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February 02, 2010

Structured Settlement Liquidity | Can You Sell Structured Settlement?

by Structured Settlement Watchdog®

To highlight the issue let's start with an adaptation of the classic courtroom interchange between Lieutenant Lionel Caffey and Colonel Nathan Jessup from "A Few Good Men":

Structured Settlement Website: You Want Answers?

Plaintiff: I think I'm Entitled

Structured Settlement Website: You Want Answers?

Plaintiff Attorney: I want the Truth!

Structured Settlement Website: You Can't Handle the Truth!

A structured settlement industry website presents the following as facts:

"Can I restructure my payments into a lump sum? THEN ANSWERS

Again, the federal law that assures the payments you receive are on a tax-free basis, also prohibits converting your payments into a lump sum."

The series of Q&As on the websites also provides further inaccuracy:

"...the federal law designed to provide these benefits to you on an income tax-free basis also prohibits you from assigning or encumbering them".

Comments

  1. A structured settlement is generally considered to be a series of periodic payments, although some structured settlements may be a single lump sum.
  2. The proper phrasing of the question should be "May a structured settlement, or part of a structured settlement, be commuted, or reduced to a lump sum payment?
  3. Federal law DOES NOT prohibit the transfer or sale of your right to receive periodic payments from a structured settlement for a cash lump sum.
  4. A body of Federal and state laws govern what is known as a structured settlement factoring transaction.
  5. In enacting the Victims of TerrorismTax Relief Act of 2001, which created Internal Revenue Code Section 5891 , Congress expressly acknowledged the existence of "structured settlement factoring transactions" by defining such term at IRC 5891(c)(3)(A) and establishing requirements for the purchaser to avoid an onerous 40% excise tax on the "factoring discount" in such transactions.
  6.  Such requirements include that the transfer of structured settlement payment rights be approved in advance in a qualified order. that is issued—
    (i) under the authority of an applicable State statute by an applicable State court, or
    (ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.(see IRC 5891(b)(2)(A) and (B)
  7. The United States Internal Revenue Code defines the term “structured settlement factoring transaction” as a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration.
WARNING

  • A sell structured settlement factoring transaction IS NOT recommended UNLESS you have a well defined essential need and have exhausted all other sources to raise cash.

  • Speak to a credentialed financial professional well versed in structured settlements andyour lawyer for guidance.

  • The lawyer handling a structured settlement transfer petition works for the settlement purchaser.
  • Read the disclosure carefully and do not waive independent professional advice

 

 

 

 

 

Posted at 09:12 PM in Bridgeport Structured Settlements, Bronx New York Structured Settlements, Brooklyn New York Structured Settlements, Buffalo New York Structured Settlements, Can You Sell Structured Settlement?, Financial Literacy, Internal Revenue Code, Internal Revenue Code (IRC), IRC 5891 Structured Settlement Factoring Transaction, Settlement Planning Issues, Structured Settlement Definitions, Structured Settlement Factoring, Structured Settlement Factoring News, Structured Settlement FAQ, Structured Settlement Industry News, Structured Settlement Information, Structured Settlement Law, Structured Settlement Liquidity, Structured Settlement Payment Rights, Structured Settlement Protection Acts, Structured Settlement Transfers, Structured Settlement Watchdog®, Structured Settlements, Structured Settlements 101, Structured Settlements Essentials |

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Guide to Structured Settlements 2023

  • What is a Structured Settlement? What You Need to Know
    Structured settlements and what you need to know about them including a helpful introductory video featuring 2023 A.M. Best Client Recommended Structured Settlement Expert and Registered Settlement Planner John Darer® of 4structures.com® LLC
  • How Do Structured Settlements Work? How Structured Settlements Work
    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in on the spectrum of settlement planning solutions.
  • Rated Ages and Structured Settlement Cost
    Rated Ages for Structured Settlement Annuities present advantages to all parties. Shift the mortality risk to a life insurance company whose business it it is to assess mortality risk to price its life insurance and annuities. Rated ages boost your structured settlement annuity benefit per premium dollar, or your yield on lifetime payments. Rated ages help to reduce the cost of funding a Medicare Set Aside arrangement where a Structured MSA, is being used { WCMSA LMSA or NFMSA].
  • Structured Settlement Annuity Companies 2023
    Which life insurance companies issue structured settlement annuities going into 2023? A list of current structured annuity issuers, the location of their home offices and their financial ratings from A.M. Best, Moodys, Fitch, Standard & Poors and/or other Tier1 NAIC ratings, with links to their websites and other useful information.
  • Treasury Funded Structured Settlements
    Treasury Funded Structured Settlements are a settlement option for the most conservative using the OTHER permissible qualified funding asset under IRC 130(d), United States Treasury Bonds in addition to, or instead of, structured settlement annuities. Treasury Funded Structured Settlements can also be used to fund installment sales, also known as structured sales and other non qualified structured settlements.
  • Compare Structured Settlement IRR to Other Settlement Alternatives
    Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
  • Structured Settlement Payments | Types of Structured Settlements
    Ways You Can Structure Your Settlement Payments. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
  • Structured Attorney Fees for Tax Deferral for Contingency Fees
    Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as the an index linked structured settlement where payments are adjusted based on upside changes in the S&P 500 with no downside and a cap of 5%. Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team.
  • Structured Settlement Annuity Company Customer Service Phone Numbers
    Receiving structured settlement payments from your own structured settlement or inherited structured settlement? You'll like this huge time saver. Click the title for a link to a comprehensive list of customer service telephone numbers that includes both current AND former structured settlement annuity issuers and reinsurers. If you have simple bank or beneficiary changes, or if the insurance company that issued the structured annuity has merged, sold or spun off its block of structured annuity business (e.g. Aviva, Allstate, Transamerica, AEGON, GE Capital, Liberty, CNA, Confederation Life) or changed its name and you're trying to track them down, here you go! The list is regularly updated. Last updated September 14, 2023
  • Structured Settlement Quote Lock-Ins | What You Need To Know
    What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
  • What Are Structured Settlement Annuities?
    Structured settlement annuities are annuities that can provide one or more customized annuity payment streams in a single contract. Read about structured settlement annuities here.
  • History of Structured Settlements
    Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
  • What Are Market Based Structured Settlements?
    Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that: 1. Can afford to take some market risk 2. Have discretionary settlement dollars. Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
  • iStructure |Uncapped Fixed Index Structured Settlement Annuity
    iStructure is an innovative game changing fixed index structured settlement annuity for plaintiffs or attorneys. with an intermediate to long term horizon

Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
    Qualified Settlement Funds | What You Need to Know
  • Firmwide Qualified Settlement Funds Debunked
    Firmwide qualified settlement funds have been heavily promoted to trial lawyers, but have been debunked in a detailed analysis in a July 2022 legal opinion a tax partner at the law firm of Faegre Drinker Biddle & Reath, LLP. Trial lawyers and firms who have established Firmwide QSFs or coinsidering establishing a Firmwide QSF should read the analysis as part of their evaluation.

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Structured Settlement Best Practices Corner

  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
  • When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
  • Be aware that financial advisors use of testimonials is prohibited or restricted
  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
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Why Take a Structured Settlement?

  • A structured settlement offers guaranteed financial security to personal injury victims, wrongful death survivors and their families. A structured settlement involves a customized stream of payments, provides long-term stable tax-free income, for a period of years or a lifetime. Unlike other income annuities. a structured settlement annuity can have multiple payment streams to address multiple needs in a single contract.

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