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

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

 

Ethics or Optics? | Personal Injury Lawyers Represent Companies Buying Structured Settlements For Pennies on Dollar

by Structured Settlement Watchdog

A number of personal injury trial lawyers, including those admitted to the New York State Bar, mebers of NYSTLA and such are representing structured settlement factoring companies in transactions that result in recipients of structured settlement payments receiving no better than pennies on the dollar. 

Ethics or optics? Personal injury lawyers who represent structured settlement factoring companies

The same lawyers and/or firms also advertise and solicit business from personal injury victims. 

One such law firm, known to have represented structured settlement factoring companies in thousands of cases advertises the millions it has recovered for injury victims, while at the same time asks if you have an an annuity or structured settlement to support its "facilitating access to your money". 

Another personal injury firm, which is now disbanded, advertised that it was a personal injury law firm "committed to representing innocent accident victims who have suffered serious and catastrophic personal injuries" while also representing some of the biggest structured settlement factoring companies in the business.

Recently I came across another firm in the New York City area which advertises it does personal injury but has popped up in representation of pennies on the dollar merchants. The law firm also shares an office address with another lawyer who is listed as an Independent Professional Advisor on a number of the first law firm's cases.

A Conflict of Interest for Personal Injury Lawyers to Represent Factoring Companies in Cash Now Deals?

I can't help thinking that this may be going on all across the United States. While not dismissing a person's right to make a living, in my opinion such representations deserve scrutiny by such firms for potential conflicts of interest.

Areas of potential conflicts of interests include:

• How data acquired during the legal representation for the personal injury case is used. 
• How that data is protected?  Is there a "Chinese Wall"?
• Has the lawyer considered structured settlements for his or her clients in the past?  Are they making structured settlements available to their clients for consideration? 
• If one of the lawyers past clients returns with questions about selling their structured settlement payments, what happens?  Does the lawyer refer the matter out or do they handle their former client's sale. 
• Does the lawyer/law firm disclose that he/she or it derives income, perhaps substantial income, from pennies on the dollar merchants?  
• Susceptibility of the lawyer/law firm or one of his/her or its employees, to potential inducements that the lawyer/law firms secondary market clients may offer for referrals
• Directly or indirectly buying factored structured settlement payment streams of clients

The is something that should concern not only judges, but consumers and other lawyers. 

 

 

 

Niagara County Judge Murphy Shows How to Question a Structured Settlement Transfer Petition

by Structured Settlement Watchdog

Niagara County New York Supreme Court Judge Matthew J. Murphy is another fine example of why New York judges are among the best in the USA in enforcing their state's structured settlement protection act, with a January 8, 2021 decision in Tiger Parrish, LLC Petitioner v BHG Structured Settlements, inc et al. Respondents , Index 173532/2020.

Niagara County Supreme Court in Lockport New York

The petition involved the proposed transfer of structured settlement payment rights from 4 structured settlement annuities due to a 23 year old, with aggregate payments totaling $2,313,704.40 in exchange for an aggregate purchase price of $895,647.03. The effective discount rate according to the mandatory disclosures was 6.10% which, while not bad, still had a considerable amount of fat. Our sources indicated that between $1,000,0000-$1,122,456.99 would have been possible.

Sacco & Fillas was the law firm representing the settlement purchaser, Tiger Parrish , LLC. True to form with some of the Sacco & Fillas petitions I've seen, their cited case support for discount rates are what one might irreverently and figuratively describe as "antediluvian".

Judge Murphy's thoughtful analysis reviewed prior transfers and attempts to transfer along with reasons that were stated in the prior petitions. The current petition reviewed by Judge Murphy also reviewed the budget and expenses , but noted that the Petition and the seller's affidavit " do not provide a complete picture  of the seller's financial landscape". The Judge went into granular detail and said that "in order to make a best interests' determination, as required by law a full explanation of the settlement must be provided."

But the kudos in my opinion for Judge Murphy are deserved for noting that payments would be sold at a discount diplomatically skewering the investment projections.

The Petition to Transfer Exhibit 14 (labeled IPA) included an investment projection assuming a 12.5% rate of return, failed to take into account income taxes and there appeared to be no stochastic analysis  (also known as Monte Carlo analysis) that takes into account multiple variables! 

Download Eglow Investment Projection Linear 12.5 pct 

______________________________________________________________

SIDE BAR

Monte Carlo Simulation/Analysis in Structured Settlements and Settlement Planning Process (4structures.com)

______________________________________________________________

Judge Murphy observes that " investing in the stock market always  involves some risk. Additionally, despite the voluminous documentation there is no simple comparison of what Mr. M. (the seller) can expect to receive now; and an explanation of the safeguards which will be imposed on the proceeds of teh transfer so that Mr M. is not able to liquidate said proceeds without Court approval.  Nor has  Mr. Eglow provided, at a least in simple comparison, any analysis of the tax consequences of investing in the stock market compared to annuity payments. It is the Court's understanding that the annuity payments are not taxable. If that is correct, it could affect Mr. Eglow's analysis".

According to New York's General Obligations Law Section 5-1701(e) “independent professional advice” means advice of an attorney, certified public accountant, actuary or other licensed professional adviser:

(i) who is engaged by a claimant or payee to render advice concerning the legal, tax and financial implications of a structured settlement or a transfer of structured settlement payment rights;

(ii) who is not in any manner affiliated with or compensated by the defendant in such settlement or the transferee of such transfer;  and

(iii) whose compensation for rendering such advice is not affected by whether a settlement or transfer occurs or does not occur;

The papers say that Eglow and his firm will be providing financial planning services (for which he will presumably be compensated).

A December 15, 2020 letter from Jeffrey Eglow, of Newbridge Securities was submitted December 16, 2020 to Judge Michael Cresitello in support of a Middlesex NJ Petition to transfer involving Park St Closing LLC.  In the letter Eglow represents that he has had "many discussions regarding all aspects of her transaction and my advice, I respectfully request her transfer"  (emphasis added). It is evident in my opinion, that either there wasn't any discussion about the market in discount rates for income payments that begin in 2020 on one of the deals and 2021 on another with the third being a deferred transaction, or Eglow was brought to "the dance" by those charging her 12% plus . Selling a structured settlement is a money loser, 100% of the time.  Instead of investing x$, with a more competitive discount rate, the seller in that case might have considerably more to invest, or she might not need to sell as much, just like the Niagara County case, but with much worse discount rates in 3 separate deals bearing discount rates of 12.8*, 12.81% and 12%. There were hundreds of thousands in the factoring profit spread, according to our sources.  See Park St Closing LLC v Moronta C  Case# MID-007817-20. 

Last updated September 17, 2024

 

Looks Like NJ Structured Settlement Annuitant About to Get Shafted in Middlesex County NJ Tomorrow

by Structured Settlement Watchdog

Annuitants Who Do Not Shop Around Do So At Their Own Peril When Selling

I don't know whether or not NJ resident Catherine Moronta shopped around for her pending structured settlement factoring transaction, but she's about to get royally shafted for an estimated hundreds of thousands of dollars in 3 separate deals bearing discount rates of 12.8*, 12.81% and 12%. There are hundreds of thousands in the factoring profit spread, according to our sources.  See Park St Closing LLC v Moronta C  Case# MID-007817-20. 

What Concerns Me...The Factoring Company/ Adviser Connection

A December 15, 2020 letter from Jeffrey Eglow, of Newbridge Securities was submitted December 16, 2020 to Judge Michael Cresitelloin support of the Park St Closing LLC  petition.  In the letter Eglow represents that he has had "many discussions regarding all aspects of her transaction and my advice, I respectfully request her transfer"  (emphasis added). It is evident in my opinion, that either there wasn't any discussion about the market in discount rates for income payments that begin in 2020 on one of the deals and 2021 on another with the third being a deferred transaction, or Eglow was brought to "the dance" by those charging her 12% plus . Selling a structured settlement is a money loser, 100% of the time.  Instead of investing x$, with a more competitive discount rate Moronta might have considerably more to invest, or she might not need to sell as much.

In November 2020, Eglow was involved as a financial adviser in a New York petition, with another proposed deal with a fat profit spread  filed in Niagara County,  E173532/2020 NIagara County Tiger Parrish LLC v Michael Monagan et al.  Accompanying that petition were Eglow's projections in Exhibit B that show a linear 12.5% Rate of return, but apparently fail to take into account income taxes and there appeared to be no stochastic analysis  (also known as Monte Carlo analysis) that take into account multiple  variables.

It was in January 2014 that I first encountered an alignment between a factoring companies and an investment adviser, which happened to Eglow in my initial investigation into the Mr. " A.D." case" . When "Mr. D "contacted me on December 31, 2013,  he was under the impression that an individual with the surname Escobar was a representative of Wells Fargo and had even contacted Wells Fargo to speak with Escobar. Worried after being told by Wells Fargo that Escobar didn't work there, he contacted me. I subsequently learned that Escobar actually worked for Client First. Client First CEO Burt Kroner freely referred me to Jeffrey Lewis Eglow, until March 1 2015, a West Palm Beach financial advisor with Wells Fargo, to discuss investment suggestions made to "Mr. A.D" for the proceeds of the sale of all of  Mr A.D's $62,000 annual income with guaranteed annual increases of 3%, for life stream from his Allstate structured settlement,  that I was questioning.  This was enough to support him and his two toddlers, but how was an unemployable man going to do that with the $577,000 proceeds from the ill-advised sale? Furthermore Allstate's Advanced Funding Exchange program would  have had a lower discount rate than what Client First charged. During the conversation I had with Eglow he admitted to me, among other things,  that the introduction to "Mr. D" came from Client First. This jives with this solicitation letter that Client First used. client-first-sell-structured-settlement-investment-show.pdf (typepad.com) that was essentially a billboard for Eglow and others.  There was no doubt in my mind after speaking with Eglow  at the time, that he did not adequately understand Mr D's situation. He certainly did not have knowledge of Allstate structured settlements or its AFEN, and it appeared that he did not know that this man was unemployable, the annuity being his primary source of income. Fortunately for Mr A.D. the order was vacated.

Eglow was also the financial advisor touted by Bexhill (Client First) in the one of the eleven Terrence Taylor deals in two years. "According to Terrence, as set forth in the legal Complaint against Bexhill, " a representative named Alex told him that Defendant Bexhill, and its agent. Boca Raton based Client First (Funding) were affiliated with Wells Fargo, a nationally recognized banking institution. Alex told Terrence that he could invest the money he received from doing this transfer with Wells Fargo. Alex told Terrence it would be crazy to pass up this deal". [Taylor Amended Complaint at #62].  Alex convinced Terrence that Wells Fargo would double his money if he did the proposed deal with Defendant Bexhill and its agent. Client First.  [ Taylor Amended Complaint  p 17 at #63]. Bexhill (Client First) quickly settled out the claim against them.

Independent Professional Advice?

In Eglow's home state of Florida, Florida Statute 626.99296 (2) (h) states that “Independent professional advice” means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser:

1. Who is engaged by a payee to render advice concerning the legal, tax, and financial implications of a transfer of structured settlement payment rights;

2. Who is not in any manner affiliated with or compensated by the transferee of the transfer; and

3. Whose compensation for providing the advice is not affected by whether a transfer occurs or does not occur."

While the Catherine Moronta case is pending in New Jersey and the Michael Monagan case is in New York, states whose statutes do not have mandatory independent professional advice, it seems reasonable that in any case, that a representation to the court should follow a certain common standard.   In discussing " all aspects of the transaction" did Eglow know  as part of "discussing all aspect of the transaction" with Moronta, that there were hundreds of thousands of dollars of fat in the deals?

Moronta's Court date is tomorrow December 18, 2020 at 2:30pm

 

 

Dismissal in Structured Settlement Broker Anti-Trust Suit v MLMIC is Affirmed

by John Darer® CLU ChFC MSSC RSP CLTC

The Appellate Division for the 4th Judicial Department of the New York State Supreme Court  has affirmed the lower court's decision to dismiss the anti-trust lawsuit brought by a Buffalo structured settlement broker against Medical Liability Mutual Insurance Company and several members of its structured settlement panel.  The 4th Department decision was entered October 2, 2015. in

 PAUL K. ISAAC AND PARAMOUNT SETTLEMENT PLANNING, LLC, PLAINTIFFS-APPELLANTS vs MEDICAL LIABILITY MUTUAL INSURANCE COMPANY, RINGLER ASSOCIATES, INC., BLACK, HOLCOMB, SMITH & ASSOCIATES, INC., KIPNES CROWLEY GROUP, LLC, THE PENSION COMPANY, AND JMW SETTLEMENTS, INC., DEFENDANTS-RESPONDENTS. 914 CA 15-00256

Appeal from an order of the Supreme Court, Erie County (Timothy J. Walker, A.J.), entered April 23, 2014. The order granted the motions of defendants to dismiss the second amended complaint.  The 4th department stated:

It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs for reasons stated in the decision at Supreme Court.

Read Structured Settlement Anti-Trust Case Against Medical Liability Mutual and Brokers Dismissed, my April 25, 2014 write up of the Supreme Court decision.

 

 

NY Structured Settlement Protection Act | 2010 Amendment Requires Payee to Attend Hearing

by John Darer CLU ChFC MSSC CeFT RSP CLTC

The New York Structured Settlement Protection Act amendment signed into law in 2010 by then New York Governor David A. Patterson (bills S3681/A6766), added a requirement that the structured settlement payee attend the hearing to approve the transfer of structured settlement payment rights.

New York General Obligations Law 5-1705 

1. Approval of transfer shall be by a special proceeding brought on by an Order to Show Cause
2. At this hearing, the payee shall attend before the Court unless attendance is excused for good cause  NY G.O.L. Section 5-1705(e).

By having a Payee appear before the Court in person or virtually, the judge has the opportunity to examine the witness and get a read on them and their comprehension of what they are asking the court to approve and why (in their own words). 

Read More

Selling A Structured Settlement in 2024? Get The 411 on Cash Now. Don't Be a Victim (4structures.com)

Independent Professional Advice (IPA) for Structured Settlement Sellers (4structures.com)

Last updated October 12, 2024

Sell Structured Settlement | Monte Carlo Analysis Helps Sellers Safely Weigh Issues

by Structured Settlement Watchdog

If you have been solicited to sell structured settlements payments, beware of the slick "sales pitch" that claims "better investment opportunities" for the discounted lump sum they are offering to pay you.

First, many of the folks promoting this "better investment opportunities" theory may not be properly qualified or licensed to tell you this and you should always check first.

A person discussing investment opportunities in securities, such as stocks, bonds, mutual funds and variable annuities will have to hold one of the FINRA Series. Visit FINRA Broker Check or the IAPD (to check out investment advisers' public disclosure. There are clear rules of engagement.

Second, without a clear understanding of risk your chances for disappointment increase, especially when you are trading guaranteed income for NO guarantee . Monte Carlo analysis, or Monte Carlo simulation can also be applied in this situation and may be very useful. The same concepts apply as they would at the time the structure was created. With Monte Carlo simulation the many variables of your stated needs can be projected and weighed with a statistical sample of hypothetical returns on the discounted "cash now" lump sum, in a statistical trial as described above. While there are no guarantees, you can safely test the assumptions, have a better understanding of the chances of success or failure. You are then in a better position to make an informed decision as to whether the risk is worth the price you pay (the discount for "cash now" or "money now").

In 2021, a Florida structured settlement factoring company "tagged teamed " with a Florida financial adviser who projected a 12% lel rates of return without taking into account income taxes or investment volatility. It was ludicrous. Thankfully the judge did not approve the deal. Imagine the deep discount of investment market performance in 2022 after the factoring deep discount. It would have been devastating.

Niagara County Judge Murphy Shows How to Question a Structured Settlement Transfer Petition - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

Last updated May 13, 2022