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Another structured annuity issuer is to leave the market. I heard the rumor last week and that has been backed up by an email today. John Hancock Life Insurance Company and John Hancock Life Insurance Company of New York will cease writing structured settlement annuities effective March 8, 2013.
Is the world coming to an end? Not at all. Consolidation is normal in business markets. It is business as usual, with the exception of the single claimant QSF market, which will effectively be dead.
John Hancock is a major insurer who has just made a business decision to withdraw from a particular line of business. The company is not going out of business and will honor its commitments to existing structured settlement annuitants.
To our friends employed there who are waiting for the shoe to drop, we wish them well as they make their transition
A Minnesota CPA has 'bellied up" to the single claimant qualified settlement fund "bar". Chris Lordan states in his blog 'Though slightly indirect, the regulation seems to allow for the formation of a QSF with only one claimant. Evidence in Private Letter Rulings supports the idea that the single-claimant QSF is legally durable".
He says" One area of uncertainly regarding QSFs is whether a single-claimant QSF complies with the governing regulations and Section 1.468B of the Internal Revenue Code. Is a single- claimant fund legally compliant with the QSF regulations? While every situation is unique, don’t let an uninformed statement by a party to the settlement derail your plan because you have only one plaintiff.
Lordan, who is also a qualified settlement fund administrator, fails to acknowledge that currently only one Best "A+" annuity funding qualified assignee admits it will take a qualified assignment from a single claimant QSF.
Today there must be another valid reason to do a single claimant QSF and incur the attendant costs. In 2000, when I was involved in my first QSF, MOST qualified assignment companies would accept an assignment from a qualified settlement fund that involved a single claimant. A settlement planner could were imposed by an insurer or Defendant. Furthermore, in many cases back then, the short term interest might have been sufficient to cover the QSF administration costs. That is probably not the case today.
It is also worth mentioning that the tax advice given on these transactions has been from a VERY small universe of attorneys and accountants, some of whom, unlike Mr. Lordan, are not even tax specialists. I'm not knocking them, but legal and tax opinions usually have disclaimers. I reckon that the aggregate amount of professional errors and omissions coverage in place for these professionals for the last decade is far less than the amount of money placed into structured settlements from the single claimant qualified settlement funds they have opined on.
I should add that I contributed $15,000 in 2003-2004 to the collective effort to get Treasury to issue a Revenue Ruling to clarify the issue, because I felt it was right at the time. Despite being on the Treasury Priority Guidance plan from 2004-2009 however, the fact remains that there has been no ruling from Treasury.
The next time you get a piece of The Rock, it won't include a single claimant qualified settlement fund.
The Prudential Insurance Company of America dealt a massive blow to promoters when it announced March 19, 2012 that it will no longer write structured settlement annuities stemming from single claimant qualified settlement funds ("QSF") effective immediately.
The Prudential defines a single claimant QSF as a fund either established for the benefit of a single claimant or, for multiple claimants who do not have “competing interests” (e.g., plaintiff family members). Prudential will not provide for “derivative” claims from the injured party, i.e., a loss of consortium or an emotional distress claim by the parents and/or siblings for the personal injury victim.
The Prudential takes the position that when the funds are deposited into a QSF for a single claimant, and there are no other factors to be negotiated under the settlement, the claimant has received economic benefit of the assets**. Prudential does not consider lien holders or other non-claimantcreditors (attorneys, medical providers, Medicare or Medicaid) as substantial additionalobligations to be satisfied prior to the claimant’s ownership of the assets transferred to the QSF (EMPHASIS ADDED)
It is Prudential’s position that the attorney’s portion of the funds deposited into a QSF is constructively received by the attorney and the attorney derives an economic benefit from those funds unless specific circumstances exist. This is based on the fact that the amount of their fee is known at that point so there are no other factors to be negotiated. Prudential will accept the assignment of attorney fees that flow through a QSF when ALL of the following conditions exist: • The attorney and his (her) client agree to structure the attorney’s fees prior to services being rendered. • The case involves multiple claimants who have competing interests. • There are multiple attorneys representing different claimants. • The attorney’s fee is dependent upon the settlement their client is awarded. • The amount their client will receive was undetermined at the time the funds were placed into the QSF
• There must be an attestation that ALL of the above conditions exist.
Despite being on the Priority Guidance Plan of the United States Treasury for several years the issue of single claimant qualified settlement fund was unceremoniously dropped in late 2009. Efforts to incorporate it into changes to IRC 104(a)(2) at February 2010 hearings failed. It is believed that only one company remains that will accept structured settlements from a single claimant qualified settlement fund. As such, heeding a claim appearing on the website of a settlement planner claiming give full annuity market access using such a strategy is simply setting the attorney up for malpractice claim
I was surprised to hear that certain plaintiff lawyers in Upstate New York are STILL routinely using single claimant qualified settlement funds when structured settlements are being considered. The status quo has changed. Could following the advice of single claimant "QSF jockeys" mean those attorneys may be unwittingly facing malpractice exposure for not looking out for the best interest of their clients?
Single claimant QSF promoting settlement planners have recommended it "as a method to get around insurance company approved lists and get a "full market survey". The reality is anything but in 2011. Unlike 2000, when this author believes the first QSF was done in Erie County ( in Buffalo), when many companies would accept qualified assignments from single claimant QSFs, in 2011 there is just one New York licensed company that will. While it is a quality company, unless you are sure John Hancock Life Insurance Company of New York has the best rates, or your case is of size where diversification beyond John Hancock is not a concern, your client's best interest may not be served. [ In March 2013 John Hancock stopped writing structured settlement annuities]
Plaintiff lawyers who think that their structured settlement broker will stand shoulder to shoulder with them SHOULD be concerned. Do the math! If a structured settlement broker carries a $1 million single limit policy, or even a larger aggregate that must be divided by multiple brokers it's painfully easy to see that there is simply not enough insurance coverage to adequately protect you or your clients.
n addition to the annuity market limitations, there is still tax controversy about single claimant QSFs. In his address to the Academy of Special Needs Planners March 11, 2011, noted settlement tax specialist Robert Wood said "The regulations seem to allow the possibility of a single claimant QSF. Indeed, they include language instructing that a QSF may be “established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability....”87 Nevertheless, the Regulations fail to address whether the doctrines of constructive receipt or economic benefit would be triggered on a transfer for the benefit of a single claimant. The IRS has, to date, failed to definitively answer this question. Hence, the best advice is to avoid the controversy by establishing a QSF with multiple claimants. (emphasis ours)
Some QSF jockeys will ply plaintiff lawyers with a "cocktail" of legal opinions written by other tax counsel who wax eloquently on the subject. Yet would an examination of their errors and omissions policy limits and the times the same advice was given, leave them, the brokers and the attorneys exposed if the advice proves to be wrong?
Then there are added costs to Plaintiffs with a single claimant qualified settlement fund. There are costs to set it up and costs to administer it. There are records that have to be kept and one or more tax returns to be filed. I recently spoke to a trustee on a settlement management trust who told me that the QSF trustee failed to file 3 years worth of tax returns on a case.
In a presentation labeled "Best Practices in Qualified Settlement Funds" to the Society of Settlement Planners in March 2006 RIchard B Risk, Jr., a Tulsa Oklahoma lawyer who offers legal advice on QSFs to attorneys and structured settlement brokers (he also administers QSFs), stated that QSF principal might need to be used to pay QSF expenses if earnings do not generate enough to cover them and that a structured settlement producer may pay all or part of funding administration costs. GIven today's virtually zero short term interest rates, who believes earnings will be sufficient in 2011? Risk cites the ABA Model Rules of Professional Responsibility, 1.8(f), independent judgment and client consent and even states that the plaintiff's attorney may pay all pr part of those fees. The presentation is still posted in the "Video and Graphic Pesenations" (sic) section of the Risk Law Firm website at the time of writing (August 24, 2011 at 1:48pm EDT). However, when mass marketing of "no cost qualified settlement funds" by Buffalo based structured settlement firmto NYSTLA members came to light in 2007, an opinion was sought from the New York State Insurance Department Office of General Counsel which opined on September 24, 2007 that it was illegal to do so under New York State insurance law. Here is a copy of the opinion.
Judges in Erie County, Onondaga County, Monroe County, Chautauqua County, Niagara County, Albany County and counties in between should be vigilant for infant compromise submissions where there is a single claimant qualified settlement fund.
The single claimant QSF is sometimes simplistically marketed to defense interests by the QSF jockeys under the "pay one price and get out of Dodge" theory. I've spoken to attorneys who see an appeal in that, but if you are a municipal government, hospital or business in the community why would you want the negative PR when the parents of some poor child realize that their child was taken advantage of for the financial gain of the structured settlement broker or settlement planner who recommended it, that the QSF represented a needless increase in costs with little to be gained in terms of better structured settlement rates or prudent diversification. This could be a child of one of your taxpayers, your voters, your clients , customers or insureds.
There are still plaintiff lawyers in Update New York who believe (perhaps because they have been told) that the QSF is necessary to get around rebates paid by structured settlement brokers to insurance companies. But has anyone asked their sources to prove it?
If you are a plaintiff and your attorney is suggesting that you participate in a single claimant qualified settlement funds, pay close attention because you might not be able to avail yourself of the best choices when it comes to structured settlement annuities.
Do the math!
Single Claimant QSF= Single Structured Settlement Market
A plaintiff cannot compel a Defendant or its Insurer to pay settlement proceeds into a Qualified Settlement Fund involving a single plaintiff says a Florida Court Order dated June 2, 2011.
In the matter of Martinez v. Tampa Bay Academy, et al., Case No. 06-CA-007546 (Hillsborough Cir. Ct.), the Court agreed with Tampa Bay Academy and found that the parties entered into an enforceable settlement … in cash from Tampa Bay Academy, in exchange for a full written release from Plaintiff as to all claims. The Court ruled that the settlement amount "shall be paid to Plaintiff, or the trust account of Plaintiff’s counsel, in exchange for a full written release from Plaintiff as to all claims.”
Despite the fact that the establishment of a qualified settlement fund had already been approved by the court in a settlement with a co-Defendant, the Court here stated
“... there was no agreement between Plaintiff and Tampa Bay Academy to pay the settlement amount into any [QSF], and that neither Tampa Bay Academy nor its insurer is obligated to consent to pay the settlement amount into any QSF. Therefore, the Court will not order Tampa Bay Academy or its insurer to pay the settlement into any QSF.”
An interesting aspect of this case is that Plaintiff settled with one of the co-Defendants and that co- Defendant agreed to pay those settlement proceeds into the QSF. On the other hand the Insurer for Tampa Bay Academy thought otherwise and hired the Philadelphia law firm of Drinker Biddle & Reath, LLP to argue its case.
Plaintiff argued that Tampa Bay Academy and its insurer should be required to pay the settlement proceeds into the QSF in order to satisfy Martinez’s alleged need for a “safe harbor” for settlement proceeds while Martinez and other interested parties negotiated the allocation of settlement proceeds, and while a special needs trust was established for the benefit of Martinez.
payment into the QSF was not a term of the settlement agreed upon by Martinez and Tampa Bay Academy
Tampa Bay Academy and its insurer could not be forced to pay into the particular QSF identified by Martinez because Tampa Bay Academy was given neither notice of the establishment of that QSF nor an opportunity to object to same
payment into a QSF in the context of a single plaintiff case could result in adverse tax consequences to Martinez, Tampa Bay Academy, and its insurer; and Martinez’s purported reasons for wanting a QSF were unpersuasive.
Single claimant qualified settlement funds continue to be controversial among structured settlement stakeholders in recent years.
Despite the fact that the 468B statutory requirement is for "one or more claims" some have argued that that's not what Congress intended, or that there are issues related to structuring benefits out of single claimant QSF due to the economic benefit rule. Clarification was sought from the United States Treasury Department in 2003 and was on the Priority Guidance plan for 6 years before being left off the 2009-2010 Guidance Plan. Nationally recognized tax expert Robert Wood has suggested avoiding single claimant QSFs until there is guidance.
A decade ago most of the qualified assignment companies for the life insurance companies issuing structured settlement annuities, freely took assignments from qualified settlement funds. Many settlement consultants advising plaintiffs would pitch the single claimant QSF route to get around a restrictive selection of annuity markets by a casualty insurer. Yet what was once a strong argument no longer is, as few companies will permit a qualified assignment out of a single claimant QSF.
Pat Hindert and I seem to be killing one bird with two stones, or at least two stones thrown from the opposite side of the Single Claimant 468B bird.
"There is no black and white, only shades of gray" goes the chorus to the 1960s tune by Barry Mann and Cynthia Weil and sung by the Will-o-Bees and The Monkees (see below). This tune could be the theme song of certain structured settlement planners, settlement consultants, settlement planners, or whatever they want to label themselves today, who prefer to operate in the gray area of 468B, possibly because the black or white might not be what they want to hear.
When the clarification was removed from the Treasury Priority Guidance Plan after many years, some privately told me that being in the gray was OK, because what if Treasury came back with something unfavorable? Jack Meligan and Dick Risk knew it, which had to be the reason for their attempt to back door the single claimant 468B issue into a February 2010 IRS hearing on 104(a)(2).
Concurrent with the Society of Settlement Planner's legal effort to clarify single claimant 468B which began in or about 2003, I learned that my late friend Richard Halpern DID seek an IRS Private Letter Ruling on single claimant 468B. During one of the numerous conversations I had with Richard prior to his untimely death from cancer in December 2009, Richard detailed his thoughts on single claimant qualified settlement funds. And what may come as a surprise to many people, they were not a whole lot different than what Marty Jacobson presented at NSSTA this month.
A leading tax authority on structured settlements, Robert Wood recommends "avoiding the single claimant controversy by establishing QSFs with multiple claimants"
A newly minted erudite LLM from NYU Law School has a lot of good things to say, but if we were to stack all of the the errors and omissions insurance of the single claimant QSF "jockeys" out there and the attorneys that are providing the tax advice (such as "the gentleman from Oklahama") to them and their clients, is it enough to cover the shortfall if they are all wrong?
Given the hundreds of thousands the SSP and its members expended on Skadden Arps legal advice related to the Treasury clarification that did not happen, what's an additional $50,000 for a Private Letter Ruling?
Can you structure damages paid for pre-death pain and suffering or other elements of damages originating PRIOR to the decedent's death?
Can a decedent's heirs avoid these elements of damages by simply allocating 100% to wrongful death when the facts of the case show that litigation was commenced many years before a decedent's death and in which the decedent's pain and suffering was extensively pleaded in the years leading up to the decedent's death, day in the life videos were produced and used to support the case, mediation briefs documented the suffering, there were projections of loss of earnings etc.
Consider the following:
Auto accident case
Litigation commenced 5+ years before decedent died
Plaintiff was in excruciating pain for 5+ years before he died,
Plaintiff left 2 minor children
Litigation commenced shortly after the accident occurred and stretched an additional 2 years after his death. The case caption was amended to the "Estate of" after the decedent died.
Discussion
A. Decedent's pre-death pain & suffering must pass through his/her estate.
"Proceeds from causes of action originating before the decedent's death, such as pain & suffering, become part of the decedent's gross estate" Death and Damages Can Be Taxing-Jeremy Babener NYU Law, Trusts and Estates Journal (Penton Media) April 2011 citing Rev Rul 69-8 1969-1 CB 219 and IRS Technical Advisory Memo 98-11-006 (November 24, 1997) (award to plaintiff's trust included in plaintiff's estate upon his death; and Estate of Jeanne M. Houston v Commissioner of Internal Revenue Service TCM 182-362 (June 28, 1982) (claim of wrongful death of husband included in widow's estate upon her subsequent death)
B. All the property that a person owns is part of his or her estate. An estate can include clothes, jewelry, tools, cars, musical instruments, a house, land the house is built on, cash, bank accounts, retirement accounts, stocks, bonds, annuities and other items. The aforesaid damages are an additur to the taxable estate of the decedent. Applicable Estate and/or inheritance taxes (after any applicable estate tax deductions) and executor fees (administrator costs, if dies intestate) must be paid BEFOREthe remainder is divided among survivors and closing of the Estate.
C. Personal physical injury damages and physical sickness damages are excludable from gross income subject to the terms oi IRC §104(a)(2)
D. Money received as an inheritance is excludable from income under IRC §102(a)
E. IRC §130 governs qualified assignments. IRC 130 is a work around the taxation of income from annuities owned by non natural persons (see IRC 72(u)). Without the work around the cost of structured settlement would likely increase as there would be no tax exclusion to the assignee. The tax exclusion is critical in the majority of structured settlements where Defendants and their insurers have no interest in owning the annuities, or having a contingent liability. on their books. We can easily point to non qualified assignment companies to prove our point. If the IRC 130 exclusion was not an issue for non natural persons then there would be no need for offshore domiciles such as Barbados and Ireland for non qualified assignment companies.
F. IRC §130(c) (2)(D) makes no provision for payments received as an inheritance under IRC §102(a). To wit
(A) such periodic payments are fixed and determinable as to amount and time of payment,
(B) such periodic payments cannot be accelerated, deferred, increased, or decreased by the recipient of such payments,
(C) the assignee’s obligation on account of the personal injuries or sickness is no greater than the obligation of the person who assigned the liability, and
(D) such periodic payments are excludable from the gross income of the recipient under paragraph (1) or (2) of section 104(a).
G. The legislative history of the 1996 amendment to Section 104(a)(2) provides explicitly: If an action has its origin in a physical injury or physical sickness, then all damages (other than punitive damages) that flow therefrom are treated as damages received on account of personal physical injuries or physical sickness whether or not the recipient of the damages is the injured party. For example, damages (other than punitive damages) received by an individual on account of a claim of loss of consortium due to the physical injury or physical sickness of such individual's spouse are excludable from gross income. H.R. Conf. Rep. No. 104-737, at 300 (1996), reprinted in 1996 U.S.C.C.A.N. 1474, 1793.
H. Private Letter Ruling 200121031, 5/29/2001, IRC Sec(s). 104..."Because there exists a direct link between the physical injury suffered and the damages recovered, Taxpayer may exclude from gross income any economic damages compensating for such injury..." Source: Little Meyers & Associates
*****
On May 4, 2011 I posed the following question to several recognized tax authorities on structured settlements:
"Can the portion of settlement allocation reflecting the pre-death pain & suffering damages be structured to heirs? My understanding is that IRC 102(a) covers inheritances, any damages flowing from PI are not income taxable, IRC 130(c) only provides for assignment of IRC 104(a)(1) and IRC 104(a)(2) What is bugging me is the severity and duration of the P&S being major part of the negotiation and prosecution of the case.
Your initial thoughts on whether or not this could be structured"
I think you are the only broker or life company in the business that pays attention to this issue. Damages suffered by the decedent before his death belong to the decedent and pass through his estate. Those are excluded from the heir’s income as inheritances, not damages for personal injury".
David M. Higgins
THE SETTLEMENT LAW GROUP 11355 West Olympic Boulevard, Suite 200 Los Angeles California 90064 Tel: 213-833-0202 Fax: 213-291-8300 Cell: 310-415-3344
B. After this clarification from me
"...apologies for not being more clear in the question, I am aware of the Estate tax issue, my question is whether or not the damages that must pass through the estate can be structured? Clearly an allocation to wrongful death is a solution. However the unusual aspect of this case is the degree and duration of P&S, which seems to make an allocation to all Wrongful death more difficult. The Surrogates Court must approve the allocation. My client is an insurer. The provisions in a standard QA that permit an unwind (of the assignment) if IRC 130 (c) (isn't satisfied) brings into focus where my concerns lie here".
To which the answer was...
"...If the damages must pass through the estate, that would mean the damages to the estate are free of income tax, but then the beneficiaries of the estate are receiving money from the estate. That may mean they are no longer (IRC Sec) 104 damages. (emphasis ours) This is a new and interesting issue, but I'd have to have someone hire me to be able to render an opinion."
Issues
1. While some may try to justify structuring such elements of damage under the "origin of claim" principle, there appear to be sufficient questions about whether structuring elements of damages that must pass through a decedent's estate is possible.
2. Defendants, their insurers and counsel should carefully review settlement allocations in cases with this peculiarity to assure that the allocation is reasonable given the facts of the case, raise the issue with opposing counsel in timely fashion and avoid participating in a structured settlements where the math on the damages doesn't work out. Remember there are unwind provisions in every qualified assignment if IRC 130(c) is not satisfied. The provision is there solely to protect the qualified assignment company in case some sneaky "S.O.B." tries to slip through a case in that does not qualify. You said you wanted a CLOSED file right? NOT THIS!
3. Plaintiff attorneys, be aware that defendants and insurers are under no obligation to pre-fund structured settlements. At their option, many do so as a convenience. Sometimes that works in your client's favor. If you have such a case it may be a good idea to propose a reasonable allocation that the defendants or insurers can live with and only structure the direct survivors actions.
4. Are you being advised to use a single claimant 48B QSF and think a single claimant 468B QSF will solve your problem because the QSF trustee doesn't care about an unwind of the qualified assignment? Think again! If the unwind provisions are set in motion after an audit several years down the road, who is going to own the annuity and the obligation of the QSF, if the QSF no longer exists? Who is going to pay the attorney fees of your client to sort out the morass that you counseled them to accept?
5. Surrogate and Probate Judges should perform an extra careful review of submissions to make sure that an allocation is reasonable.
6. Should a fix to IRC 130 be sought that includes inheritances of this fashion under IRC 102(a)?
7. Lest anyone misinterpret me, I am not saying don't do structures on wrongful death cases.
8.. Some have suggested using a non qualified assignment but the idea needs further fleshing out.
"Spotted Dick" a steamed "sue it" pudding containing a dried fruit (single claimant 468B QSF)...
Well if it wasn't obvious before. it is obvious now that "The Dick" has spots.
Today Beyond Structured Settlements March 1, 2010
(Dick) Risk offered two comments after the (recent IRC 104(a)(2) hearing. First, what he, as commissioner of the IRS, would say to staff.
'The proposed revision is deficient, as pointed out in the written
public comments and in the testimony at the hearing, as it fails to
“prescribe all needful rules and regulations for the enforcement” of
Code section 104, as the law requires. The clarification of the
single-claimant issue can be resolved with a single paragraph,
consistent with congressional history, court decisions and the agency’s
previous rulings, without creating new policy. The definition of
“personal physical injury or physical sickness,” as Congress has
prescribed, which other commentators have recommended, also merits
inclusion in this regulation. Fix it and publish it again as a revised
proposal. I do not concur that the revision should be made final in its
current state. Your duty is to serve the people, not operate for the
convenience of the staff. Further, it is abusive to the people you are
here to serve to have suggested during the hearing that they start the
process over again by requesting that the single-claimant issue be
placed on the Priority Guidance Plan, without giving any assurance that
the result would be any different than when the request was first made,
in June 2003, accepted as a project in April 2004, and finally
abandoned in late 2009.
Second, his overall take of the hearing.
'I am extremely disappointed at the staff’s position in favor of pushing
through a shoddy and deficient product for its own convenience that
fails to address legitimate issues brought to its attention by comments
from the public, rather than doing the job right".
November 28, 2009
In his November 28, 2009 "sour grapes" about the Treasury Priority Guidance "swansong", Patrick Hindert cited that Risk "interprets
the decision to remove the single claimant 468B project from the
Priority Guidance Plan as evidence that sufficient guidance favoring
single claimant 468B QSFs already exists. Risk points to I.R.C. §
7805(d) which requires the Treasury Secretary to “prescribe all needful rules and regulations for the enforcement of [the Internal Revenue Code].” Risk concludes that Treasury’s decision is an acknowledgment that additional guidance is not “needful.”
I guess that explains Dick Risk's wistful post hearing comments, as related by S2KM
All the more reason that a supporter of single claimant 468B doesn't want "poker choker" Risk running the plays.
It was a case of "Dick' not getting 'Jack' when, as expected, the Treasury Panel presiding over yesterday's IRC 104(a)(2 hearing) pushed back 'forum shopping' interlopers Jack Meligan and Dick Risk by informing them them that the hearing WAS NOT the forum to argue IRC 468B single claimant qualified settlement funds.
Meligan argues that the National Structured Settlements Trade Association (NSSTA) doesn't represent all structured settlement consultants and I agree. However based on a lamely thought out strategy (punctuated by the plaintiff wail of "why did you remove single claimant 468B from the Priority Guidance Plan"?) one could also say that Meligan does not represent all those who have an interest in the resolution of questions conerning single claimant 468B qualified settlement funds. In 2003 the guns were partners at Skadden Arps with notable histories at Treasury or IRS. In 2010 is the best there is "Mack Jeligan" and "Dick Risk"?
While assigning an appropriate nod to the right to free speech, given the easily foreseeable outcome one can't help but view that the left wing front of the settlement industry was simply wasting tax payers' money and time during a period of economic crisis. John McCulloch of IFS Corp deserves a hand for showing that there are those in the industry who desire to keep things on point.
Jeremy Babener does a nice job of summarizing the "voices" at the 104(a)(2) hearing on Beyond Structured Settlements. Still not sure what Babener's gig is after he threw his QSF white paper into the IRC 104(a)(2) comments mx lead up to the hearing. Perhaps only he really knows.
What federal tax rules govern the use of structured settlements and qualified assignments?
One ANSWER appearing on an industry website: "In order to protect the public, Congress specified in Section 130 the requirements to establish a qualified assignment:
The assignee assumes the liability from the defendant;
Both the victim (and his/her attorney) and the defendant agree that the payment schedule cannot be "accelerated, deferred, increased or decreased";
The payment stream may be excluded from the recipient`s gross income for tax purposes;
The injury must be a physical sickness or injury; and
A highly secure funding asset (such as an annuity or U.S. Government obligation) must be used to fund the payments".
Comments
While the statement on the other website is true by itself, it is an incomplete answer, because it completely ignores the FACT that the terms of Rev Proc 93-34 provide assurance that a designated settlement fund or qualified settlement fund will satisfy the "part to the suit or agreement" requirement set forth in IRC 130(c)(1). This is of importance to lawyers who handle mass torts, class actions and those who participate in class action lawsuits.
To wit, please find the relevant text of Rev Proc 93-34
"Section 4 .01 A designated settlement fund or a qualified settlement fund will be treated as "a party to the suit or agreement" within the meaning of section 130(c)(1) of the Code if each of the following requirements is satisfied: (1) the claimant agrees in writing to the assignee's assumption of the designated or qualified settlement fund's obligation to make periodic payments to the claimant; (2) the assignment is made with respect to a claim on account of personal injury or sickness (in a case involving physical injury or physical sickness) that is either: (a) a claim described in section 2.04(1) in the case of a designated settlement fund, or (b) a claim described in section 2.05(2) in the case of a qualified settlement fund; (3) each qualified funding asset purchased by the assignee in connection with the assignment by the designated or qualified settlement fund relates to a liability to a single claimant to make periodic payments for damages; (4) the assignee is not related to the transferor (or transferors) to the designated or qualified settlement fund within the meaning of sections 267(b) or 707(b)(1); and (5) the assignee is neither controlled by, nor controls, directly or indirectly, the designated or qualified settlement fund. For purposes of this section 4.01(5), examples of control include an assignee that is a corporation the stock of which is owned by the fund or an assignee that is a trust the trustee of which is the administrator of the fund. .02 If an assignment by a designated or qualified settlement fund satisfies the requirements of section 4.01 of this revenue procedure and all the other applicable requirements of section 130 of the Code, the assignment is a qualified assignment within the meaning of section 130 and the transferor to the designated or qualified settlementfund will not be treated as receiving a deemed distribution described"
A Revenue Procedure or Rev. Proc., such as Rev. Proc 93-34 is a statement from the IRS or state tax authority intended to provide guidance to taxpayers with regard to the administration of laws and regulations.
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Compare Structured Settlement IRR to Other Settlement Alternatives Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
Structured Settlement Payments | Types of Structured Settlements Ways You Can Structure Your Settlement Payments. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
Structured Attorney Fees for Tax Deferral for Contingency Fees Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as the an index linked structured settlement where payments are adjusted based on upside changes in the S&P 500 with no downside and a cap of 5%. Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team.
Structured Settlement Annuity Company Customer Service Phone Numbers Receiving structured settlement payments from your own structured settlement or inherited structured settlement? You'll like this huge time saver. Click for a comprehensive list of customer service telephone numbers that includes both current AND former structured settlement annuity issuers and reinsurers. If you have simple bank or beneficiary changes, or if the insurance company that issued the structured annuity has merged, sold or spun off its block of structured annuity business (e.g. Aviva, Transamerica, AEGON, GE Capital, Liberty, CNA) or changed its name and you're trying to track them down, here you go! The list is regularly updated. Last update August 17, 2021.
Structured Settlement Quote Lock-Ins | What You Need To Know What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
What Are Structured Settlement Annuities? Structured settlement annuities are annuities that can provide one or more customized annuity payment streams in a single contract. Read about structured settlement annuities here.
History of Structured Settlements Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
What Are Market Based Structured Settlements? Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that:
1. Can afford to take some market risk
2. Have discretionary settlement dollars
Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
STRUCTURED SETTLEMENTS 4REAL® Blog Is a Popular Source of Structured Settlement News and Information, Settlement Planning News, Tax Deferral and Deferred Income Planning Solutions,
with a stable readership that seeks credible structured settlement information and/or opinion about topical issues related to settlement planning, targeted to lawyers, injured persons and their family members, guardians, survivors, judges, magistrates, special masters, mediators, administrators, trust companies, insurance company executives and adjusters, financial advisers settlement professionals, financial professionals, insurance regulators, government leaders, federal and state law enforcement, buyers and sellers of structured settlement payment rights, the news media and other interested parties.
4structures.com LLC established the structured settlement blog in 2005 and for over 15 years it has been a leading source for critical commentary. The John Darer authored blog has been among the most prolific, regularly providing fresh structured settlement, settlement planning and litigation recovery management content and commentary . John Darer®, CLU ChFC MSSC CeFT® RSP CLTC, President of Stamford, CT based 4structures.com, LLC, is an experienced New York City area structured settlement expert, structured settlement broker, Certified Financial Transitionist, and Registered Settlement Planner.
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New York Structured Settlement Expert Whether you're at the crossroads of the world or the crossroads of your life, structured settlements provide stability for when life is at a crossroad. Call 888-325-8640
New York Settlement Planning Expert for NY Attorneys and Residents - YouTube New York settlement expert John Darer's comprehensive approach to Settlement Planning helps New York personal injury lawyers and their clients move through the financial transition resulting from a major life event. CPLR Articles 50A and 50B expertise for New York lawyers
New York Structured Settlement Expert Useful information and ideas about structured settlements, settlement planning and litigation recovery managements for New York residents, New York Lawyers and New York judges
New York General Obligations Law §5-1702 The New York Structured Settlement Protection Act imposes mandatory requirements on the defendant or the defendant's legal representative when a structured settlement is created (as part of the resolution of a case)
Structured Settlements v Structured Judgments Often confused by writers on the Internet, but there IS a difference between structured settlements and structured judgments under CPLR Articles 50A or 50B. Find out more...
"Impressive Blog" -Counsel to Am Law 200 ranked International Law Firm July 22, 2020
"Thank you so much for giving us your time and leading us in the right path , Thank you, you are a God send , God bless you in all your works" -K April 11, 2017
"Once again, I can't tell you how appreciative I am for your help. In today's day and age, it is rare that you actually find people who are willing to go the extra mile..." -TC May 5, 2015
"I wanted to send you this email to say Happy New Year to you and your family. May God continue to bless you. I am grateful that I had the opportunity to meet you on the phone. I truly thank you for introducing me and my son, (redacted) to (lawyer). It is people like you that God put in the path of my son situation. Thanks a million times! {original on file] 1-2-2015
"John Darer has been nothing but honest,helpful,informative with options, & his
"time" was NEVER an issue!"-Andrew S 8/18/2012
" I wish there were more like you" JG 9-15-2014
In my opinion, John Darer is an excellent consumer advocate in the insurance industry. When I had no one else to turn to after running up against the stone walls of these giant insurance company, John Darer used hours of his own time to investigate my situation. Not only is this an invaluable service to me the consumer but it is also of great value to the insurance industry by providing them consumer feed-back. This allows the insurance companies to correct their faults and move toward greater transparency which improves the overall public image of the insurance industry as a whole" JW 9/4/2014
John, Keep fighting the fight. -NASP member 12-4-2013
John...Thank you for your professional advice-Brandon 11-13-2013
"...Thanks to Mr. Darer's blog and personal pointers I was able to obtain a fair price for the sale of client structured settlement. Therefore, if one has no choice, but to sell their settlement educate yourself first before selling start by reading John's blog" Mr P. 11/17/2012
"I always appreciate when he (John Darer) keeps us informed on regs and rules. No one does it better"- structured settlement industry colleague and reader RY 7/26/2012
"Amen - and continued thanks for your vigilance, John"- RL 8/18/2011
"Thanks for writing these great blogs on your site John! As an individual investor I have learned so much about the secondary market (for annuities, structured settlements, lottery payments, etc.) from your blogs and video series!!!" (6/5/2011)
I have found the intelligent and forthright information on your site a godsend. So much so I have tried in a small way to pass on my findings to others. Please keep up the good work and enhance your well deserved reputation as the authority on this subject- Mike 4/29/2011
John -
I can't thank you enough for bringing this to my attention. In my wildest dreams... PJ-May 12, 2011
John, I love reading your blog! Not only have I found very useful information there, but the comedy is much appreciated! Thanks for talking about "the big pink elephant in the living room" that everyone else ignores!
Thank you again for your help via phone and blog! I really needed to hear what you had to say today! BM 11/23/2010
John—this (video published 11/2010) is a well done piece. I like the way you always stick to the facts-AM
What a wonderful blog you have! I have completely enjoyed reading some of your posts (4/16/2010)
Thank you so very much for discussing my concerns about Symetra, my annuity company. I am amazed that PI attorneys as well as a settlement broker in San Diego, could not answer the simplest questions I had regarding the Safeco/Symetra issue. Your blog/web site is most interesting and informative, and I am grateful you have take on the "watchdog" role!
Thank you so much again (3/25/10)
"Keep up the good work exposing abuses in our industry - our future depends on clients being properly advised."-CD
Just checked out your blog and loved it. Keep up the good and balanced work-DL
"...we have never met but I thoroughly enjoy your web site and blog - excellent material…-PB
"I enjoy your website and its content. Informative and well written"-JC
I heard a radio ad for the Peachtree Settlement Fund as I was driving into work this morning. (San Francisco Bay area.) I decided to check it out on the Internet and came upon your blog. Thank you very much. I do not have a “structured” settlement,
"All the others that I had emailed & have seen on the net were "cash now types" & have no concern of me & just are looking for my $$$. When I came across your site & blog I realized that u are an upstanding guy & are not like others. That's why I emailed"
This was Great. Right On Point-TS
"Other Than John Darer No One Seems To Be Doing Anything"-J
Thanks for your help and also for the good work you do on behalf of our industry-L
"Thank you for being the inspiration that you are and for being a strong advocate for integrity in our business"-KL
"I Commend You On Your Effort To Make a Difference!" -R
"He is a fabulous writer who has a great passion for the structured settlement industry. I commend him on the passion he invokes when he writes on his blog listed above. That type of commitment and passion is hard to find and is rare in this world" -AC
Structured Settlement Best Practices Corner
New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
Be aware that financial advisors use of testimonials is prohibited or restricted
Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
Number of States That Prohibit Payment of QSF expenses by licensed agents and brokers
All posts Copyright 4structures.com, LLC 2021. All rights reserved. Ongoing filings have been made with the United States Copyright Office. Except for those videos in which John Darer appears or any video advertisements or public service videos appearing on, this blog, no claim is made to videos, music or images in any mashup which are the property of their respective owners
Structured Settlement Watchdog® is a registered trademark of 4structures.com LLC.Reg. 4711312 All rights reserved.
John Darer® is a Registered Trademark of John Darer, Stamford CT. Reg. 4674907 All rights reserved
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Jay J. Sangerman, PLLC A New York and Florida based AV rated estate planning law practice with an emphasis in Supplemental Needs Trusts, which assists attorneys in efficient case settlement though the use of Supplemental Needs Trusts and Special Needs Trusts; and Elder Law
Day Pitney LLP - People - Keith Bradoc Gallant Brad's practice includes traditional trust and estate planning and administration, special needs and disabilities planning, planning for same-sex couples and their families, planning for incapacity, and all types of probate litigation.
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Why Take a Structured Settlement?
A structured settlement offers guaranteed financial security to personal injury victims, wrongful death survivors and their families. A structured settlement involves a customized stream of payments, provides long-term stable tax-free income, for a period of years or a lifetime. Unlike other income annuities. a structured settlement annuity can have multiple payment streams to address multiple needs in a single contract.
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