by John Darer® CLU ChFC MSSC CeFT® RSP CLTC
How can Treasury Funded Structured Settlements pay monthly or quarterly when US government obligations typically pay interest semi-annually with a repayment of principal the end of the bond term?
I'll let my colleague Doug Brand explain:
"That's because the US Government Obligations that are purchased to provide the periodic payments are STRIPS. STRIPS (Separate Trading of Registered Interest and Principal Securities) are U.S. Government Securities or Obligations that make a specific payment at a fixed date of maturity. Thus they don't pay a semi-annual coupon rate (or interest payment) and a return of principal at the end of the term like a bond (that is not broken up) does. STRIPS can be purchased to specifically match or produce the payment stream(s) per the settlement agreement. For example, if $1000 per month for ten years is the periodic payment plan, then 120 STRIPS would be purchased to make those payments ($1000 per month = 12 payments per year X 10 years (12 X 10 = 120) = 120 payments".
Midwest Trust Offers a treasury funded structured settlement program that can be used on both qualified ( e.g. personal physical injury , physical sickness , wrongful death) and non qualified cases through its Barbados non qualfied assignment facility, Structured Assignments Inc.
Treasury Funded Structured Settlements are an alternative to structured annuities, and are permissible as "qualified funding asset" under Section 130(d) of the United States Internal Revenue Code