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July 02, 2012

Stockton, CA Bankruptcy Fueled by Falling Real Estate and Soaring Pensions

by John Darer® CLU ChFC MSSC RSP CLTC

The City of Stockton, CA is filing for bankruptcy protection under Chapter 9 of the U. S. bankruptcy code. Stockton is the largest city (300,000 residents) to ever seek Chapter 9 protection. The city has been pummeled by falling real estate values and soaring pension costs.

Pension costs are expected to increase about 94% over the next ten years. According to various major news outlets, such a sthe Los Angeles Times, the  Stockton  City Council halted bond payments, slashed employee benefits and adopted an emergency budget in the wake of the failure of mediation talks with creditors. California Law AB 506, requires such mediation prior to  a municipality being able to file for debt reorganizaton.

Median home prices in Stockton have fallen from $407,000 in 2005 to just $118,000 in February 2012.  That's a -16.29% annual return over the 7 years!

The Stockton situation illustrates how placing a substantial percentage of your settlement into a home is not always a good idea. Setting aside the cost of maintaining the home and taxes, let's look at what might have happened to a Stockton, California plaintiff who bought a home at the median price.

Case Example  $1,000,000 net settlement February 14, 2005. Plaintiff unable to work

Had a plaintiff purchased a home with all cash  in February 2005, they could be looking at almost a $300,000 loss. It could be worse if a substantial portion was borrowed and there is an "underwater" mortgage.

  • A 7 year Treasury Bond averaged 3.97% for the month of February 2005
  • A 10 year Treasury Bond averaged 4.22% for the month of February 2005 
    Source: Federal Reserve H15

A lump sum of $407,000 invested at 4% for 10 years would equal in excess of $535,000. Structured settlement rates generally tracked Treasury rates in 2005 and if the structure is for payment of damages for personal physical injury or physical sickness the payments are income tax free.

When thinking about your personal injury or wrongful death settlement proceeds, be sure to think about the alternatives.

 

 

 

 

Posted at 03:01 PM in Brooklyn New York Structured Settlements, California Settlement Planning, California Structured Settlements, Dissipation Risk, Financial History, Financial Planning, Los Angeles CA Structured Settlements, New York City Structured Settlements, New York Personal Injury, New York Structured Settlements, Newburgh Structured Settlements, NJ Structured Settlements, Plaintiff Settlement Planning, Plaintiff Structured Settlements, Stockton, CA Structured Settlements, Structured Settlements in California, Westchester Structured Settlements, White Plains Structured Settlements |

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Guide to Structured Settlements 2024

  • What is a Structured Settlement? What You Need to Know
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    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].
  • Top Structured Settlement Annuity Companies 2024
    Which life insurance companies issue structured settlement annuities in 2024? 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. Last updated June 14, 2024
  • 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 2024
    Ways You Can Structure Your Settlement Payments in 2024. 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 Attorney 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 capped or uncapped index linked structured settlement annuities where payments are adjusted based on upside changes in the S&P 500 or another index, 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 in 2024.
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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 May 20, 2024.
  • 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
  • Structured Settlements and Longevity Risk| What Are the Odds?
    Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can include one or more customized payment streams and types.

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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