As landowners look to transition out of property ownership, whether due to retirement, market timing, or life changes, structured installment sales provide a flexible and tax-efficient alternative to traditional lump sum sales. 

In a recent episode of the National Land Podcast, Chad Ettmueller, Senior Vice President at JCR Settlements, explained the unique benefits of this strategy and why it’s gaining traction.

What is a Structured Installment Sale?

A structured installment sale allows a seller to receive proceeds from a property sale in the form of customized, future payments through a specially designed annuity. This strategy not only provides predictable income but also allows sellers to defer capital gains taxes by avoiding constructive receipt of the sale proceeds at closing.

Instead, funds are directly transferred to a life insurance company that issues the annuity, aligning with IRS Section 453 guidelines.

Benefits of Structured Installment Sales

The primary benefit of a structured installment sale is that it allows sellers to defer capital gains taxes until the year they begin receiving payments. This approach turns a potentially large tax burden into manageable future liabilities. Payment schedules can also be tailored to fit the seller’s needs. These payments could serve as monthly income for retirees, future college tuition for conscientious parents, or even help finance healthcare expenses for aging sellers.

Sellers can choose between fixed annuities for stable, predictable returns or indexed annuities tied to major indices like the S&P 500, offering greater growth potential than a traditional sale. These guaranteed payments can also be passed along to beneficiaries in order to build generational wealth for heirs.

Ideal Scenarios for Use

This strategy is particularly attractive for landowners nearing or in retirement, those facing significant capital gains exposure, or anyone looking to protect their financial future through predictable income. It also works well as a companion strategy to a partial 1031 exchange, offering more flexibility when inventory for reinvestment is limited.

Implementation and Considerations

To utilize a structured installment sale, the seller and buyer must sign two key documents at closing: an addendum to the purchase agreement outlining the payment plan, and an assignment document transferring payment obligations to the annuity provider. It’s crucial to plan this strategy well in advance, ideally before listing, to ensure a smooth closing.

Structured installment sales present a compelling option for sellers who value financial stability, tax planning, and flexibility. With no setup or management fees and a 55-year track record of reliability, this approach provides a powerful tool for real estate professionals and landowners alike. For those seeking to maximize their return on a land sale while ensuring long-term peace of mind, it’s a solution worth serious consideration.

If you’ve got questions about whether a structured installment sale is right for you, get in touch with your local Land Professional today!