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

Structured Settlement Annuities Are Not Tax-Free Insurance Contracts | Wait! What?

by Structured Settlement Watchdog

Tax-Free Structured Settlement Annuity |  No Such Thing

You may encounter the term "tax-free structured settlement annuity" on the Internet. Be mindful that there is no such thing.

Don't worry annuitants, there is a tax exemption, but not exactly the way it's being presented in many cases by competent settlement practitioners and reputable settlement companies that should know better.

Examples:

• One settlement planner's website says "Structured settlement annuities are not taxable — they're completely tax-exempt"
• Another settlement planner's website says "Tax-free Income: 100% of structured settlement annuity is tax-free – including the settlement award, principal, ongoing payments and interest earned".
• "a tax-free structured settlement annuity to meet medical and living expenses, or other financial planning tactics".
• "A tax-free structured settlement annuity qualifies for special tax treatment under IRC §§104(a)(2) and 130(c)"
• "A claimant cannot accept a cash settlement and then purchase an income tax-free structured settlement annuity on his/her own"
• The best time to start preparing for your financial future is right now. Consider the many advantages of a Tax-Free Structured Settlement Annuity.*"
• " I work with the Tax Free Structured Settlement Annuity Product and Various Trust products"
  

The Damages That the Structured Settlement Payments Represent is The Key

While some of these statements may seem plausible, the nature of damages that the payments represent is a critical factor, not the annuity contract itself. 

Think about the applicable tax code sections cited in every settlement agreement that involves a structure.  The word "annuity" does not appear in IRC Sections 104(a)(2) or IRC 130(c). 

" Annuity" appears in IRC 130(d), which  provides the requirements an annuity must meet to qualify as a qualified funding asset, including the requirements that (i) the periods of the payments under the
annuity contract are reasonably related to the periodic payments under the qualified
assignment, and (ii) the amount of any such payment under the contract does not
exceed the periodic payment to which it relates.

Furthermore, a structured settlement annuity is a versatile insurance contract that can be used for a variety of applications, including structured settlements being used as a funding vehicle for settlements involving periodic payment of taxable damages and structured installment sales. 

I encourage my industry colleagues to take greater responsibility, hopefully with the recognition that inaccurate statements end up getting parroted or cited by others.

See my comprehensive write up on Settlement News Network What's a "Tax-Free Structured Settlement Annuity"? (4structures.com)

Last updated September 29, 2023

 

What Is A Structured Settlement Annuity? | Separating Fact From Fiction

by John Darer CLU ChFC MSSC CeFT RSP CLTC

What is a Structured Settlement Annuity?

• A structured settlement annuity is insurance product that (1) can provide multiple payment streams, as well as (2) different types of structured settlement payments,  in a single annuity contract that can be customized to a person's needs.
• A structured settlement annuity is often (but not exclusively) used as a "qualified funding asset", as the latter term is defined by IRC 130(d).
  

What is a Qualified Funding Asset?

For purposes of IRC 130(d), the term “qualified funding asset" means any annuity contract issued by a company licensed to do business as an insurance company under the laws of any State, or any obligation of the United States, if—

(1)  such annuity contract or obligation is used by the assignee to fund periodic payments under any qualified assignment,

(2) the periods of the payments under the annuity contract or obligation are reasonably related to the periodic payments under the qualified assignment, and the amount of any such payment under the contract or obligation does not exceed the periodic payment to which it relates,

(3) such annuity contract or obligation is designated by the taxpayer (in such manner as the Secretary shall by regulations prescribe) as being taken into account under this section with respect to such qualified assignment, and

(4) such annuity contract or obligation is purchased by the taxpayer not more than 60 days before the date of the qualified assignment and not later than 60 days after the date of such assignment.

 

It should be noted that the term "structured settlement annuity" does not appear in IRC 130(d).

 

Examples of Where a Structured Settlement Annuity Would Not Be Used as a Qualified Funding Asset 

 

A structured settlement annuity can be used in cases involving taxable damages.  A non-qualified assignment is used in such cases  (or parts of cases) involving such damages.

 

Examples of What is NOT a Structured Settlement Annuity

• Acquired structured settlement payment rights  (the rights to someone else's structured settlement).  See the National Association of Insurance Commissioners' statutory issue paper No. 160, issued April 6, 2019.  Plaintiffs, Counsel, Guardians Ad Litem, Probate and Surrogate judges and investors, should be leery of any attempt by a settlement planner or financial adviser to pass off the direct or indirect acquisition of factored structured settlement payment streams as a structured settlement annuity.  Such unregulated products carry higher risks than structured settlement annuities and may not have the same statutory protections.
• A retail single premium immediate annuity is an annuity, but it is not a structured settlement annuity
• A retail single premium deferred annuity is an annuity, but it is not a structured settlement annuity
• A retail deferred index annuity is an annuity, but it is not a structured settlement annuity
• A retail fixed index annuity is an annuity, but it is not a structured settlement annuity

None of these becomes a structured settlement annuity just because it is owned by an independent assignment company.

What Do Structured Settlement Annuity Issuers Say?

A quick survey of insurance companies underwriting structured settlement annuities shows that about half of them specifically identify with structured settlements. Not a single one would sell a structured settlement annuity to an independent assignment company.  

1. The Prudential Insurance Company of America

Single Premium Structured Settlement Annuity Certificate

2. Pacific Life Insurance Company/ Pacific Life and Annuity Company  (New York)

Single Premium Settlement Annuity

3. USAA Life  Insurance Company  

Single Premium Immediate Annuity  (For Use as a Funding Asset in Structured Settlement Assignments)

4. New York Life Insurance Company

Lists Plan as Structured Settlement on contract

Others do not.

Would any structured settlement annuity issuer sell a structured settlement annuity to an independent assignment company?

None of the structured settlement annuity issuers that we canvassed for this post on November 2, 2021 would sell a structured settlement annuity to an independent assignment company.

Assignment Fees

With one exception, Qualified Assignment fees will not be over $750 for a true structured settlement annuity

You may find some independent assignment companies charging higher fees, perhaps even asset based qualified assignment fees that are a significant multiples of what the insurance company subsidiary qualified assignment companies charge.

Last updated August 19, 2023

 

Structured Settlement | What is a Structured Settlement | Definition of Structured Settlement

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

What is a Structured Settlement?

A structured settlement is a negotiated financial or insurance arrangement through which a claimant or plaintiff agrees to resolve a personal injury tort or wrongful death claim by receiving all or part of a settlement in the form of periodic payments on a agreed customized schedule, rather than as a lump sum.

A structured settlement is a negotiated agreement

Definition of Structured Settlement per IRC §5891(C)(1)

The term "structured settlement" means an arrangement—

(A) which is established by—

(i)

suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or

(ii)

agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and

(B) under which the periodic payments are—

(i)

of the character described in subparagraphs (A) and (B) of section 130(c)(2), and

(ii)

payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

 

 

 Read What You Need to Know About Structured Settlements

 

 

Non Qualified Structured Settlements

Structured settlements can also be used for taxable damages, or for tax exempt damages that are not specifically included in IRC §130  (e.g wrongful imprisonment, wrongful conviction which are exempt under IRC §139F).

How Are Structured Settlements Funded?

Structured settlement payments are generally funded and backed by highly rated and regulated life insurance companies, a number of which have been in operation for more than 100 years.  Structured Settlements can also be funded with obligations of the United States Government (Treasury Funded Structured Settlements)

Structured settlements have received widespread bipartisan support from the U.S. Congress since the enactment of the Periodic Payment Settlement Act of 1982. 

Last updated August 5, 2023

 

 

Minors Personal Injury Settlements | The Negative Consequences of CDs v Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

If You Bank It, Don't Bank on Maximum Financial Aid

Structured Settlements Avoid the Kiddie Tax and Can Be Designed To Minimize Impact on Financial Aid

Parents or guardians of minors who are receiving a settlement in a personal injury or wrongful death case, should give due consideration to how the settlement will impact the ability to receive financial aid for college.  Having a lot of money in a bank account, or in a CD coming due at age 18, could reduce or even eliminate, the possibility of receiving needs based financial aid.  Depending on the school, the FAFSA (for federal student aid) or CSS Profile (for institution based student financial aid) may be used. Each of those forms requires a significant percentage of student assets be used in its calculation of Expected Family Contributions (EFCs). At present that is 20% for FAFSA and 25% for the CSS Profile. 

Structured Settlement Annuity is Not an Asset of Minor

A structured settlement annuity is not an asset of the minor. The structured settlement annuity is owned by a qualified assignment company in most cases. In rare instances it is owned by the Defendant or Defendant's insurer. The minor only has the right to receive payments when due and would have had no control over the establishment of the structured settlement. Furthermore, in accordance with terms of the structured settlement and in compliance with tax code, the periodic payments cannot be accelerated, deferred, increased, or decreased, by the recipient of such payments".  [ see IRC 130(c)(2)(B)]

Tax Difference Between Structured Settlements and CDs

Damages for personal injury or wrongful death are income tax free,  subject to IRC 104(a)(2). While a lump sum from a personal injury or wrongful death settlement would be income tax free,  the interest on a lump sum invested in bank CDs would be taxable. So, for example if you have a 12 year old son and invest in a 5 year CD with Barclay's at time of posting, it would earn 2.75%. The 2.75% would effectively be reduced by the tax on the interest, which could be inflated if there is a kiddie tax  [ See below and  Taxable Equivalent Yield | What is The Value of the Structured Settlement Tax Benefit?]

Kiddie Tax Impact

The interest on a minor's personal injury or wrongful death settlement could be taxed at a high rates if invested in CDs, or other taxable investments. The Kiddie Tax is applied to the amount of the child's unearned income that exceeds $2,100. The Kiddie Tax rate is parent's or parents' marginal tax rate (the highest rate applied to the last dollar earned) which could be as high as 37%, for the 2018 tax year.  [ see IRS Topic 553  Tax on a Child's Investment and Other Unearned Income (Kiddie Tax)]

Notwithstanding the above, there is substantial risk of wasteful dissipation in making a large sum of cash available at age 18. A teenager or young adult could benefit from wealth orientation by speaking to a Certified Financial Transitionist.

Read more about Structured Settlements for Minors

 

NY Settlement Planning Options | Free Tuition at NY State Colleges for Qualifying Families

by John Darer® CLU ChFC MSSC RSP CLTC

On April 9, 2017, the New York State Senate passed a budget that includes a $163-million annual initiative to offer free full-time undergraduate tuition at public colleges and universities to students with an annual family income of $125,000 or less. No age limit! The new program represents a first in the United States and includes students from many families whose income levels would be considered middle class.

Eligible Students Can Make Use of The NY Excelsior Scholarship Starting With Fall Semester 2017

The Excelsior Scholarship

It's called The Excelsior Scholarship and it was first proposed by New York Governor Andrew Cuomo in January 2017. The program is slated to be phased in over the next few years, but families earning $100,000 or less will be able to take advantage of the scholarship beginning with the Fall semester 2017 with increases in family income to be phased in  $110,000 in 2018 and $125,000 in 2019. Students who qualify for The Excelsior Scholarship may avail themselves of a wide selection of colleges and campuses at City University of New York (CUNY) or  State University of New York (SUNY). The State University of New York claims to be the largest comprehensive system of higher education in the United States, with 64 college and university campuses located within 30 miles of every home, school and business in the State of New York.

An April 8, 2017 press release issued by Governor Cuomo's office estimates that nearly 80% or more of the 940,000 families with college-aged children would qualify for tuition-free college under the Excelsior Scholarship program.

 

How Does It Work?  What is the potential savings on tuition? When Will Excelsior Scholarship Applications Be Available?

An Excelsior Scholarship recipient can receive up to $5,500 from the Excelsior Scholarship, minus any amounts received for TAP, Pell or other scholarships. The remainder of your tuition charge will be covered through a tuition credit paid through SUNY or CUNY.

It adds up to $25,880 at current rates for a 4 year degree at SUNY schools and $17,400 at current rates for a 4 year degree at CUNY schools, where tuition can go up by a nominal $200 annually.

 

The New York website indicates that Students in an undergraduate program of study normally requiring five years are eligible to receive the award for five years

 

New York state's website says that the application for the Excelisor Schiolarship will be first available in May 2017. Check the link at the bottom of this post and sign up for alerts.

Are books, fees and room and board covered by The Excelsior Scholarship?

No

 

Other Eligibility Rules to Obtain and Continue to Recieve New York's The Excelsior Scholarship?

• Must be full time (i.e. 12 credits per term, 30 credits per academic year, including summer school).  Important Note: Students with disabilities will not be required to register full time to be eligible for the scholarship at SUNY
• Must maintain the necessary grade point average to graduate on time.
• Must be a citizen of the United States, permanent resident or a refugee.
• Currently undocumented aliens are not eligible.

Do you qualify for The New York Excelsior Scholarship If Your Family Earns More Than The Threshold income?

If your family earns more than that, you don't get the scholarship. There is no sliding scale and the threshold does not take into consideration how many children are in the family.

Students Must Remain in New York For The Same Number of Years That They Received.  Why?

If you receive the scholarship for 4 years a student must remain in New York for 4 years. If you don't remain then the scholarship is converted to a loan. Yuck!

Think about it, the Excelsior Scholarship is a costly program that potentially does a lot of good.  By providing education that creates more job opportunities for more people to get ahead and potentially earn more money that can be taxed by New York State to finance the program is good business.  The fact that there is no age limit expands the opportunity.

Settlement Planning Opportunities and Considerations With The Excelsior Scholarship and Collateral Benefits

• Potentially helpful on small to mid-size personal injury or wrongful death settlements involving minors as resources allocated to fund tuition could be deferred longer via a structured settlement to help fund graduate school, in New York (so your scholarship doesn't convert to a loan!).
  
• Consider as an example a minor's settlement involving a 15-16 year old. The short deferral period for a lump sum payments from a structured settlement at 18 or 19 is not cost efficient in the current environment, but payments beginning at age 22 to help pay for grad school may very well be.
• Let's take a look at the math. Assuming  a 15 year old currently finishing freshman year in high school and expected to start college in 2020 and using the rates of Liberty Life Assurance Company of Boston for illustrative purposes, the estimated SUNY 4 year tuition cost, assuming $200 annual increases each year until and through the 4 years of college would be $29,480.  That could be funded at current rates for for about $27,856.  If the same amount of money were to instead pay only two annual payments to help with grad school starting July 2024, the total payout would be $33,058. The interest gain accumulated by using taking advantage of Excelsior and using the same premium to fund the graduate payments results in about 3.2 times more interest!
  
• Another option would be to take the same amount of premium generated by not having to fund the annual tuition starting with freshman undergraduate and fund a 5 year income stream after college graduation to help subsidize independence. A monthly payment of $586.09 ($7,033.08 annually) could be generated based on book rates of Liberty at time of posting.
• Given that there are no age restrictions, on the one hand a New York resident, possibly a single parent, who had a child or children at a very young age and may have curtailed some education to raise a family, has affordable options and can now go back to school and open a new world of opportunities for themselves and their families.
• On the  other hand an ambitious senior could get a college degree, just like my maternal grandmother who went back to college after my grandfather died and earned her Bachelors at age 80.
  
• Be sure to consider the cost of room and board and fees not covered by the scholarship.
• Stop structured settlement cash now pushers dead in their tracks. As long as the student is willing to go to one of the many fine SUNY or CUNY schools this should seriously eliminate college tuition as an excuse to sell structured settlements. Regulators and judges reviewing transfer petitions will have to be on their toes.

What Excelsior Scholarship Does Not Cover

• Room and Board and Fees
• Graduate School

 If you want to go to a non SUNY or CUNY university, or a school outside of New York Excelsior is not going to help.  But if you want to maximize the resources you could attend undergraduate school in New York and one of the many excellent grad schools in New York and then if you like go for another degree at a non New York school.

Useful Resources About The Excelsior Scholarship and Other Financial Aid for Education

• State of New York    you can sign up to get an alert when the application becomes available
• High Education Services Corporation's Get on Your Feet Program, Federal student loan debt relief for New Yorkers.

New York Structured Judgments | The Interest Rate Lever on Present Value

by John Darer CLU ChFC MSSC RSP CLTC

The low interest rate environment continues to favor New York plaintiffs willing to try strong liability cases due to a 30 year old statutory growth rate juxtaposed against today's low interest rates.

1. The 4% statutory growth rate under New York's Article 50-B statute, set in 1986, now exceeds the 10 year bond by 2.63%.
2.  Long term damage awards which used to afford a significant discount no longer do so, with the net discount rate closing in on -2%. A negative 2% discount rate is a growth rate of 2%.

What does this mean?

• Assume $1,000,000 net future pain & suffering (after accounting for the first $250,000 in future damages under Article 50-B)
• Instead of a discount, with a net growth rate of 2.63% for 10 years the present value adds $26,000 plus per year for 10 years to the verdict number.
• When calculating the present value of other elements of damages like future medicals and future lost earnings, you could be adding close to $20,000 annually per $1,000,000 to the verdict, for the number of years awarded by the jury
• Then interest gets added onto that at 9% (less if state or city government)
• Do the math.

 

 

 

Rated Ages Boost Yield on Lifetime Structured Settlements, Reduce Cost of NY Structured Judgments

by John Darer® CLU ChFC MSSC RSP CLTC

A rated age will be issued if the structured settlement annuity issuer believes the plaintiff has an impaired life expectancy.  The rated age is simply the age used to price the structured settlement annuity, or New York structured judgement annuity, as opposed to the actual age

Rated Age Structured Settlements Can Boost Your Potential Lifetime Annuity Payout

• From the plaintiff's perspective,  rated age will serve to boost the yield per settlement dollar allocated to a structured settlement.
• From a defendant or insurer's perspective,  a rated age will serve to reduce the cost of settlement offers for paying life contingent future damages.

How Does a Rated Age Help Reduce the Cost of A New York Structured Judgment?

A rated age could reduce the cost of a structured judgment in New York for a Defendant.  Certain aspects of a structured judgment, pursuant to CPLR 50A or CPLR 50B are life contingent, future medical expenses and future pain & suffering.  A rated age would most likely impact future medicals, which stretch many years into the future,  Under New York law, future pain & suffering is compressed into 8 years for Article 50-A and 10 years for Article 50-B structured judgments,  so it would need an exceptionally high rated age to have any impact.

High rated age structured settlements may hold an advantage over other vehicles and even a modest amount allocated from a large settlement, can effectively be used as an  "investment backstop" to assure a certain level of future income, even if everything else is lost.

Moreover payments from structured settlements are income tax-free pursuant to Sections 104(a)1 or Section 104(a)(2) and 130(c) of the Internal Revenue Code. A structured settlement offers contractual certainty as opposed to hypothetical investment possibility. A structured settlement blended with a settlement trust,such as a Settlement Preservation Trust or Special Needs Trust (Supplemental Needs Trust in New York state),in tandem, may offer a plaintiff a measure of liquidity, contractual guarantees, upside potential along with downside protection.

Index-Linked Structured Settlements for Minors Catch The Eye of New York Judges

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

New York judges are approving index-linked structured settlements for minors in an Infant Compromise, as part of a proposed settlement planning allocation to complement fixed rate structured settlements in the current interest rate environment.  What's the attraction? Priced at approximately the rate of a structured settlement with a 2.3% COLA, index-linked structured settlement payment riders on structured settlement annuities, issued by Pacific Life and Annuity Company in New York* and Pacific Life Insurance Company elsewhere, are ideally suited for a plaintiffs with a long time horizon.

Indexed Linked Annuity Payment Adjustment riders are generally not a cost effective solution for short term structured settlements

The initial adjustment cap since the product was introduced has been 5%.  That's 5% increase in payments on completion of the first year of payments , but the cost of a 2.3% COLA.  If there was a down market the following year the minor's payments stay the same, averaging out to a 2.5% increase annually over the two years with the exemplar.   If you are concerned about low interest rates and have the time to spread out your payments then an allocation to the index-linked structured settlement is a good alternative, as some New York judges have discovered.

Download Index Linked Structured Annuity Pacific Life brochure

The ILAPA rider can be used for plaintiffs or structured attorney fees.

*Pacific Life & Annuity Company will issue annuity policies if ANY of the following occur inside the state of New York: solicitation, sales, negotiation of settlement, court/legal action, or claimant/payee residence.

Last updated August 28, 2023

New York CPLR § 5003-a Prompt Payment of Settlement :The Structured Settlement Broker is Not Defendant

by John Darer® CLU ChFC MSSC RSP CLTC

The structured settlement broker for the Defendant on a recent case got their nose out of joint after I instructed the plaintiff lawyer to send directly to defense lawyer, one original of the settlement agreement  and release, qualified assignment agreement and Stipulation of Discontinuance by Certified Mail, with the remaining originals to be routed through me and then on via my counterpart.  But why?

New York's CPLR 5003-a was enacted in 1992 to encourage prompt payment of settlements (see Cunha v Shapiro, 42 AD3d 95, 101; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5003-a: 121). The statute requires any settling defendant, subject to certain exceptions (set forth in CPLR 5003-a[b], [c], [d]), to pay all sums due to any settling plaintiff "within twenty-one days of tender, by the settling plaintiff to the settling defendant[s], of a duly executed release and a stipulation discontinuing [the] action executed on behalf of the settling plaintiff"(CPLR 5003-a[a])   When the release and stipulation of discontinuance are tendered by mail, the 21-day period is measured from receipt of the documents (see Leipold v Arnot Ogden Med. Ctr., 46 AD3d 1299, 1300; Cunha v Shapiro, 42 AD3d at 101). If the settling defendant fails to pay the sum due under the settlement agreement within 21 days of tender of the required documents, the statute authorizes the plaintiff to enter, without further notice, a judgment in the amount of the settlement, which is to include interest, costs, and disbursements (see CPLR 5003-a[e]).     Source: David M. Gottlieb, Esquire.

The statute does not appear to have any provision for the "21 day clock" starting to run when the documents are received at the office of the structured settlement broker.

I'm certainly willing to be corrected if I'm wrong, but the statute does not appear to have any provision for the "21 day clock" starting to run when the documents are received at the office of the structured settlement broker. Some structured settlement brokers conducting business that involves cases with New York jurisdiction have their paperwork handled by remote independent contractors to the structured settlement broker, who are not even based in the same office; in some cases not even from the same state.

Is the structured settlement broker the agent of the Defendant for purposes of "tender" or is it an agent of the insurance company? How about the independent contractor who is handling the administration for the broker?

Typically structured settlement brokers when working for defendants are retained by an adjuster for the insurer. In some cases the defense attorney retains them with the knowledge and approval of the insurer or market leader.

It is clear that the defense attorney is an agent of the Defendant and thus, in my personal opinion, one original set of documents should be delivered there. Looking for a parallel, with the disclosures that must be made under the New York Structured Settlement Protection Act, the obligation is on "the Defendant or the Defendant's legal representative", NOT the structured settlement broker or the defendant's insurer.

Delays which result in failure to comply with the statute can prove costly for the defendant or insurer and thus, in my personal opinion, noses ought to stay in place.

For more information here is a good article about New York's statute concerning prompt payment following settlement. In a 2nd department case decided in 2010 and discussed in the aforementioned article, the Appellate Division overturned a lower court ruling that supported the defendant's contention that the completion of a IRS Form W-9 was a condition precedent for payment of the sum due in a settlement of a personal injury claim.

 

 

 

Minimum Size Structured Settlement For Minor's Personal Injury Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

What is the minimum size for a structured settlement?  At least two of the primary companies writing structured settlement annuities will accept a minimum of $5,000. But does it make sense to structure $5,000?

Says one industry colleague in a bar publication, "Is your client a minor? For example, $5,000 awarded to a 5-year-old child could be placed in a Blocked Account with minimal interest rates. However, a structured settlement could easily double, if not triple",

The investment and is both state and federal tax-free. Additionally, the parents have the opportunity to direct the distribution past the minor’s 18th birthday". (emphasis ours)

Comments

1. The "minimal interest rates" offered on a 5 Year CDs today range from 2.39% to $2.6% at the time of posting.  Source: BankRate.com
2. There is a Kiddie Tax exemption on the first $2,100.00 the child earns as investment or interest income  (updated 2018)
   
3. Now do the math, assuming $5,000. What's the net return?
4. Consider that in some cases today one can get a zero (or even a negative) return for a structured settlement cash flow of 5 years or less.
5. Consider that one of the life insurance companies offering structured settlements for $5,000 charges a $750 qualified assignment fee AND a small case policy fee  of $300.00 on a case of $5,000 premium meaning that 21% of the premium is eaten up in fees.
6. Consider that another life insurance company offering structured settlements for $5,000 has a qualified assignment fee of $500.00 and a small case policy fee of $400.00 , meaning that on a case with $5,000 in premium 18% of the premium is eaten up in fees
7. Note that a small case fee does not apply over certain amounts, which vary by the life insurance company that issues the structured settlement annuity contact as qualified funding asset.
8. Because of such fees, a structure for $5,000 premium or other small premiums, should only be considered for very young children, where there is a significant time for deferral or the very rare case where need for spendthrift protection beyond majority age overrides return. 
9. The article states that Orange County Superior Court requires the purchase of an annuity where the net amount distributable exceeds $25,000 and the child is under 15 years of age. Given the information presented above this author, who is also California licensed, suggests that Orange County judges even more carefully scrutinize the proposed cash flows to be sure that the structured settlement is indeed in the best interest of the minor.
10. In addition to the CDs, over certain durations and for amounts in multiples greater than $5,000, carefully selected structured settlement payment rights purchased on behalf of the minor in the secondary market, as an asset class,  might make sense since such cash flows yield more than even CD rates do.  Whether or not the Court would approve such purchases by a trust on behalf of a minor is another story.

In conclusion, I am not downplaying the benefits of structured settlements for minors. I'm saying let's get real with the application of structured settlements for minors.