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May 16, 2012

Treasury Funded Structured Settlements: A Tax Question

by John Darer CLU ChFC MSSC RSP CLTC

Are Treasury Funded Structured Settlements Tax Free?

The answer is, it depends on what you are using TFSS for.  Treasury Funded Structured Settlements can be used to pay for both qualified and non qualified settlements. Said another way, damages for both taxable and non taxable settlements can be funded with Treasury obligations.

What governs the tax treatment of qualified settlements are two sections of the Internal Revenue Code of 1986, as amended. These sections are IRC 104 and IRC 130

IRC 104,  provides an income tax exclusion for damages paid on account of physical injury or physical sickness, and workers compensation.

IRC 130 provides an income tax exclusion for payments received by a substitute obligor (assignee) of a future periodic payment obligation) subject to certain requirements.

IRC 130(d) describes the requirement to be considered a "qualified funding asset". Per IRC 130(d) a qualified funding asset may be either an annuity, or an obligation of the United States government.

Most cases that resolve with structured settlements use a form of assignment, qualified assignment or non qualified assignment. This is because defendants and insurers do not want a long term contingent liability on their books. They want to pay and buy their peace.

A personal injury plaintiff cannot literally buy a structured settlement themselves and achieve the same tax benefits. Plaintiffs can buy a recycled structured settlement cash flow from the tertiary market (or incorporate one as part of their settlement plan), but that entails a certain degree of additional risk and that is not really a structured settlement in the true sense of the word.  At this point our understanding is that such cash flows would be tax deferred at best.

Read more about Treasury Funded Structured Settlements | 4structures®

 

 

Posted at 12:54 AM in Albany New York Structured Settlements, Baltimore Structured Settlements, Bethesda Structured Settlements, Boca Raton Florida Structured Settlements, Bowling Green Kentucky Structured Settlements, Bridgeport Structured Settlements, Bronx New York Structured Settlements, Brooklyn New York Structured Settlements, Buffalo New York Structured Settlements, Chevy Chase Structured Settlements, Chicago Illinois Structured Settlements, CT Structured Settlements, Dallas Fort Worth TX Structured Settlements, Florida Structured Settlements, IRC 104(a) Income Tax Exclusion Damages PI | Sickness | WorkComp, IRC 130 Qualified Assignment Tax Exclusion Qualified Assignee, IRC 130(d) Qualified Funding Asset, New York City Structured Settlements, NJ Structured Settlements, NYC Structured Settlements, Qualified Assignment, Qualified Funding Asset, Stamford Structured Settlements, Staten Island Structured Settlements, Structured Settlements in Fort Lauderdale FL, Structured Settlements in Ithaca New York area, Structured Settlements in Kentucky, Structured Settlements in Louisiana, Structured Settlements in Maine, Structured Settlements in Massachusetts, Structured Settlements in Miami Florida area, Structured Settlements in Michigan, Structured Settlements in Nassau County, NY, Structured Settlements New York, Suffolk County Structured Settlements, Sumter County Structured Settlements, Syracuse Structured Settlements, Tampa Structured Settlements, Taxes and Structured Settlements, Treasury Funded Structured Setttlements, TX structured settlements, United States Treasury Structured Settlement, VA Structured Settlements, Virginia Structured Settlements, Washington Structured Settlements, West Virginia Structured Settlements, Westchester Structured Settlements, White Plains Structured Settlements, Wisconsin Structured Settlements, WV Structured Settlements |

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Guide to Structured Settlements 2025

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  • Treasury Funded Structured Settlements
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  • Structured Settlement Payments | Types of Structured Settlements 2025
    In 2025, you can structure your settlement payments in various ways. A structured settlement allows for multiple payment types within one agreement. You can tailor and merge different structured settlement payments to suit your individual needs, either alone or alongside other financial instruments. If desired, diversify your structured settlement by utilizing multiple annuity issuers, treasury-funded structured settlements, index-linked structured settlement payments, and market-based structured options.
  • Structured Attorney Fees for Tax Deferral for Attorney Contingency Fees
    Structured attorney fees offer a financial strategy that provides a unique method for deferring taxes for attorneys and their firms. Attorneys can structure or defer their legal fees independently of whether the plaintiff structures their settlement. There are various ways to structure attorney fees, including capped or uncapped index-linked structured settlement annuities with payments adjusted according to the S&P 500 or another index's positive changes. Trial lawyers might also opt for a special deferred payment/compensation arrangement if they seek market-based returns without a cap. As the year-end approaches, consider adding structured attorney fee specialist John Darer® to your settlement planning team for 2025.
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    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), oran annuity issuer has changed its name and you're trying to track them down. Here you go! The list is regularly updated. Last updated December 9, 2024.
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  • 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
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  • 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
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Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
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  • Firmwide Qualified Settlement Funds Debunked
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