Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

Better Than 5% Income Tax Free on Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Now is the time to make good use of stuctured settlements and build enduring guaranteeed income streams

Compelling yields in Excess of 5% are possible on intermediate and long term cash flows.  On November 1, 2022 for example, I locked-in a 10 year certain plan with a 5.7% Internal Rate of Return with a  daily rate from United States Life Insurance Company in the City of New York. 

So what does 5.7% tax-free mean?

Taxable Equivalent Yields at Different  Hypothetical Tax Rates

15%        6.705%

18%        6.951%

28%        7.916%

31%        8.261%

33%        8.507%

40%        9.500%

50%      11.400%

See expanded taxable equivalent yield chart

What about investing in the Stock Market?

Well you're not going to put all your eggs in one basket are you?  But let's say you did and if you had the fortitude to stay in the S&P 500 from January 3, 2000 to December 31, 2021 you would have averaged 9.52%.

However, if you missed just the 20 biggest trading days in the S&P 500 from January 3, 2002 to December 31, 2021 you would have averaged only 2.6%. If you missed the 30 biggest trading days the averag would onl have been 0.43% (and it goes downhill from there), according to the J.P. Morgan Asset Mnaagement 2022 Retirement Guide published March 3, 2022 p 44. Read Structured Settlement Rate of Return Compared to Alternative Investments (4structures.com) for more details.

Note: Structured settlement rates vary by insurance company and other factors such as duration. Read more about structured settlement quotes

Pacific Life A+ Superior Financial Strength Rating is Affirmed by A.M. Best

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Pacific Life is a Leading Issuer of Structured Settlement Annuities

On June 22, 2022, rating agency A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of Pacific Life Insurance Company and Pacific Life & Annuity Company (collectively referred to as Pacific Life Group). The companies are leading issuers of structured settlement annuities, the latter company being Pacific Life’s structured settlement annuity issuer in the state of New York. Both companies are headquartered in Newport Beach, CA.

Additionally, AM Best has affirmed the Long-Term ICR of “a” (Excellent) of the group’s intermediate holding company, Pacific LifeCorp (Wilmington, DE). AM Best also has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of Pacific LifeCorp. PacificLife Corp serves as the guarantor of Pacific Life and Annuity Services, Inc., the Missouri domiciled company that serves as the qualified assignee for periodic payment obligations under qualified assignments pursuant to IRC §130(c)and which purchases and owns Pacific Life structured settlement annuities as qualified funding assets pursuant to IRC §130(d)

The A.M. Best outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Pacific Life Group’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM). Pacific Life’s balance sheet is supported by a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its history of positive earnings trends, which are supported by being one of the industry’s leading sales organizations in its key product lines. The favorable business profile assessment reflects its prominence as a leader in the affluent market segment.

Pacific Life offers competitively priced fixed structured settlement annuities, medically underwritten life contingent structured settlement annuities,  index linked structured settlement annuities (ILAPA) and has a variable structured settlement annuity in development. Pacific Life & Annuity Company also issues structured judgment annuities in New York cases.

Pacific Life has been named one of the 2022 World’s Most Ethical Companies^®

2022 marks the fifth consecutive year Pacific Life has been recognized by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices. Pacific Life was evaluated on five categories, including its ethics and compliance program; culture of ethics; environmental and societal impact; corporate governance; and leadership and reputation. The Ethisphere Institute, which honors companies demonstrating exceptional ethics-focused programs and practices. Pacific Life was one of 11 insurance and financial service industry honorees.

USAA Celebrates 100 Years in Business

by John Darer CLU ChFC MSSC CeFT RSP CLTC

We're pleased to have a business relationship with USAA Life Insurance Company . The San Antonio based USAA was founded June
20,1922 by a group of soldiers to take care of their own. Over the years the USAA customer base has explanded.

USAA Structured Settlement Annuity Issuer

Today the A++(Superior) A.M. Best rated insurer has become a highly respected issuer of structured settlement annuities for a wide spectrum of claimants, particularly competitive for use as a qualified funding asset to fund long duration cash flows as payment of damages in on personal physical injury, physical sickness and wrongful death in medical malpractice, aviation, trucking, maritime and other types of legal settlements.

USAA ranks 25th on Fortune’s 2022 list of the world’s most admired companies. The ranking is based on the magazine’s poll of about 3,700 corporate executives, corporate directors, and business analysts. 

USAA ranks 96th in the 2022 US Fortune 500 and 330th in the Global Fortune 500.

USAA is one of the Wards 50 Life & Health Insurers for 2021 (29 years).

Watch a short video about the history of USAA

Read more about

What is a Structured Settlement?

What is Settlement Planning?

Structured Settlements for Minors

Structured Settlements for Seniors

USAA Life Insurance Company does not write structured settlement annuities in taxable damage cases or where litigation is in the State of New York.

Last updated July 1, 2022

 

 

 

Structured Settlement Annuities Are NOT Tax Exempt

by John Darer CLU ChFC MSSC CeFT RSP CLTC

There is a false narrative concerning structured settlement annuities that claims that structured settlement annuities are tax exempt. Structured

Structured settlement annuities are not tax exempt. The focus is on the damages

settlement annuities are not tax exempt. Where used as a "qualified funding asset"  the structured settlement payments may be tax exempt, but the essential reason for the tax exemption is the damages that the payments from the structured settlement annuities represent.

For example:

1. Payments for workers compensation  see IRC 104(a)(1)
2. Payments for damages on account of personal physical injury, physical sickness and wrongful death, see IRC 104(a)(2)   [and IRC 104(c) for Alabama wrongful death]
3. Payments for wrongful imprisonment, see IRC 139F

Structured settlement annuities can be used to fund the payment of damages in settlement of lawsuits comprised of many types of taxable damages. Even though they are funded with structured settlement annuities, if established properly each payment in such cases is taxed in the year received.

I'm sure that the false narrative is not intentional, but what is surprising is the false narrative is articulated in public facing communications by certain people and companies with credentials and experience. Those who spread the false narrative, even unintentionally, may be used as sources of "validation" for content barfers in (or serving) the structured settlement secondary market. Clearly this does not serve the greater good for consumers or the industry.

 

 

4structures.com LLC places in CT Law Tribune Best of CT for Structured Settlements 2017

by John Darer® CLU ChFC MSSC RSP CLTC

Thanks to CT Lawyers and readers of the Connecticut Law Tribune who voted  4structures.com LLC (John Darer) into the Top #2 in the 2017 Best of CT Survey for Structured Settlements that takes place annually.  We've placed in all but one year since 2006. The 2017 Best of CT vote is especially gratifying because we placed without even canvassing lawyers to vote for us in emails or on social media. The full survey will be published in October.

We are also AM Best Client Recommended Structured Settlement Expert for 2017, the 5th consecutive year.

John Darer Linkedin

 

 

Structured Attorney Fees Best Practices to Avoid Unexpected Timing of Income

by John Darer® CLU ChFC MSSC RSP CLTC

When structuring attorney fees or taxable damages in the second half of the year, it is common to push the first payment out until January of the following year so that it is not received in the same tax year as the settlement.  An attorney who is already having a great income year can use this strategy to delay receipt (and thereby some of the taxes) on the fee. In some cases this may result in a lower tax bracket.

Timing is everything when it comes to structured attorney fees and structuring taxable damages

 Care should be taken to avoid the tax planning strategy backfiring by not using a January 1 payment start date for structured attorney fee payments.  Many structured settlement annuity issuers automatically send out payments by check in advance, to assure they arrive on time. One company is known to send out payments as much as 10 days in advance! 

Even if you have direct deposit, you're not completely out of the woods with a January 1 payment date.  The annuity issuer has a contractual obligation to make payments on time.  This applies not just to your January 1 payments, but to likely to tens of thousands of other annuitants and policyholders with the same payment due date.  In 2016, January 1st was on a Friday and the next business day was Monday January 4, 2016.  If the insurer waited to pay the next business day,  payments for thousands of people would have been 3 days late.  Therein lies their dilemma.  So a number of insurers set their computerized payment systems to release direct deposit payments early so that they would be in good faith and timely.

It is possible that you will also receive a 1099 for that payment, in the year of settlement.  What a way to mess up your tax planning if you're not careful.

The same issue goes when using a structured settlement for taxable damages.
 
How to Avoid Getting Hit With Unexpected Income in the Wrong Tax Year  When Structuring Attorney Fees

• Select a first payment date no earlier than January 10th, if getting paid by check
• Select a first payment date a few business days into January, if being paid by direct deposit.

Good Faith Use of Structured Settlements in Bad Faith Claims

by John Darer® CLU ChFC MSSC RSP CLTC

Insurance bad faith  describes a tort claim that an insured person may have against his/her/its  insurance company for its intentional bad acts. Under the law of most jurisdictions in the USA, insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract.  [ Source : Wikipedia]

In Good Faith Use of Structured Settlements in Bad Faith Claims,  published in the Connecticut Law Tribune on March 14, 2016 , I explore how structured settlements can make a difference in bad faith cases on either side of the damages tax spectrum.  Download Good_Faith_Use_of_Structured_Settlements_in_Bad_Faith_Cases_3-2016 .

I am a frequent contributor to "The Trib". The Good Faith/Bad Faith article, is my 6th published in the Connecticut Law Tribune in the last 12 months.

For further information on structured settlements and bad faith claims and practical illustrations, please contact the structured settlement experts at 888-325-8640

Structured Settlements in a Divorce

by John Darer® CLU ChFC MSSC RSP CLTC

What is a Divorce Structured Settlement?

 

Having the stable income stream that a structured settlement provides, as a foundation, can be helpful in a financial transition to the new normal

The parties negotiate the terms of settlement of marital property.

The Paying Spouse agrees to settle the marital property interest in the form of  periodic payments to the Payee Spouse. The Divorce Settlement Agreement creates an obligation for the the Paying Spouse to make the negotiated periodic payments for a stated number of months or years.

Following the execution of the Marital Settlement Agreement, the Payor Spouse assigns his/her periodic payment 0bligation to an assignment company.  In this case we are speaking of a non qualified assignment. The Payor Spouse transfers a lump sum, representing the discounted value of the payment stream due under the Marital Settlement Agreement. In return, the assignment company agrees to assume the Payor Spouse’s payment obligations. The assignment company is a subsidiary or an affiliated company of a highly rated life insurer which issues the annuity contract to the assignment company, which makes all periodic payments required by the Marital Settlement Agreement. In this way, the Recipient Spouse will not be financially dependent on the Payor Spouse, but rather, on a highly rated, well-capitalized life insurer.

When Does a Divorce Structured Settlement Work Best?

• A divorce structured settlement works best if there is enough liquidity in divisible assets and/or the Paying Spouse has sufficient resources  to fund a future payment stream for some element of the divorce today; 
• Where the amount of  future payments can be quantified at the time of settlement.  One cannot for example quote a divorce structured settlement for  a payment that may vary from one payment to the next, or may otherwise vary over time;  AND
• Where the Recipient Spouse would like the security of core income stability that is unaffected by the Paying Spouse's employment status, solvency or income reporting integrity.
• Where the Recipient Spouse would like the security of core income stability that is  unaffected by the death of the Paying Spouse.
• Where the Paying Spouse and the Recipient Spouse want to keep things simple    

 

 

Structured Settlement Annuity Companies Among World Most Admired in 2016 FORTUNE Survey

by John Darer® CLU ChFC MSSC RSP CLTC

The FORTUNE Most Admired list is the definitive report card on corporate reputations and has been published annually for over 30 years.  FORTUNE teamed with its survey partners at Korn Ferry Hay Group initially with approximately 1,500 companies: the Fortune 1,000—the 1,000 largest U.S. companies ranked by revenue—and non-U.S. companies in Fortune’s Global 500 database with revenues of $10 billion or more. Korn Ferry Hay Group then selected the 15 largest for each international industry and the 10 largest for each U.S. industry, surveying a total of 652 companies from 30 countries. To create the 54 industry lists, Korn Ferry Hay Group asked executives, directors, and analysts to rate companies in their own industry on nine criteria, from investment value to social responsibility. A company’s score must rank in the top half of its industry survey to be listed.

Berkshire Hathaway was rated #4 most admired company in the world in the 2016 survey. Berkshire Hathaway issues structured settlement annuities through its subsidiaries Berkshire Hathaway Life Insurance Company of Nebraska, First Berkshire Hathaway Life Insurance Company, in New York and Periodic Payment Reinsurance through National Indemnity Company. Obligations of its qualified assignment company, BHG Structured Settlements Inc. are guaranteed by another subsidiary Columbia Insurance Company.  Berkshire Hathway was also the most admired property & casualty insurer on the industry list.

Companies that issue structured settlemeent annuties are among the largest and most admired in the world.

Companies who issue structured settlement annuities who placed in the  top life insurance category  [ all three companies have been in business since the 1800s!]

 

1. Prudential Financial

2. New York Life Insurance

3. MetLife 

No structured settlement factoring companies have ever been named in the FORTUNE survey of most admired companies.

 

Rated Age Can Boost Yield on Structured Settlement & Lifetime Annuities, 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

Rated Age Structured Settlements Can Boost Your Potential Lifetime Annuity Payout

age used to price the structured settlement annuity, or New York structured judgement annuity,  as opposed to the actual age.

• 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.