by John Darer® CLU ChFC MSSC RSP CLTC
Structured settlements are not just for personal injury, medical malpractice and wrongful death settlements. Structured settlements are also a great solution for settlements with taxable damages, such as employment lawsuits and commercial disputes, through non qualified assignments and periodic payment reinsurance.
Possible Tax Benefits of Non Qualified Assignments and Periodic Payment Reinsurance in Employment Settlements
Help spread tax liabilities throughout future years, smoothing out income and potentially alleviating high tax obligations in the year of settlement.
- A potentially greater overall payout than would otherwise be achieved with a single lump sum payment even taking into account taxes that ultimately have to be paid.
- Avoidance of higher tax brackets
- Preserve tax deductions that may be lost at higher income levels
- Avoidance or mitigation of the alternative minimum tax (AMT)
Today there is a variety of solutions
- Annuity funded employment structured settlements that use domestic non-qualified assignments are currently available through appointed structured settlement consultants and brokers for Metropolitan Tower Life Insurance Company, American General Life Insurance Company, United States Life Insurance Company in the City of New York. American General and United States Life insurance Company in the City of New York, also offer a funding agreement for use with the domestic non qualified assignments, where deferrals are desired longer than one year.
- Independent Life Insurance Company is a provider of annuity funded employment structured settlements that use market recognized non-domestic assignment companies, Structured Assignments, SCC of Barbados and Kenmare Assignment Company Limited (Kenmare) of Ireland.
- Anther non-domestic non qualified qualified assignment program, Havelet Assignment Company of Barbados, funds the periodic payment obligation using a private placement annuity.
- Treasury Funded Structured Settlements can be used and are currently available through Structured Assignments, SCC (SASCC). Structured Assignments, SCC is a Barbadios company, where in this case the periodic payment obligations are funded through the purchase of United States Treasury Obligations which are held in a sub-trust of a master trust at Midwest Trust Company. the SASCC facility may also be used for structured installment sales, enhanced attorney fee structures (EAFS) and more.
- Periodic Payment Reinsurance is available through National Indemnity Company, a unit of Berkshire Hathaway and a unit of American General. Many of the same transfers of risk can be accomplished as with non qualified assignments, however periodic payment reinsurance can only be utilized where the paying party is an insurer. An uninsured defendant must use a non qualified assignment.
- Market Based structured settlement solutions are also available for both plaintiffs and attorneys, with the appetite and risk tolerance.
Updated February 2021