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Survivor Payments | "All payments From a Structured Settlement Are Guaranteed" ?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Structured Settlement Survivor Payments

Seen on the Internet about Structured Settlements this week

A. "If no beneficiary was designated, the payments will become part of the recipient's estate and be distributed according to their will or state laws".

The statement needs further clarification.

Commentary

1. If the Payee dies without having designated a beneficiary to the annuity issuer prior to the Payee's death, AND there are any remaining period certain payments or guaranteeed lump sums, those payments will be paid, when due, to the Estate of the Payee. From there, payment will be distributed in accordance with the Payee's will, if there is one, or state intestacy laws if there is no will.  See intestacy | Wex | US Law | LII / Legal Information Institute (cornell.edu)

2. If a Commutation Rider is in place when the Payee dies, any remaining certain payments and guaranteed lump sums are commuted to a lump sum in accordance with the terms of the commutation rider.

3. If the Payee dies after there are no remaining period certain payments or guaranteed lump sums then payments will cease at the Payee's death.  

Structured Settlement Beneficiary | Why It's Important (4structures.com) May 8, 2024 update

Structured Settlement Beneficiary Designations (4structures.com) May 24, 2021

B. "All payments from a structured settlement are guaranteed"

Commentary

All payments from a structured settlement are contractually guaranteed in accordance with the terms of the contract. 

When a structured settlement is established there are multiple contracts

• A settlement agreement and release which establishes an obligation to pay periodic payments as damages in exchange for a release of claims.
• A qualified assignment, which is a subsitution of obligors from a Defendant or his/her/its insurer(s) to a qualified assignment company
• An annuity contract, which is purchased as a "qualified funding asset" by the qualified assignment company and is owned by the qualified assignment company.

How Do Structured Settlements Work | Structured Settlements Explained (4structures.com)

While the terms "guaranteed" and "certain" are often used synonymously by those holding an insurance license, including some settlement planners and structured settlement brokers and even lawyers, such use is inaccurate and can lead to misinterpretation and/or misunderstanding by Payees.

 

Who Owns a Structured Settlement Annuity?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Who Owns a Structured Settlement Annuity?

The majority of structured settlement annuities are owned by qualified assignment companies not the payees of the structured settlement.  The structured settlement annuities are purchased as a qualified funding asset subject to the terms of IRC 130(d). All structured settlement annuities used to fund taxable damages or attorney fees purchased are purchased by a non-qualified assignment company as part of a non-qualified assignment. As such they may be owned by a company specializing in non-qualified assignments.

A case in point would be American General Life Insurance Company and United States Life Insurance Company in the City of New York, subsidiaries of Corebridge Financial (formerly AIG Life & Retirement), which use AGL Assignment Company LLC for non qualified assignments. Where a qualified assignment is to be utilized, American General Annuity Services Corporation is the qualified assignment company. Another example is Independent LIfe Insurance Company which uses different assignment companies for qualfied and non-qaualified assignments,

In the case of MetLife Assignment Company, Inc, MetLife's assignment company owns structured settlement annuities funding both tax-exempt and taxable damages. 

Merchants of Factored Structured Settlement Payment Rights/Receivables Often Get It Wrong

Merchants of factored structured settlement payment rights mislabel factored structured settlement payment rights to prospective investors and to financial advisors, who may then market the mislabeled receivables to investors incorrectly as annuities.

Immediate Annuities (Dot) Com, a New Jersey broker of structured settlement payments and one of several companies that conducts such business using the debunked label  Secondary Market Annuity, which is not an annuity at all.  

Immediate Annuities (dot) com states, inaccurately, that  "A Secondary Market Annuity (also called an 'SMA') refers to a transaction in which the current owner of an income annuity sells his future income steam to a third-party in exchange for a lump-sum payment. Annuity income streams most commonly originate from lawsuit settlements, lottery winnings, or immediate annuities".

Immediate Annuities (dot ) com is not correct because it inaccurately suggests that a structured settlement payee is the owner of the income annuity funding a structured settlement. In fact, nothing could be further from the truth when it comes to structured settlement ownership.

It's hard to believe that Immediateannuities.com continues to use the debunked term "Secondary Market Annuity" or its plural "Secondary Market Annuities" when

1. The National Association of Insurance Commissioners does not recognize acquired structured settlement payment rights as annuities or insurance product.  See Statutory Issue Paper No. 160, which was finalized April 6, 2019.
2. There is no protection for investors in the event of insolvency in the 37 states that have adopted the 2017 Revisions to the Life & Health Guaranty Associations Model Act (#520). Investors should not feel comfortable in the 13 states that have yet to adopt, because the Model Act has a reach back provision that applies to such acqusitions before or after the adoption of the 2017 Revisions in a state.
3. Past and ongoing litigation that in some cases HAS resulted, and in pending cases MAY result in losses for investors in structured settlement payment rights. 

Pay Attention to the Settlement Agreement and Release!

A settlement agreement establishing the structured settlement will expressly state that the assignment company has all rights of ownership of the annuity. The structured settlement payee only owns the right to receive the periodic payments from a structured settlement as part of the consideration for a release of liability. The payee does not own the structured settlement annuity. It is the structured settlement payment rights that are transferable as long as the transaction complies with state and Federal law.

Last updated January 30, 2024

 

How to Use Structured Settlements in a Divorce Settlement

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 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. This is critical to get off squere one; 
• 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.  

Read more about Divorce Structured Settlements

Divorce Structured Settlements 888-325-8640 | 4structures.com

 

Last updated May 18, 2024

 

 

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

What is a Rated Age with a Structured Settlement Annuity?

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

A rated age is an important component of a structured settlement pricing when there are life contingent payments* such as:

• Pricing out and funding a life care plan
• Providing a backstop to a special needs trust or to an investment strategy
• Funding a Structured Medicare Set Aside Arrangement (MSA) at the maximum discount.
• Funding the temporary life elements of a New York CPLR 50A or 50B structured judgment such as future pain and suffering, or future medicals in excess of statutory thresholds.
• Funding lifetime retirement benefits or any other lifetime payment stream
• Longevity Insurance

A Rated Age Puts a Younger Person Into an Older Person's Body For Structured Settlement Pricing Purposes

Structured settlements are one place where acting your age (or less) results in more expensive pricing! Your good habits result in you being rewarded with a longer life, but a more expensive annuity.

To obtain the best rated age, it is important to take the time to have the structured settlement consultant review medicals before they send them to the annuity issuer. This helps to eliminate redundant reports and may identify salient points for the underwriter's consideration.

Period certain payments and guaranteed lump sum payments are not affected by a rated age. Such payments are guaranteed to be paid whether or not the payee survives the entire payment schedule.

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