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January 21, 2013

Qualified Assignment Paragraph 9 | Getting Comfortable With IRC Section 130(C)

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

What is a Qualified Assignment and Why is it Necessary?

A qualified assignment is an important component of a structured settlement transaction. As part of its operation, the future periodic payment obligation to the payee is assigned to a qualified assignment company (with some exceptions, generally a special purpose company which is a subsidiary of the annuity issuer). Qualified assignments enable a Defendant, Insurer, or Qualified Settlement Fund, to achieve a complete novation of the future periodic payment claim established by suit or agreement, through a substitution of obligors.

Qualified Assignment | The "Order of Operations"

In order of operation in the structured settlement process, first a periodic payment obligation is established in the Settlement Agreement and Release. The assignee then takes on the obligation by way of the qualified assignment agreement and subsequently acquires a "qualified funding asset" which, in accordance with IRC 130(d), can be an annuity or an obligation of the United States government. The purchase is made with funds it receives from the Defendant, Defendant's Insurer or Trustee/ Adminstrator of a Qualified Settlement Fund. The qualified assignment company directs the annuity issuer or trust company holding the US treasury obligations to make payments to the payee. If you would like to see a flow chart showing how a structured settlement works please click here

Proper structured settlement documentation is necessary to assure that the objectives of settling parties are met and get to a Structured Settlement state of Zen.  

What is Paragraph 9 of the Qualified Assignment and Why Is It Necessary?

All qualified assignment agreements contain a "Failure to Satisfy IRC Section 130(c)" unwind clause, which on occasion I've playfully referred to as the "Sneaky S.O.B. clause".   The purpose of the clause, generally found in paragraph 9, is to protect the qualified assignment company from taking on an assignment that does not meet the criteria of IRC Section 130(c) and thereby jeopardize the assignment company's tax status.  Needless to say the clause is necessary, for example, as a deterrent to overly optimistic attempts to characterize some atypical cases as physical injury. The tax exemption to qualified assignment companies provided under IRC 130 is what makes the majority of structured settlements possible,  as it has since 1983, when the Periodic Payment Settlement Act of 1982 was signed into law by  then President Ronald Reagan.

This clause has from time to time given some defense lawyers "twisted blood" . An unwind of the qualified assignment might actually hurt the payee as well, particularly if a qualified assignment release and pledge agreement has been used to give the payee a security interest in the structured annuity. Such a security interest would not apply if there was an unwind.  To help attorneys work through this issue when it arises,  4structures.com LLC President John Darer has created a short video on Qualified Assignment Paragraph 9 and the criteria required to satisfy IRC 130(c).

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Posted at 03:59 PM in Alabama Structured Settlements, Albany New York Structured Settlements, Buffalo New York Structured Settlements, Fort Worth Structured Settlements, Hartford CT Structured Settlements, IRC 130 Qualified Assignment Tax Exclusion Qualified Assignee, Lexington KY Structured Settlements, Long Island NY Structured Settlements, Los Angeles CA Structured Settlements, Maryland Structured Settlements, Missouri Structured Settlements, NC Structured Settlements, New Jersey Structured Settlements, New Orleans Louisiana Structured Settlements, New York Personal Injury, New York Structured Settlements, Newburgh Structured Settlements, NH structured settlements, NJ Structured Settlements, North Carolina Structured Settlements, NYC Structured Settlements, Palm Beach Structured Settlements, Philadelphia PA Structured Settlements, Qualified Assignment, Rhode Island Structured Settlements, Rochester Structured Settlements, Rockland Structured Settlements, Sacramento Structured Settlements, San Francisco Structured Settlements, Santa Monica Structured Settlements, Sarasota Structured Settlements, Settlements in Queens County New York, South Carolina Structured Settlements, St. Louis Structured Settlements, Structured Annuity, Structured Settlement Documentation, Structured Settlement Information, Structured Settlements in Georgia, Structured Settlements in Illinois, Structured Settlements in Ithaca New York area, Structured Settlements in Louisiana, Structured Settlements in Maryland, Structured Settlements in Miami Florida area, Structured Settlements in Nassau County, NY, Syracuse Structured Settlements, TX structured settlements, VA Structured Settlements, Washington Structured Settlements, White Plains Structured Settlements, WV Structured Settlements |

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Guide to Structured Settlements 2024

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  • Top Structured Settlement Annuity Companies 2024
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  • 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.
  • 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), 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.
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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
    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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