by John Darer CLU ChFC MSSC CeFT RSP CLTC
Is a structured settlement an annuity? No a structured settlement is not an annuity, it is a form of settlement that is typically funded with an annuity, but may be funded with other vehicles.
An annuity is a type of qualified funding asset defined under IRC 130(d). A structured settlement can also be funded with United States Treasury obligations.
Las Vegas Personal Injury Firm Gets It Wrong
A Nevada law firm's explanation inaccurately states that a structured settlement is an annuity in a posting entitled "Structured Settlements and Minors Compromises".
Attorney Fee Deferral Is Not Simply the Matter Of Buying an Annuity
The same law firm claims that attorney fees can also be structured. True. They claim "If an attorney wants to defer paying income taxes on a portion of or all of his fees, he can use a Structured Settlement". True. The Las Vegas personal injury law firm then flubs its lines by saying " One example would be if an attorney had a very large fee on a case, he could purchase a Structured Settlement that would pay him a fixed sum per month, or he could receive a lump sum after a fixed period of years. This may be a way for the attorney to defer some income tax to a point in time when he has a reduced tax exposure". The Las Vegas personal injury law firm's explanation is highly inaccurate. Assuming arguendo, that the Las Vegas firm's inaccurate statement that a structured settlement is an annuity were true, an attorney or law firm will not get the tax relief it seeks by simply buying an annuity. To do so would mean that he/she or it would have receipt of the funds to make the purchase.
Furthermore, a lawyer or law firm cannot enter into a settlement with himself/herself or itself and hope his/her or its tax deferral objective is going to work. If any attorney is trying to structure his or her attorney fees, then it has to be done properly.
Seek Professional Advice For Structured Attorney Fees and Other Methods For Attorney Fee Deferrals
Personal injury lawyers have a host of options for attorney fee deferrals. For more information please read