by John Darer CLU ChFC MSSC CeFT RSP CLTC
Non qualified assignments are a fantastic settlement planning tool for the settlement of claims or lawsuits sounding in taxable damages, or where a component of the settlement involves taxable damages.
When Did Non Qualified Assignments Begin?
One structured settlement company states today that "non-qualified assignment products were introduced to the market in November 2001". It is noteworthy that non-qualified assignments originated in the 20th Century, rather than the 21st, specifically to help settle workers' compensation claims initiated before August 5, 1997, which did not qualify for IRC 130 qualified assignments. Subsequently, non-qualified assignments were further developed in the 21st Century.
The Connie Bobbitt Case
The 21st Century origin claims are impeached by Bobbitt v. Safeco Assigned Benefits Ser., 1999 Ct. Sup. 11892, 25 CLR 324 (Conn. Super. Ct. 1999), a foiled structured settlement factoring transaction.
"In 1987, the plaintiff, Connie Bobbitt, sustained a back injury during the course of his employment and pursued a workers compensation claim. In December 1993, the plaintiff settled the claim, which had been transferred to the Second Injury Fund, by accepting a $112,500 structured settlement comprised of a $68,500 lump sum payment and $450 per month for ten years.
"As an addendum to the settlement agreement, the parties agreed that the (Connecticut) Second Injury Fund would purchase an annuity from SAFECO Life Insurance Company to discharge the Fund's obligation to make future payments. Paragraph 8 of this addendum provides: "[t]he periodic payments to be received by the [plaintiff] are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by the [plaintiff]." Affidavit of Katherine A. Scanlon, Exhibit A, Settlement Agreement, Addendum, ¶ 8. The addendum also provided that the plaintiff would not "have the power to sell or mortgage or encumber same, or any part thereof, nor anticipate same, or any part thereof, by assignment or otherwise." Id., ¶ 5.
The addendum further provided that the Second Injury Fund would assign its liability under the settlement agreement to SAFECO National Life Insurance Company. Pursuant thereto, the parties entered into an the parties entered into an assignment and release. The assignment agreement, like the addendum to the settlement agreement, provided that the payments called for in the settlement agreement "may not be accelerated, deferred, increased, or decreased." Id., Exhibit B, Assignment Agreement
Bobbitt v. Safeco Assigned Benefits Ser., 1999 Ct. Sup. 11892 | Casetext Search + Citator
What was SAFECO National Life Insurance Company?
SAFECO offered a domestic non qualified assignment through its SAFECO National subsidiary, funded with annuities from SAFECO Life Insurance Company, now Symetra Life Insurance Company. The SAFECO National program limitations meant that periodic payments were restricted to being "substantially equal"and had to "begin within 13 months" [to comply with IRC 72(u)]
What was Barco Assignment Ltd. and When Did It Start?
In or about 1996, Liberty Mutual introduced an innovative non qualified assignment program through Barco Assignments Ltd. Liberty Mutual initially used it as a alternative, more flexible method to settle its own worker's compensation liabilities on claims commenced prior to August 5, 1997 (when IRC 130 was amended to include worker's compensation). Liberty Mutual discovered that the Section 18 A2 of the Tax Treaty Between Barbados and the United States permitted the ownership of annuities to be taxed in the state of beneficial ownership.
A Spotted "Hyphena" 
More fun with word play spotted on the structured settlement firm's website
"Non-Qualified Assignments allow settlements from a non-personal physical injury to be placed in a structure with guaranteed returns on a tax deferred basis..."
Further reading on the history of non qualified assignment in this 2014 blog
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