by John Darer® CLU ChFC CSSC RSP CLTC
Great article by Libby Kane and Andy Kiersz in Business Insider on April 2, 2015
Piggybacking off a Pew Charitable Trust report about shrinkage in the middle class from 2000 to 2013, Kane and Kiersz have done a state by state analysis of what it means to be middle class in terms of household income from the low end of the range to the high end of the range.
Kane and Kiersz took the median income numbers from the US Census Bureau's 2013 American Community Survey, which Pew used in its analysis and which we've listed in the leftmost column. Then, they did the math to figure out how much middle-class earners make in each state, based on Pew's definition of middle class, which is those earning 67%-200% of a state's median income.
Lower Bound $38,937
Upper Bound $114,738
Lower Bound $44,732
Upper Bound $134,196
’Neither rich nor poor...Middle-class’ describes an income category but also a set of attitudes…An essential characteristic is the possession of a reasonable amount of discretionary income. Middle-class people do not live from hand to mouth, job to job, season to season, as the poor do" The Economist
One of the most popular reasons that people take a portion of their settlement in the form of a structured settlement is to have a strong income core funded with well capitalized insurance companies. I like to call this "like a 'job' that you can never be fired from".
Settlement purchasers know what a great deal structured settlements are so they solicit structured settlement annuitants, in some case trying to unsettle the annuitant with sales pitches like "why wait?". The more aggressive ones pitch speculative investments with the proceeds of the discounted present value sale.
If your structured settlement, the 'job you cannot be fired from" is keeping you above the median of the middle class, why would you sell it? Why would you jeopardize it, unless you really had no other alternative?
Note that the figures in the Pew study as well as the Kane and Kiersz analysis, represent gross income. Structured settlement payments that represent damages for personal physical injury, physical sickness, wrongful death, or worker's compensation claims are income tax free [ see IRC 104]
n 2013, a Florida resident was receiving over $63,000 annually (increasing to in excess of $105,000 by 2018 and growing at 3% thereafter!), income tax-free, from a structured settlement [which is the approximately equivalent to $74,118 in a 15% tax bracket or $87,500 in a 28% tax bracket] and was briefly convinced to sell his structured settlement apparently for a real estate investment (according to the transfer petition) that was speculative and/or possibly less than conservative investments that appeared to be in conflict with the individual's cognitive abilities. Eventually, with legal intervention and agreement of the parties, the transfer order was vacated and his payments were restored, but it was not without quite a bit of "agita" for all concerned. Consider these numbers from the Kane/Kiersz analysis , incorporating the Pew median for Florida, for 2013.
Lower Bound $30,691
Upper Bound $92,072
If you are receiving payments from a structured settlement and run into a high pressure "cash now" sales pitch from an out of town salesperson, or a salesperson otherwise trying to befriend you and "groom you" over a period of time into making a regrettable decision, keep this post handy and refer to it.
I encourage judges to read the study and consider this information as part of an overall evaluation of transfer applications. Knowledge of this information is definitely something worth questioning a seller about during in person appearance at the transfer hearing.