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March 17, 2013

Special Needs Trust With Structured Settlement Yes or No?

by John Darer® CLU ChFC MSSC RSP CLTC

A structured settlement whose payments represent damages on account of personal physical injury, physical sickness, workers compensation or wrongful death, provides income that is tax free to the recipient of the structured settlement payments. [see IRC 104(a)(1) amd IRC 104(a)(2) as applicable].

Structured settlements may be an appropriate vehicle to be used in conjunction with a Special Needs trust (generally referred to as  a Supplemental Needs Trust in New York) to provide investment stablity and reduced expenses of the recovery.

On its website, one of my industry colleagues also purports that using a structured settlement will be useful in "preventing the taxation of interest income within the SNT".  This is untrue.

A structured settlement has absolutely no bearing on the taxation of interest income within the Special Needs Trust. Absent an investment in tax exempt investments, once structured settlement payments are deposited in to the SNT,  the interest subsequently earned on the structured settlement payments is taxable. 

The use of a structured settlement created outside a Special Needs Trust with payments feeding into the SNT,  may be helpful when comparing the potential outcome of the  investment of a comparable amount to the cost of the structured settlement by the trustee of the SNT in a permissible taxable investment.

 

Posted at 04:13 PM in Bridgeport Settlement Planning, Bridgeport Structured Settlements, Bronx New York Structured Settlements, Brooklyn New York Structured Settlements, Buffalo New York Structured Settlements, Connecticut Settlement Planning, Long Island NY Structured Settlements, Long Island Settlement Planning, New Jersey Structured Settlements, New York City Structured Settlements, New York Personal Injury, New York Settlement Planning, New York Structured Settlements, NJ Settlement Planning, NYC Settlement Planning, NYC Structured Settlements, Plaintiff Settlement Planning, Settlement Planning Issues, Settlement Tax Issues, Settlement Trusts, Special Needs Trust with Structure, Structured Settlement FAQ, Structured Settlement Information, Structured Settlement Tax Issues, Structured Settlement with SNT, Structured Settlements, Westchester Settlement Planning |

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Guide to Structured Settlements 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.
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    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
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    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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  • 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.
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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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