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February 24, 2016

The Difference Between Structured Settlements and Annuities

by John Darer® CLU ChFC MSSC RSP CLTC

A structured settlement is a negotiated compromise between a plaintiff and a defendant in which part of the settlement includes a promise to make future periodic payments. The future periodic payments are negotiated and may be tailored to the plaintiff's specific needs.

Structured Settlement Annuities tool chest
Structured settlement annuities are dependable stable core settlement planning tools that come in a variety of sizes and torque to address most settlement  and financial planing needs

How Are Structured Settlements Funded?

Generally structured settlements are funded with annuities, but under Federal tax law [IRC 130(d)] they can also be funded with obligations of the United States government [also known as Treasury Funded Structured Settlements]. 

What are Annuities?

Annuities are types of insurance contracts issued by life insurance companies that come in a variety of shapes and sizes to fit different financial needs. In general a premium is paid to secure a contractual promise to pay a defined set of payments, or payments calculated based on a fixed and determinable formula. While annuities are most often associated with retirement, billions are funded every year to meet the current and/or future income needs of personal injury victims, wrongful death survivors, employment settlement plaintiffs and more.

What's the Difference Between Structured Settlement Annuities and Regular Annuities?

Pull into your settlement planner's or financial adviser's "service bay" while your needs are elevated on "the service lift" for further examination.  Regardless of whether it is a structured settlement annuity or other type of annuity,  you will find that there is a variation of this financial tool to address most every need. There is a difference between structured settlement annuities and regular income annuities (SPIAs or DIAs). Structured settlement annuities can have multiple payment streams all in a single contract which is a major administrative convenience for people who receive structured settlement payments.

Types of structured settlement payments available with structured settlement annuities

Is a so-called "Secondary Market Annuity" Really An Annuity or a Structured Settlement?

Very simply, NO a Secondary Market Annuity, or SMA is not an annuity at all.  What is being misrepresented all over the Internet as an annuity, is actually the right to receive structured settlement payment, transferred from the original payee. The annuity itself is not transferred.   Structured settlement payment rights can be sold to you by every Tom, Dick or Harry,  structured settlement annuities can only be solicited and placed by licensed life insurance agents in your state.  Investors can easily verify if they are speaking with a licensed agent, broker,  or a bullshit artist, by checking the website of their state's insurance department, which is some states (such as New York) may be called the Department of Financial Services.

What is an Equity Indexed Annuity?

FINRA defines equity index annuities as complex financial instruments that have characteristics of both fixed and variable annuities. Their return varies more than a fixed annuity, but not as much as a variable annuity. So EIAs give you more risk (but more potential return) than a fixed annuity but less risk (and less potential return) than a variable annuity.

EIAs offer a minimum guaranteed interest rate combined with an interest rate linked to a market index,such as the S&P 500. Because of the guaranteed interest rate, EIAs have less market risk than variable annuities. EIAs also have the potential to earn returns better than traditional fixed annuities when the stock market is rising.

Equity Indexing and Structured Settlement Annuities

A form of equity indexing is available with structured settlement annuities. It's important to distinguish that in an indexed structured settlement annuity,  it is the income that is indexed, while the traditional equity indexed annuity is both an accumulation and decumulation product.  An Indexed Linked Annuity Payment Adjustment Rider (ILAPA) has been offered by appointed agents of Pacific Life Insurance Company and Pacific Life and Annuity Company (In New  York)  since April 2014, when Pacific Life received a favorable IRS Private Letter Ruling supporting the tax structure of the indexed structured settlement.

Differences in Tax Treatment between Structured Settlement Annuities and other Annuities

Generally structured settlement annuities are used to fund damages in lawsuits where the damages are exempt from taxation.  It is important to distinguish that it is not the annuity itself, but what the payments represent that governs the tax consequences.  For example on the one hand, properly structured settlement annuity payments for damages to someone who lost a leg in a construction accident are income tax exempt. On the other hand structured settlement annuity payments to an attorney or law firm are not tax exempt, but could shelp the attorney defer the tax on his or her contingency fees. Other annuities are used for tax deferral of interest. 

Differences in Structured Settlement Annuities and SPIAs

Structured settlement annuities can have deferred start dates longer than 13 months,  while traditional single premium immediate annuities cannot. Structured annuities can accommodate multiple payment streams in a single contract.

 Call 888-325-8640 for more information about structured settlement annuities

Posted at 07:07 PM in Albany New York 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, Chicago Illinois Structured Settlements, Connecticut Settlement Planning, Conshohocken Structured Settlements, Detroit Michigan Structured Settlements, Hartford CT Structured Settlements, 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 Settlement Planning, New York Structured Settlements, Newburgh Structured Settlements, News About Structured Settlements, NH structured settlements, NJ Structured Settlements, North Carolina Structured Settlements, NYC Structured Settlements, Palm Beach Structured Settlements, Philadelphia PA Structured Settlements, Rhode Island Structured Settlements, Rochester 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 Settlement Information, Structured Settlements in Fresno County, Structured Settlements in Georgia, Structured Settlements in Illinois, Structured Settlements in Ithaca New York area, Structured Settlements in Kentucky, Structured Settlements in Louisiana, Structured Settlements in Maryland, Structured Settlements in Nassau County, NY, White Plains Structured Settlements, WV Structured Settlements |

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Guide to Structured Settlements 2025

  • What is a Structured Settlement? What You Need to Know
    Structured settlements and what you need to know about them including a helpful introductory video featuring A.M. Best Client Recommended Structured Settlement Expert and Registered Settlement Planner John Darer of 4structures.com LLC
  • How Do Structured Settlements Work? How Structured Settlements Work
    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in on the spectrum of settlement planning solutions.
  • Rated Ages and Structured Settlement Cost
    Rated Ages for Structured Settlement Annuities present advantages to all parties. Shift the mortality risk to a life insurance company which specializes in assessing mortality risk to price its life insurance and annuity products. 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 2025
    Which life insurance companies issue structured settlement annuities in 2025? 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 November 3, 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 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.
  • 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 December 9, 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.
  • Intellectual Property Structured Settlements
    While intellectual property wasn’t a common focus for structured settlements, the growth of IP litigation led to some firms, including 4structures.com, LLC, adapting structured settlements in this context. The 2017 Tax Cuts and Jobs Act shifted some Intellectual Property assets (e,g, patents) from capital gains treatment to ordinary income treatment, while increasing tax rates on lump-sum sales from 20% to 37%, increasing the appeal of structured settlement options for tax planning. Click through for more details!

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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    with a stable readership that seeks credible structured settlement information, John Darer Reviews, commentary and/or opinion about topical issues related to settlement planning, targeted to lawyers, injured persons and their family members, guardians, survivors, judges, magistrates, special masters, mediators, administrators, trust companies, insurance company executives and adjusters, financial advisers, settlement professionals, financial professionals, insurance regulators, government leaders, federal and state law enforcement, buyers and sellers of structured settlement payment rights, the news media and other interested parties. 4structures.com LLC established this structured settlement blog in 2005. John Darer ®, CLU ChFC MSSC CeFT® RSP CLTC, President of 4structures.com, located in Stamford, CT 06902. John Darer is an experienced New York City area structured settlement expert, structured settlement broker, Certified Financial Transitionist, and Registered Settlement Planner. He holds insurance licenses in 45 states, has 41 years financial services experience and 31 years in the structured settlements and settlement planning space. In his capacity as a investigative journalist and commentator, and professionally, John Darer passionately believes that shining the light on a business practice is both healthy and newsworthy. It is in the best interest of injury victims, their families and their legal advisers, that the settlement planning discussion involve those that are properly trained in the topic, properly informed on the topic and, with respect to structured settlements, properly licensed and/or appointed. It has significant instructional and deterrent value to other practitioners and firms as well as those who may be caught in the cross hairs. WHAT YOU GET here is the straight stuff with a touch of irreverence and humor. We hope you enjoy and find the content to be helpful. Subscribe to the structured settlement blog feed, or a specific category feed through your blog reader, or through the Subscribe button at the top left of this page. Followers of JDDarer™ on Twitter may also receive select content. If you would like to speak with John he can be reached at (888)325-8640 Thank you for reading! Last updated February 18, 2025

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Connecticut Structured Settlements

  • Connecticut Structured Settlement and Settlement Planning Experts 2025
    4structures.com LLC is based in Stamford CT and Connectict works with clients all over CT, Greenwich, Stamford, Darien, New Canaan, New Haven, Hartford, West Hartford, West Haven, Torrington, Danbury, Weston, Wilton, Windsor Locks, , Norwalk, Middletown, New London, Ridgefield, Westport, Oxford, Stratford, Old Greenwich, Stafford, Storrs, Groton, Harwinton, Milford, West Haven, Glenville, Long Ridge, Stonington, East Hartford, Guilford, Litchfield County, Fairfield County, New Haven County, Waterbury, Shelton
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  • Rep. Joe Courtney D-CT - "Structured Settlements & Holly's Story-Video
    Connecticut Rep. and former Plaintiff lawyer Joe Courtney discusses structured settlements and favorable experiences using them with his former clients in this May 2009 video.

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Structured Settlement Best Practices Corner

  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
  • When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
  • Be aware that financial advisors use of testimonials is prohibited or restricted
  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
  • Number of States That Prohibit Payment of QSF expenses by licensed agents and brokers
    5 Survey not yet complete.

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Why Take a Structured Settlement?

  • A structured settlement offers guaranteed financial security to personal injury victims, wrongful death survivors and their families. A structured settlement involves a customized stream of payments, provides long-term stable tax-free income, for a period of years or a lifetime. Unlike other income annuities. a structured settlement annuity can have multiple payment streams to address multiple needs in a single contract.

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