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December 28, 2016

Can Structured Settlement Annuities Be Sold After They Are Established?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Can Structured Settlement Annuities Be Sold?

No.  Structured Settlement annuities may not be sold. However the rights to receive structured settlement payments can be sold.
 
This is an important distinction that even confounds many  structured settlement factoring companies and even some commentators and advertisers for structured settlement factoring companies and the media.
 
One of the leading structured settlement producers in my industry. a California agent, observes on his blog "Factoring companies, which also buy lottery winnings, casino jackpots and other annuity-based payouts, use television and print advertising to reach individuals with structured settlements, offering to "buy the settlement annuities" at deeply discounted rates and paying the individuals a lump sum. (These lump sums are fully taxable, unlike annuity payments)"

Things to Consider

1. A structured settlement annuity sold is a fallacy. Structured settlement annuities cannot be sold once established, since they are generally owned by a qualified assignment company,

By virtue of the agreement that creates the structured settlement the payee has no ownership interest in the annuity contract.  Standard language in a settlement agreement & release: 

"Neither Payee, nor any beneficiary of theirs, nor anyone acting on their behalf shall have any right of or incidence of ownership whatsoever in the annuity policy; shall have any right to accelerate or defer payments due from the Fund or Assignee; shall have any right to increase or decrease any payments due from Assignee; shall have any other right of dominion or control of or over the annuity policy, which shall be owned exclusively by Assignee, 

2. When a structured settlement factoring transaction occurs it involves the sale and transfer of the right to receive a defined payment or series of payments in exchange for cash

Restating from above, while a structured settlment payee cannot sell the structured settlement annuity that's funding the structured settlement payment due them, they can sell stuctured settlement payment rights. This is an important distinction.

A judge must find that the sale and transfer as being in the best interest of the payee and applicable dependents. The transaction must comply with applicable state and federal law.

3. Should a structured settlement payee sell his/her/their structured settlement payment rights the lump sum IS NOT taxable. 

This is what the IRS Factoring Audit Technique Guide says:

"When a structured settlement factoring transaction occurs, and the applicable requirements of Internal Revenue Code Sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the time the original structured settlement was entered into, the factoring transaction does not affectthe application of the provisions of such sections to the parties to the structured settlement in any

taxable year. In other words, a structured settlement factoring transaction will not disturb the original tax treatment of the settlement for the parties to the settlement. IRC § 5891(d).  [ at page 13]


                                                                                              

It is well settled that factored structured settlement payment rights are not annuities 

  1. Structured settlement factoring is a sale of receivables.

    A. DRB Capital -- Structured Settlement Receivables Successfully Acquired | News & Insights | Arnall Golden Gregory LLP (agg.com) "DRB Capital, LLC, is a Florida-based specialty finance company that buys and sells structured settlement receivables, such as annuity payments and court-ordered payments"  and "As a result of the deal, DRB, which has over $1 billion in committed capital and employs more than 150 people, was able to add a substantial inventory of structured settlement receivables to its balance sheet".

    B. Genex Capital Corporation Issues "Recall Notices" on Certain Pre-2015 Genex Capital Receivables - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com; also see
  2. Coral Springs Co. Wholly Misleading Statement Re "Purchase of Structured Settlement Annuities" - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)

Last updated September 18, 2023

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Guide to Structured Settlements 2025

  • What is a Structured Settlement? What You Need to Know
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  • Rated Ages and Structured Settlement Cost
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  • Top Structured Settlement Annuity Companies 2025
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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.
  • 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
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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
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  • 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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    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 July 10, 2024

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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
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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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