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August 12, 2016

What is a Structured Settlement Receivable? | Structured Settlement Terms

by John Darer CLU ChFC MSSC CeFT RSP CLTC

What is a Structured Settlement Receivable?

Structured settlement receivable is an investment that provides the investor with a single future payment or a series of future payments funded by the assignment or transfer of future payments from a structured settlement contract. A structured settlement derivative is sometimes referred to as a "recycled structured settlement". 

Investopedia defines "derivative" as a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, index or security.

Structured settlement derivative risk
Origination risk on structured settlement derivatives can bite an investor who is misled into thinking it is an annuity and that purported "statutory protections" on an "SMA'  are about as useful as an umbrella to an elephant

Structured settlement receivable is a more accurate term than secondary market annuity

While some refer to a structured settlement derivative as a secondary market annuity or SMA, such use of the term "annuity" by the salespeople  is false or misleading. 

Annuity

  • An annuity is a regulated financial product. Each state and the District of Columbia has its own regulator.
  • The life insurer issuing the annuity must be admitted in your state
  • The annuity contract must be filed with the state insurance and approved for sale
  • The insurer is subject to annual audits for reserve adequacy.
  • An annuity can only be sold by insurance agents who are licensed in your state who have solicitation agreements with the annuity issuer.
  • Solicitation agreements with insurers require errors & omissions coverage
  • State law generally requires the legal address of the company and the address of the home office to be clearly identified.
  • Those with criminal records  are typically barred from obtaining an insurance license

Structured Settlement Receivable (a/k/a Recycled Structured Settlement)

  • Not a regulated financial product
  • Underwriting is not performed by an admitted or licensed insurance company
  • Exposure to origination risk if the deal does not comply with the relevant state structured settlement protection statute and the originator is no longer in business when that happens.  [ at time of publication there are legal actions pending that seek to vacate transfer orders].  In more than 200 recent instances structured settlement transfer orders were forged by a paralegal or the lawyer representing the structured settlement purchaser/originator.
  • May be offered by unlicensed and unregulated sales people who misrepresent the structured settlement derivative as an annuity and the misrepresent statutory protections in the event of insolvency of the annuity issuer underlying the structured settlement derivative.  A proposed model act would specifically exempt structured settlement derivatives from statutory protections.

Structured settlement receivables are bought up by originators, and generally packaged and sold as a securitizations to institutional investors, including hedge funds, banks and even insurance companies. Structured settlement receivables began to be marketed to invividual investors when secondary market credit lines dried up during the 2008-2009 financial crisis. 

Personal injury attorneys have been known to invest in structured settlement receivables.

Upon information and belief, in or about 2010, certain settlement planners began offering structured settlement receivables to injury victims, including brain damaged babies!  These structured settlement receivables investments have been offered straight up, in a trust, in an LLC that receives the cash flows, in an IRA. Some have used a qualified settlement fund to initiate such strategies.

 

 

Posted at 03:15 PM in Albany New York Structured Settlements, Boston 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, Connecticut Settlement Planning, Corpus Cristi Structured Settlements, CT Structured Settlements, Dallas Fort Worth TX Structured Settlements, Hartford CT Structured Settlements, Jacksonville Florida Structured Settlements, Recycled Structured Settlements, Rhode Island Structured Settlements, Rochester Structured Settlements, Sacramento Structured Settlements, San Diego Structured Settlements, San Francisco Structured Settlements, Santa Monica Structured Settlements, Sarasota Structured Settlements, South Carolina Structured Settlements, St. Louis Structured Settlements, Stamford Structured Settlements, Staten Island Structured Settlements, Structured Settlement Factoring News, Structured Settlement Investments, Structured Settlement Payment Rights, Structured Settlement Watchdog®, Structured Settlements in Florida, 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 Maine, Suffolk County Structured Settlements, Sumter County Structured Settlements, Syracuse Structured Settlements, Tampa Structured Settlements, Texas Structured Settlements, TX structured settlements, VA Structured Settlements, Virginia Structured Settlements, Washington Structured Settlements, West Virginia Structured Settlements, Westchester Structured Settlements, White Plains Structured Settlements, Wisconsin Structured Settlements |

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Guide to Structured Settlements 2024

  • 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 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.
  • 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.
  • 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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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.
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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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