by John Darer® CLU ChFC MSSC RSP CLTC
Do you really understand the leverage of a rated age? A rated age will be issued if the opinion of the structured settlement annuity issuer is that the plaintiff/annuitant has a shorter than normal life expectancy. The rated age is the age used to price the structured settlement annuity, or structured judgement annuity, as opposed to the actual age.
On a recent case, a matter involving a 5 year old child with severe medical impairments, the results of our annuity issuer survey were all across the board. Yet one annuity issuer came up with a rated age of 63 (a +58 year rate up!). Wow! What this meant is that it was possible to fund every aspect of the plaintiff's life care plan , without question, for just over $3million with an AM Best rated A++ (Superior) rated structured settlement annuity issuer. Under the priced scenario if the plaintiff lived to normal life expectancy the payout would be over $80million.
This is where high rated age structured settlements hold an advantage over other vehicles. Moreover payments from structured settlements are income tax-free pursuant to Sections 104(a)1 or Section 104(a)(2) and 130(c) of the Internal Revenue Code. A structured settlement offers contractual certainty as opposed to hypothetical investment possibility. A structured settlement blended with a Settlement Preservation Trust or Special Needs Trust (Supplemental Needs Trust in New York state),in tandem, may offer a plaintiff a measure of liquidity, contractual guarantees, upside potential along with downside protection.