Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

New Ohio Structured Settlement Protection for Minors as Court Scraping Repelled

by Structured Settlement Watchdog

Ohio Amended Law To Restrict Public Access to the Judicial Records of Minors

Effective April 3, 2023, Section 2111.18 of the Ohio Revised Code, Claim for Injury to Ward or Damage to Property – Settlement, was amended to state as follows:

“If the claimant is a minor, records of proceedings pursuant to this section are not subject to disclosure to any person who is not a party to the settlement, or made available for publication or inspection, except upon motion and show of good cause.”

The Ohio amendment to Section 2111.18, shields information about an Ohio minor’s settlement from third parties trawling court dockets (such as structured settlement factoring companies, or those they patronize that do the scraping), looking to exploit a minor once they reach the age of majority.

Two decades of history has shown that the structured settlement factoring industry is unable to self-regulate effectively.

 

 

 

 

 

Are Structured Settlement Annuities Taxable? It's All About The Damages

by John Darer CLU ChFC MSSC CeFT RSP CLTC

“Is a structured settlement annuity taxable? And is the initial amount that I get from the settlement taxable?”

Asked by a rhetorical question posed by a settlement planning firm.

Here is their response:

"If the origin of the claim is based on a personal physical injury, Section 104[a][2] of the Internal Revenue Code states that the initial principal amount on the settlement that the client receives is not taxable. It is tax-exempt at the state, local, and federal levels. however, if the client decides to invest their settlement funds, then the interest that grows from the investment is taxable. One way to avoid this is to establish a structured settlement annuity for the client to receive their settlement funds. All of the interests (sic) that grow inside of the structured annuity will also be tax-exempt. Payments received from a structured settlement annuity do not need to be reported on any tax return form (1040) or any tax document. Both the principal amount and interests (sic) in the annuity are completely tax exempt".

Here's the thing...

1. The Internal Revenue Code is Federal tax code. While there may be state and local tax laws that are modeled after federal tax law, those are the dominion of the individual states or local governments and their respective departments of revenue. 
2. IRC Section 104 (a)(2) permits a taxpayer to exclude from gross income "the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or physical sickness" Source: Internal Revenue Service irs.gov

Key Structured Settlement Takeaway

The key take away is that under IRC 104(a)(2) it is the damages are tax exempt not the annuity

With a properly established structured settlement, that starts with an obligation to make future periodic payments as damages on account of personal physical injury, where the obligation is generally assigned by way of a qualified assignment, and then funded with a structured settlement annuity or structured settlement annuities as a qualified funding asset, each of the future payments is tax exempt.

Taxes and Structured Settlements. It's All About the Damages!

 

Last updated May 11, 2024

Structured Settlement Gender Card Played and...Really?

by Structured Settlement Watchdog®

While I was pleased to learn through a series of nationally syndicated press releases that a well respected industry colleague had taken over a structured settlement firm, I was disappointed that this colleague decided to play "the gender card' by claiming that hers was the only female owned structured settlement firm in the United States.  That is simply not true and disrespectful of other respected industry colleagues and entrepreneurs who run female owned structured settlement firms. 

Riding to"rescue" the honor of:

• Kelly Ramsdale
• RobinYoung
• Traci Kaas
• Dorothy Scanlan
• Michelle Pardue
• Carola Davis
• Sara L. Van Fleet
• Karen Meyers  (co-owner)

and leaders of agencies such as Kim Taylor, Melissa Evola,  past leaders of the structured settlement trade association like Kyle Hording and anyone else I may have left out who legally run "their own companies" as part of a franchise system.

Other than a factor to be used in pricing life contingent structured settlement payments, sex is not an issue when it comes to structured settlements or the competency of the structured settlement professional.

 

 

 

 

 

 

How Are Ohio Personal Injury Settlements Taxed?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

How Are Ohio Personal Injury Settlements Taxed?

Someone using the Bing Search engine has a question concerning the taxation of personal injury settlements  "I'm getting a settlement for a car accident what would the Capital Gains Tax in Ohio be?"

Comments:

1. The amounts you receive as compensation for damages related to a personal physical injury (such as what one might sustain in a car accident) are generally income tax free. There is a specific exclusion for such damages at Internal Revenue Code Section 104(a)(2).
2. You will not be able to exclude the part of your recovery for past medical expenses, that you have already taken a tax deduction for.
3. Capital gains are the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property.
4. A capital gains tax is a levy on capital gains. A personal injury lawsuit settlement is not a capital gain.
   
5. You may be able to deduct a capital loss to the extent that it exceeds $100 (new for 2010) with a limit of 10% of your Adjusted Gross Income (AGI)
6. Casualty loss proof.   According to the IRS, for a casualty loss, your records should show all the following
   

   • The type of casualty (car accident, fire, storm, etc.) and when it occurred.
   • That the loss was a direct result of the casualty.
   • That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage.
   • Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.

   Payments from a structured settlement that is established in your Ohio personal injury case as damages for physical injury, physical sickness, wrongful death or workers compensation are excluded from gross income per IRC Sections 104(a)(2) and 130. Constructive or actual receipt of funds used to establish the structure, must not have occurred.
   

    

Structured Settlement Payments Can Be Laddered Like Bonds to Provide Stable Income

by John Darer CLU ChFC MSSC RSP CLTC

Accepting your settlement in a structured settlement bolsters your finances via stable income payments.

Structured settlements are free of ongoing investment management, portfolio management or wrap account fees and enjoy tax free status pursuant to IRC Section 130(c) and the tax exemption provided in 104(a)(1) or 104(a)(2) of the Internal Revenue Code.

While some people like to receive a portion of their structured settlement payments for life, others have different ideas and needs which might be addressed with period certain structured settlement payments, deferred lump sum structured settlement payments, increasing payments, variable structured settlement payments and many other possible combinations.

If you or your client is the type of person, who doesn't need lifetime income and would be interested in a tax-free municipal bond or treasury bond and are being advised to follow a "laddered bond" strategy, consider that a structured settlement can be designed to simulate any kind of bond held to maturity by creatively utilizing multiple payment streams. By pairing a period certain payment with a guaranteed lump sum payment matched respectively to the bond duration and maturity date, we can accomplish something like a bond ladder in many aspects except that the annuities are not traded on the open market. If you compare the yields earned on the laddered bond strategy, from your favorite stockbroker to the yields offered by designing a "structured settlement bond simulation" ladder you will find the structured settlement yields to be highly competitive. The strategy works for all types of plaintiffs and all levels of sophistication.

Some could argue that the real bonds are readily marketable and thus hold an advantage. But consider that if you were really desperate to "cash out", with Court approval you could sell your structured settlement payment rights to a factoring or transfer company.  The fee for doing so (discount rate to calculate the lump sum) is quite a bit more conceptually than the penalty for breaking a CD and I probably wouldn't recommend it but at least you know it's there. A competent structured settlement planner and/or other advisers that you are working with should be able to advise you on issues such as having a reserve and budgeting so that you don't fall into the desperation hole.