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December 24, 2011

Structuring Oil and Gas Lease Bonus Payments: Tax Planning Opportunities for Landowners in Ohio, New York, Pennsylvania, Other Locations For Oil & Gas Exploration and Drilling

by John Darer CLU ChFC CSSC RSP

The Structured Oil & Gas Lease Bonus Payment Option allows landowners to take advantage of IRS Revenue Ruling 68-606 by spreading out a lease bonus payment over a number of years, instead of getting whacked all at once in the first year. Tax forms

In short, by ‘structuring’ the lease bonus, landowners can:

  • Reduce current tax liability where the bonus payment pushes them into a higher tax bracket.
  • Earn pre-tax interest accumulation to be paid in the future according to a schedule chosen by the landowner. Note: longer schedules provide the greatest advantage;
  • Enjoy a customized structured payment plan that meets your anticipated future needs whether that be retirement, education of children or grandchildren, or anything else! 
  • Structured lease bonus payments are backed by an Agreement to Pay from Allstate Life Insurance Company,  Allstate is rated A+(Superior) by A.M. Best Company at the time of posting.

FAQ About Structuring Oil & Gas Lease Bonus Payments  (That's "The Frack" Jack!)

A. How Do I Take Advantage of the Tax Benefits?

 

  • The oil and gas lease bonus payment must be ‘structured’ BEFORE the land lease is signed. If you’ve been offered a bonus from an oil and gas company during negotiations for lease payments on your property, DONT WAIT until everything is settled.
  • You can only structure your lease bonus payment. Landowners cannot structure future royalties. They are not eligible.
  • The critical details in the process for the Structured Oil & Gas Lease Bonus Payment Option must be handled properly and involve an insurance agent or firm that is licensed in your state, appointed and authorized by Allstate Life Insurance Company for structured settlements (or Allstate Life Insurance Company of New York, for New York landowners), together with your attorneys and/or other advisers. 

B. What is the Basis for the Spreadout of Lease Bonus Payments on Oil and Gas Drilling and Exploration by Landowners?

Here is the Revenue Ruling citation:

Rev. Rul. 68-606, 1968-2 C.B. 42.378.40  Lease bonus income; installment contract.
Cash-method taxpayers who receive an installment bonus contract as consideration for an
oil or gas lease must include its value in gross income for the year in which the lease is executed
if the obligation is transferable and readily saleable. §§1.61–1, 1.446–1, 1.451–1. (Secs. 61, 446,
451; ’86 Code.)

C. What is the fee for structuring lease bonus payments?

If a structured lease bonus is elected, our firm receives a commission from Allstate Life Insurance Company or Allstate Life Insurance Company of New York for the placement of the funding vehicle.

D.  What is the transaction flow for structured lease bonus payments?

  1. Parties agree on the terms of the oil and gas lease installment bonus contract, which includes the structured payments.
  2. The parties execute the Representation and Acknowledgeemnt Statement for Oil and Gas Lease Installment Bonus s  Download Rep Acknowledgment for Oil and Gas Installment Bonus
  3. Lessor signs Hold Harmless Agreement Download Structured Oil and Gas Lease Hold Harmless
  4. Lessor and Lessee execute an Assignment of Obligation Agreement. See sample Download Structured Oil Gas Lease Bonus Assignment of Periodic Payment Obligation
  5. Money goes from the Bonus Payor (Lessee) to Allstate International Assignments, Ltd. , in Barbados subject the assignment of obligation (non qualified assignment).
  6. Allstate International Assignments, Ltd purchases funding agreement from Allstate Life Insurance Company (Allstate Life Insurance Company of New York, if you are a New York landowner)
  7. Allstate Life Insurance Company (Home Office: Northbrook, IL) issues an Agreement to Pay to back up Allstate International Assignments, Ltd.

E   Is Allstate International Assignments, Ltd. Safe?

Link to Allstate International Assignments, Ltd.

   
     
   

QUESTIONS? PLEASE CALL

JOHN DARER 

4structures.com LLC

888-325-8640

 
     

We Sell On Time Every Time Want Some

 

 

Posted at 11:48 AM in California Structured Lease Bonus, Colorado Structured Lease Bonus, Erie, PA Structured Lease Bonus, Financial Planning, Louisiana Structured Lease Bonus, Non Qualified Assignments, Non Qualified Structured Settlements, Ohio Structured Lease Bonus Payments, Pennsylvania Structured Lease Bonuns Payments, Structured Lease Bonus Payments, Texas Structured Lease Bonus, West Virginia Structured Lease Bonus |

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Guide to Structured Settlements 2022

  • What is a Structured Settlement? What You Need to Know
    What you need to know about structured settlements. General explanation of structured settlements, including the stable guaranteed income and favorable tax benefits that give structured settlements their "juice" and a helpful introductory video featuring 2022 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 | Structured Settlement Diagram
    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in with other 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 2022
    Which life insurance companies issue structured settlement annuities going into 2022? 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 for 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, Transamerica, AEGON, GE Capital, Liberty, CNA) or changed its name and you're trying to track them down, here you go! The list is regularly updated. Last update January 13, 2022.
  • 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

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  • STRUCTURED SETTLEMENTS 4REAL® Blog Is a Popular Source of Structured Settlement News and Information, Settlement Planning News, Tax Deferral and Deferred Income Planning Solutions,
    with a stable readership that seeks credible structured settlement information and/or opinion about topical issues related to settlement planning, targeted to lawyers, injured persons and their family members, guardians, survivors, judges, magistrates, special masters, mediators, administrators, trust companies, insurance company executives and adjusters, financial advisers settlement professionals, financial professionals, insurance regulators, government leaders, federal and state law enforcement, buyers and sellers of structured settlement payment rights, the news media and other interested parties. 4structures.com LLC established the structured settlement blog in 2005 and for over 16 years it has been a leading source for critical commentary. The John Darer authored blog has been among the most prolific, regularly providing fresh structured settlement, settlement planning and litigation recovery management content and commentary. John Darer®, CLU ChFC MSSC CeFT® RSP CLTC, President of Stamford, CT based 4structures.com, LLC, is an experienced New York City area structured settlement expert, structured settlement broker, Certified Financial Transitionist, and Registered Settlement Planner. In his capacity as a journalist, and professionally, Darer passionately believes that exposing a business practice is both healthy and newsworthy. It is in the best interest of tort victims, their families and their legal advisers, that the settlement planning discussion involve those that are properly trained in the topic, properly informed on the topic and, with respect to structured settlements, properly licensed and/or appointed). It has significant instructional and deterrent value to other practitioners and firms as well as those who may be caught in the cross hairs. WHAT YOU GET here is the straight stuff with a touch of irreverence and humor. We hope you enjoy and find the content to be helpful. Subscribe to the structured settlement blog feed, or a specific category feed through your blog reader, or through the Feedburner icon on this page. Followers of JDDarer™ on Twitter may also receive select content. Thank you for reading!

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  • "...Thanks to Mr. Darer's blog and personal pointers I was able to obtain a fair price for the sale of client structured settlement. Therefore, if one has no choice, but to sell their settlement educate yourself first before selling start by reading John's blog" Mr P. 11/17/2012
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  • "Amen - and continued thanks for your vigilance, John"- RL 8/18/2011
  • "Thanks for writing these great blogs on your site John! As an individual investor I have learned so much about the secondary market (for annuities, structured settlements, lottery payments, etc.) from your blogs and video series!!!" (6/5/2011)
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  • John - I can't thank you enough for bringing this to my attention. In my wildest dreams... PJ-May 12, 2011
  • John, I love reading your blog! Not only have I found very useful information there, but the comedy is much appreciated! Thanks for talking about "the big pink elephant in the living room" that everyone else ignores! Thank you again for your help via phone and blog! I really needed to hear what you had to say today! BM 11/23/2010
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  • Thank you so very much for discussing my concerns about Symetra, my annuity company. I am amazed that PI attorneys as well as a settlement broker in San Diego, could not answer the simplest questions I had regarding the Safeco/Symetra issue. Your blog/web site is most interesting and informative, and I am grateful you have take on the "watchdog" role! Thank you so much again (3/25/10)
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  • "All the others that I had emailed & have seen on the net were "cash now types" & have no concern of me & just are looking for my $$$. When I came across your site & blog I realized that u are an upstanding guy & are not like others. That's why I emailed"
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  • "Other Than John Darer No One Seems To Be Doing Anything"-J
  • Thanks for your help and also for the good work you do on behalf of our industry-L
  • "Thank you for being the inspiration that you are and for being a strong advocate for integrity in our business"-KL
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  • "He is a fabulous writer who has a great passion for the structured settlement industry. I commend him on the passion he invokes when he writes on his blog listed above. That type of commitment and passion is hard to find and is rare in this world" -AC

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.
  • Number of States That Prohibit Payment of QSF expenses by licensed agents and brokers
    5 Survey not yet complete.

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