US Treasury Funded Structured Settlements...The Other Qualified Funding Asset

by John Darer CLU ChFC MSSC RSP CLTC

Did you know that a structured settlement need not only be funded with an annuity? The Internal Revenue Code makes a provision for more than one type of qualified funding asset, to wit:

IRC 130 (d) Qualified funding asset

For purposes of this section, the term “qualified funding asset” means any annuity contract issued by a company licensed to do business as an insurance company under the laws of any State, or any obligation of the United States, if—

(1) such annuity contract or obligation is used by the assignee to fund periodic payments under any qualified assignment,

(2) the periods of the payments under the annuity contract or obligation are reasonably related to the periodic payments under the qualified assignment, and the amount of any such payment under the contract or obligation does not exceed the periodic payment to which it relates,

(3) such annuity contract or obligation is designated by the taxpayer (in such manner as the Secretary shall by regulations prescribe) as being taken into account under this section with respect to such qualified assignment, and

(4) such annuity contract or obligation is purchased by the taxpayer not more than 60 days before the date of the qualified assignment and not later than 60 days after the date of such assignment.

For the most conservative, a structured settlement funded with United States Treasury obligations offers an attractive alternative, particularly when part of a structured settlement trust funded with a combination of TIPS (Treasury Inflation Protection Securities) and STRIPS

What about the threat of inflation?  Here is a sampling of news reports in the last 9 months:

" No Near Term Inflation Threat" Charles Plosser, Philadelphia Federal Reserve Bank  11/12/2009. He also said  "While inflation is not a threat for now, the United States will have to look very hard at reversing course on rates as the economy strengthens"

"Inflation will likely rise 6% by the end of 2011 and to 7.5% by mid-2012"  economist Alan Beaulieu of Institute for Trend Research. October 2009

“I am 100 percent sure that the U.S. will go into hyperinflation,” Investor Marc Faber said to Bloomberg May 27, 2009. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Treasury Funded Structured Settlements

Think about it!