Selling Your Pension For Cash Lump Sum: Pros, Mostly Cons

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The only problem, from the buyer's perspective, is that veterans' pensions enjoy what Rossman calls "features that may be unique." By law, he says, a military pension cannot be assigned to a third party.

Inventive buyers, Rossman tells ABC News, have used a variety of ways to try to get around that prohibition. The buyer, for example, may require that the benefits be paid "into an account established in the veteran's name but controlled by the company." The company, which may also have demanded and been given durable power of attorney by the veteran, then can withdraw the funds—even if the pensioner later tries to stop the withdrawals.

Whether the pensioner is military or civilian, the buyer may require the seller, at his or her own expense, to take out a life insurance policy with the buyer as beneficiary, so that if the seller dies prematurely, the buyer still gets the value of the pension. The insurance cost further reduces the size of the lump the pensioner gets.

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