Can Non US Citizens and Foreign Nationals Receive US based Structured Settlements?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Yes, Non-US Citizens and Foreign Nationals Receive US based Structured Settlements

Travelers to the United States who suffer serious personal injuries on their travels are not precluded from the benefits of structured settlements. Nor are foreign nationals who are parties to lawsuits with jurisdiction in Federal or state courts the United States 

Examples

1. The spouse and children of a successful businesswoman who was killed or rendered paraplegic as the result of an accident while on assignment for work in the U.S.
2. The undocumented alien you represent who was seriously injured on a construction site,
   
3. The 6-year-old who got his fingers caught in the revolving door at a hotel on a family vacation to the United States
   
4. The 10-year-old from Canada, who was scalded by hot coffee on a flight between Orlando and Dallas on the way back from Disney World
5. The child of a deceased US green card holder who is not a US citizen but has a derivative claim.
   
6. The student from Trinidad is severely injured as a bicyclist in Union Square while riding to school at NYU in New York City
   

It is possible for foreign nationals to obtain the same types of structured settlement payments as someone who is a US citizen or permanent resident of the United States.

Some structured settlement annuity issuers will not write lifetime payments on foreign nationals residing outside the United States, while others require periodic proof of living, typically by signing an " I'm not dead yet" affidavit on the presence of a notary public annually.

The reason for this is that the insurance company must consider the risk of an obligation to make payments only as long as a person is alive, when the annuitant lives in an area where verification of such information from public records is difficult. Compare this to the facility of being able to determine mortality of annuitants in the United States via the Darth Vader sounding "Social Security Death Master"

As part of case preparation prior to a settlement conference, plaintiff lawyers should have their foreign national clients complete and submit an IRS Form W-7. 

The IRS form W-7 is used to establish a taxpayer identification number for individuals who are required for U.S. tax purposes to have a U.S. taxpayer ID, but who do not have and are not eligible to get a social security number (SSN). The ITIN is for federal tax purposes only. It does not entitle you to social security benefits and does not change a person's   immigration status or your right to work in the United States. It could take 6-8 weeks to obtain an ITIN, so don't wait until the case is settled.

Download IRS Form W-7

At least three of the life insurance companies issuing structured settlement annuities will mail checks, in US dollars, directly to foreign nationals in their country of residence, whether that be Mexico, Germany, Canada, Trinidad, South Korea, Costa Rica, Guatemala, the Philippines, or any not on the OFAC List

Structured settlements for personal physical injury, physical sickness, workers compensation and wrongful death that are established correctly, afford the payees customized tax-free income under US tax law.

Please note:

• If the plaintiff is a citizen of a country that taxes worldwide income however, there could be issues that need to be addressed. One country for example will only extend a tax exemption if an admitted market (in that country) is used to fund the structured settlement.
• On the other hand, in a case I participated in, favorable income tax rulings for our clients were obtained from both Canadian and Quebec tax authorities on a US wrongful death case where survivor spouse and dependents were Canadian resident nationals, and the structured settlement was set up for the survivors with a US qualified assignment company and annuity issuer.
  

There are still plenty of reasons to do a taxable structured settlement (e.g. if stable income is needed or desired).

Travelers to the United States who suffer serious personal injuries on their travels are not precluded from the benefits of structured settlements. Nor are foreign nationals who are parties to lawsuits with jurisdiction in Federal or state courts the United States 

Examples

1. The spouse and children of a successful businesswoman who was killed or rendered paraplegic as the result of an accident while on assignment for work in the U.S.
2. The undocumented alien you represent who was seriously injured on a construction site,
   
3. The 6-year-old who got his fingers caught in the revolving door at a hotel on a family vacation to the United States
   
4. The 10-year-old from Canada, who was scalded by hot coffee on a flight between Orlando and Dallas on the way back from Disney World
5. The child of a deceased US green card holder who is not a US citizen but has a derivative claim.
   
6. The student from Trinidad is severely injured as a bicyclist in Union Square while riding to school at NYU in New York City
   

It is possible for foreign nationals to obtain the same types of structured settlement payments as someone who is a US citizen or permanent resident of the United States.

Some structured settlement annuity issuers will not write lifetime payments on foreign nationals residing outside the United States, while others require periodic proof of living, typically by signing an " I'm not dead yet" affidavit on the presence of a notary public annually.

The reason for this is that the insurance company must consider the risk of an obligation to make payments only as long as a person is alive, when the annuitant lives in an area where verification of such information from public records is difficult. Compare this to the facility of being able to determine mortality of annuitants in the United States via the Darth Vader sounding "Social Security Death Master"

As part of case preparation prior to a settlement conference, plaintiff lawyers should have their foreign national clients complete and submit an IRS Form W-7. 

The IRS form W-7 is used to establish a taxpayer identification number for individuals who are required for U.S. tax purposes to have a U.S. taxpayer ID, but who do not have and are not eligible to get a social security number (SSN). The ITIN is for federal tax purposes only. It does not entitle you to social security benefits and does not change a person's   immigration status or your right to work in the United States. It could take 6-8 weeks to obtain an ITIN, so don't wait until the case is settled.

Download IRS Form W-7

At least three of the life insurance companies issuing structured settlement annuities will mail checks, in US dollars, directly to foreign nationals in their country of residence, whether that be Mexico, Germany, Canada, Trinidad, South Korea, Costa Rica, Guatemala, the Philippines, or any not on the OFAC List

Structured settlements for personal physical injury, physical sickness, workers compensation and wrongful death that are established correctly, afford the payees customized tax-free income under US tax law.

Please note:

• If the plaintiff is a citizen of a country that taxes worldwide income however, there could be issues that need to be addressed. One country for example will only extend a tax exemption if an admitted market (in that country) is used to fund the structured settlement.
• On the other hand, in a case I participated in, favorable income tax rulings for our clients were obtained from both Canadian and Quebec tax authorities on a US wrongful death case where survivor spouse and dependents were Canadian resident nationals, and the structured settlement was set up for the survivors with a US qualified assignment company and annuity issuer.
  

There are still plenty of reasons to do a taxable structured settlement (e.g. if stable income is needed or desired).