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April 07, 2022

NJ Personal Injury Attorney's "Negative Aspects of Structured Settlements" Falls Short

by Structured Settlement Watchdog

A Fort Lee New Jersey personal injury law firm asks, " What Are the Negative Aspects of a Structured Settlement?" Its response to its own question falls a bit short. 

Here is my response to the Fort Lee personal injury firm's 3 purported claims

What Are the Negative Aspects of a Structured Settlement?

  1. These settlements may have some exceptions of the tax rule, meaning that punitive damages and some attorney’s fees may be taxed.

Response

Punitive damages are not a negative aspect of structured settlements.  Punitive damages are not a negative aspect of settlements if you're the plaintiff. Attorney fees are not a negative aspect of structured settlements. Attorney fees are payable whether or not there is a structured settlement.

A structured settlement is defined under the Internal Revenue Code. Where payments represent damages on account of physical injury or physical sickness, wrongful death, wrongful incarceration, claims for workers compensation the plaintiff/claimant receives payments income tax free.  [ See IRC Sections 104(a)(1), 104(a)(2), 130, 139F]

Read about the Tax Benefits of Structured Settlements

Claims for taxable damages such as punitive damages, interest on judgment and so on, may benefit from a non-qualified structured settlement. These are tax deferred periodic payment solutions.  Where there are taxable damages such as punitive damages or judgment interest, attorney fees on certain taxable damages, a plaintiff attorney ought to engage a settlement planner and consider employing a two-pronged approach, with a Plaintiff Recovery Trust as well as a tax deferred non qualified structured settlement to help mitigate current taxes and maximize the client's net recovery.

Read about Plaintiff Recovery Trust

Attorneys may benefit from structured attorney fees or attorney fee deferred compensation. An attorney may defer well in excess of the limits of qualified pension plans. In fact, there are many options for attorneys. 

Read about Attorney Fee Deferrals and Structured Attorney Fees and Non-Qualified Assignments

2. Unknown changes in the economy could lead to a sudden, drastic change in payments and a plaintiff may receive less.

Response

If you invest in stocks, you can lose value in a minute. People go into structured settlements for safety and income certainty. Insurers are highly regulated, must maintain reserves that are annually audited in each state in which they do business. 5 companies that currently write structured settlement annuities have been in business since the 19th Century.  Modern index linked structured settlement annuities offer options that provide upside potential with downside protection.

The 2012 Executive Life of New York liquidation was an instance where there was a reduction in benefits. It was far from sudden. It was well known in the mid 1980s that ELNY priced very aggressively and that its qualified assignment company had at one time 40% of its assets in junk bonds. I've studied and written about it extensively. 

See for example, Lessons to be Learned from Eric Yerkes v Cessna and Yerkes v Anapol Weiss

3. Insurance companies are sometimes reluctant to disclose how much they would have to pay to buy an annuity to cover the settlement, which means that an attorney can’t make a complete assessment of the benefits of the offer.

Response

All the more reason for plaintiff lawyers to work with a settlement planner. It's so easy to find out the cost. This talking point is nearly 40-year-old relic of a time of the "urban legend" that knowledge of the cost of a structured settlement would trigger a taxable event.  For a comprehensive write up, please see my February 5, 2010 blog Disclosure of Structured Annuity Cost by Defendant Is Not Constructive Receipt - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

There is more to settlement planning than a structured settlement.

A plaintiff attorney should be engaging a settlement planner to (at the very least) price out the cost of the plaintiff's needs.  Advocate from a position of knowledge. Avoid reacting from a position of the unknown.

What is Settlement Planning?

 

Posted at 01:48 AM in Fort Lee Personal Injury, Fort Lee Structured Settlements, Misinformation About Structured Settlements, New Jersey Structured Settlements, Newark NJ Structured Settlements, NJ Structured Settlements, Non Qualified Assignments, Non Qualified Structured Settlements, Structured Settlement FAQ, Structured Settlement Watchdog® |

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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
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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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