is a "structured sale" and why would you use one?

A structured sale, so named by the company that created the concept, Allstate Life Insurance Co. is a somewhat derivative product that combines the best of a structured settlement periodic payment annuity and the tax rules governing Installment sales. As you might know, installments have a long and established tax history and are used in many transactions when the seller of real property, typically a business or some real estate, wishes to defer their tax hit over a period of years, or "structure" the income. What this new "structured sale" annuity allows is to create an installment sale, and then fully fund the future payments, with interest, to be paid on a schedule designed by the seller to best meet their future plans.

Are you selling a Business or Personal piece of property?

Many individuals selling a businesses, professional practice or personal property would like to liquidate their investment in those assets, with out having to at the same time recognize a huge taxable gain in the year of the sale. For people who are so inclined, the structured sale annuity is a powerful tool. However, keep in mind this only works for the sale of Real Assets. In other words it is not a deferred compensation tool to be used on commissions, ordinary income, or any other type of revenue not associated with the sale of a long term asset.

What is an installment sale and how do you qualify for one if you are selling property?

While I don't provide tax advice, in general, for a sale to be considered an installment sale it must be a sale of a qualified property where you receive at least one payment after the tax year of the sale. Each installment payment you receive consists of the following components; non-taxable recovery of investment, taxable gain and interest income on the money held with the funding company.

What should you consider when using a structured sale annuity to fund your installment sale?

First, since an installment sale permits the seller to receive the payments from the buyer of the property in future tax years, it is obviously crucial to consider who that buyer is, and do they have the resources and track record to assure you that you will in fact receive your promised payments. Outside of using the new "structured sale" annuity, there is almost no way to reduce or minimize this risk short of buying a stand by letter of credit from a commercial lender which is a complex and costly transaction that the seller typically doesn't want or need to engage in just to secure their future payments.

This bring out one of the key benefits of using a structured sale annuity. By using this product through an authorized agent the sale can be structured so that the periodic payments will be funded with an annuity from a large, highly rated life insurer such as Allstate Life Insurance Company, with the assurance built into the transaction that the future payments will be paid By the Life Company, and not the buyer, thus upgrading the security of the transaction by a huge margin.

How do you go about setting up a Structured Sale of Real estate or business property?

This is a very new field and the level of professional competence is quite low across the life insurance and tax planning community. Very few annuity brokers have the necessary depth of knowledge in tax planning, business planning and estate planning to work with high level advisors on these sales, so be careful who you deal with. That said, the actual process of the sale and quotation process is quite simple compared to more complex transactions such at private annuities and 1031 real property exchanges.

1. You enter into an installment sale agreement under which a buyer promises to make periodic payments for a stated number of years, and then you have the funding life insurance company run a quotation for you illustrating the payment options you desire.

2. The buyer then assigns their obligation to make those periodic payments to an assignment company, which in the case of Allstate Life, is named NABCO assignments Ltd. and is a wholly owned subsidiary of Allstate Life.

3. The assignment company funds the payment obligation by purchasing an annuity from the life insurance company.

4. The life insurance company then begins making the payments to the seller as agreed to under the terms of the sale, and issues an agreement to pay on the performance of the assignment company.

It's that simple and the paperwork is exceptionally low compared to other means of deferral.

What are the benefits of a structured installment sale annuity?

First of all you get to defer the recognition of taxable gain until future year. Deferral is almost always preferable to immediate recognition of income and the huge tax hit that comes with it.

Second, you get a guaranteed rate of return from the life company. Just like with any other fixed annuity product you get a fixed, guaranteed payment schedule, at interest that is tax deferred as well, at what are usually very competitive yields.

Third, through the structured sale you eliminate concerns about the buyers ability to make the future payments that are so crucial to the seller. Allstate stands in place of the buyer and makes the payments directly to the seller with no middle man or trustee involved.

Finally, long term financial security and planning options. Just as you can in a court settlement annuity, by using a structured sales annuity you can do monthly, quarterly, annual, semi-annual payments, balloon lump sums, increasing income streams, etc. There are almost no limits to how you design the cash flow, it's up to the seller and their advisor to devise the best options.

Do you want to know more about "Structure Sales"?

Wahlstrom & Associates has spent the last year developing a particular emphasis in their annuity practice to assist financial professionals, tax lawyers, estate planners and CPA's in learning about this fantastic tool. We will be adding updates and fresh content almost every week on our blog page here on the site, so click on the Structured Sales Blog, to stay up to date. 

If you are a private investor or seller of real property and are interested in learning whether or not this product is right for you, please go to my contact page here on the site and email my with your questions and requests and we will be happy to assist you. Our practice is national and we have affiliated experts in almost every state in the US, so we can be sure to at least start you on the right path to determine if this is for you.