What if the buyer defaults?
After closing, the buyer has nothing left to default on. In a structured installment sale the buyer pays the full price in cash at closing, and an assignment company owes your payments, funded by a fixed annuity from a highly rated life insurer. If the buyer later goes broke, your schedule does not change. A default before closing just means the deal did not close.
Buyer cash → Assignment Co. → fixed annuity → You, on schedule
Hans Goldstein structures installment sales for sellers and works alongside their CPAs. Email hans@goldsteinco.net or call 213-340-2018.
Why doesn't a buyer default reach my payments?
Because the buyer is out of the deal at closing. Here is the sequence:
- Before closing, you and the buyer agree in the purchase agreement or an addendum that part of the price is paid in installments.
- At closing, the buyer pays that part in cash to an assignment company. The assignment company takes over (assumes) the buyer's obligation to make the payments.
- The assignment company buys a fixed annuity from a highly rated life insurer (A or better by A.M. Best or equivalent) to fund the payments.
- You are paid on the schedule set in the contract.
The buyer's cost is the same as any all-cash purchase. After escrow closes, the buyer owes you nothing on the structured portion. If the buyer files bankruptcy, divorces, dies or loses the property, none of it is your problem on that portion.
How is that different from seller financing?
With seller financing, the buyer owes you directly on a note. Their default is your loss.
What is the tax bill on your sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
See why not just take payments from the buyer for the full list.
What risk is left?
Credit risk moves; it does not disappear. Your payments now depend on the claims-paying ability of the assignment company and the insurer behind it. You are an unsecured general creditor of the assignment company. The seller never owns the annuity.
That is a different kind of risk than a buyer. A life insurer is regulated by state insurance departments, is subject to reserve requirements and examination, and its financial strength is rated by outside agencies. Before you sign, check the exact names of both the assignment company and the insurer in the documents, and check the insurer's current A.M. Best rating. Ratings are opinions and can change.
Also watch for parts of the deal that are not structured:
- Earnouts and holdbacks in a business sale are still the buyer's promises.
- A separate seller note for part of the price still carries buyer risk.
- Indemnity and warranty claims can still arise between you and the buyer under the purchase agreement.
Only the structured portion is moved to the assignment company.
What if the buyer defaults before closing?
Then there is no structured sale. Nothing is funded until the buyer pays at closing. If the buyer walks or cannot get financing, the deal fails like any other failed escrow: the purchase agreement governs any deposit, and you relist or find a new buyer. The structure can be written into the next buyer's contract. There is no annuity to unwind and no payment stream in place.
What does it look like with real numbers?
Illustrative: you sell a business for $1,500,000. The buyer pays it all at closing: $500,000 to you and $1,000,000 to the assignment company for 10 years of payments. In year four the buyer's business fails and the buyer files bankruptcy. Your $1,000,000 structure keeps paying on schedule. Under seller financing with the same $1,000,000 note, you would be a creditor in that bankruptcy.
Frequently asked
Q: Can the buyer stop the payments after closing? A: No. The buyer is released at closing. The assignment company owes the payments, and the schedule is fixed in the contract.
Q: Do I hold a lien on the property in a structured sale? A: No. The buyer owns the property free of any claim from you on the structured portion. Your claim is against the assignment company, as an unsecured general creditor.
Q: What if the assignment company or insurer has trouble? A: That is the remaining risk. The payments depend on the claims-paying ability of the assignment company and the insurer behind it, which is why you check both names and the insurer's rating before signing.
Q: Does the buyer pay more for this protection? A: No. The buyer pays the same price as an all-cash purchase. The commission is built into the annuity pricing.
What should you read or run next?
- Is a structured installment sale safe?
- Which insurance companies fund structured installment sales?
- Can the buyer refuse a structured sale?
- Why not just take payments from the buyer?
- How the deal works
- Seller financing calculator
- All structured installment sale questions
Who wrote this?
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Send me the sale price and roughly what you paid. Within one business day I’ll come back with the number you’re actually looking at and whether a structured installment sale can push it down. If it can’t, I’ll say that just as plainly.
You'll also get the plain-English Seller's Guide to §453: the math, the alternatives, and the cases where it does not work.
📞 Hans Goldstein · 213-340-2018 · CA Insurance License #4273294 · Independent §453 specialist · Goldstein & Co. LLC
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-340-2018