Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary, Now in 16th Year!

What Do You HAVE To Do If You Have a Structured Settlement?

by John Darer CLU ChFC MSSC RSP CLTC

Absolutely Nothing!

 

Tax Benefits of Structured Settlement Payments in Physical Injury and Non Physical Injury Settlements

by John Darer® CLU ChFC MSSC RSP CLTC

Following is a brief summary of the tax benefits of structured settlements in physical injury and non physical injury settlements.

Personal Physical Injury/Physical Sickness Cases  (including Wrongful Death)

Structured settlement payments that are payable as damages, within the meaning of IRC 104(a)(2) and IRC 130, are income tax free.  Such damages payments are income tax free whether the qualified funding asset is a structured settlement annuity, treasury obligations or an indexed linked structured settlement payment [such as the ILAPA offered by Pacific Life Insurance Company and Pacific Life and Annuity Company (in NY)]

Workers' Compensation Claims (post-August 1997)

Structured settlement payments that are payable as damages, within the meaning of IRC 104(a)(1) and IRC 130, are income tax free.  Such damages payments are income tax free whether the qualified funding asset is a structured settlement annuity, treasury obligations or an indexed linked structured settlement payment [such as the ILAPA offered by Pacific Life Insurance Company and Pacific Life and Annuity Company (in NY)]

Wrongful Conviction/Wrongful Incarceration Settlements

Structured settlement payments that are payable as damages, within the meaning of IRC 139F, are income tax free.  Note that since damages subject to the IRC 139F exclusion are not currently covered under IRC 130, the structured settlement transaction must be done as a non qualified assignment even though the payments will be income tax free.

Employment Settlements [Settlement of Wrongful Termination, Sexual Harassment, Failure to Promote,  Gender, Ethnic, Sexual Orientation based lawsuits]

Tax deferred structured settlement payments flowing from a properly drafted release and executed non qualified assignment provided tax breaks for the plaintiff make offers more attractive and there are advantages for both parties.

Long Term Disability Settlements

Tax deferred structured settlement payments flowing from a properly drafted release and executed non qualified assignment provided tax breaks for the plaintiff make offers more attractive and there are advantages for both parties.

Other Non Physical Injury or Physical Sickness Claim Settlements

Tax deferred structured settlement payments flowing from a properly drafted release and executed non qualified assignment provided tax breaks for the plaintiff make offers more attractive and there are advantages for both parties. By deferring compensation over time, plaintiff defers in three ways and effectively earns interest tax deferred on

• principal
• accumulating interest
• the taxes deferred in the year of settlement.

Punitive Damages

Lump sum settlements risk plaintiffs exceeding the Alternative Minimum Tax (AMT) threshold which can, in some cases, be mitigated by spreading the settlement payments over time.

With a qualified assignment or a non qualified assignment the Defendant or its insurer receives a novation of the future payment obligation at the time the assignment is completed.

Annuitant Sees Shadow Decides Doesn't Need Cash Now for Structured Settlement

by Structured Settlement Watchdog®

Alternative news reports that a Pennsylvania annuitant has seen his shadow on the steps of the Schoharie County Pennsylvania Court of Common Pleas and decided not need to cash in his

Nah, i don't think I'll sell my structured settlement

structured settlement .  Alternative facts reporter 'Simon Says' has noted that this phenomenon occurs about once a year, usually at the beginning of February.  Some Pennsylvania legal observers feel that selling your structured settlement is a "praecipe for disaster"

Representatives of the structured settlement buyer "'One For You, Three for Me Capital" were left "Knobler's Gobsmocked' by the proceedings. Having scraped the court records they are now left "scraping the cage' for few droppings.

Happy Groundhog Day readers!  May your structured settlement payments keep providing you stable income over and over AND over.

Our family loves our structured settlement

 

Structured Settlement Payees Feel Secure As Stock Get Hammered

by John Darer® CLU ChFC MSSC RSP CLTC

The stock market of early 2016 has already suffered multiple days of multiple three digit losses, before an up morning. Making money in the stock market takes risk tolerance and discipline.  Not everyone has the mentality and intestinal fortitude to lose 10% or more of value in a few days or months.

Structured settlements are a haven in turbulent times.  People with structured settlements receive stable, secure guaranteed structured settlement payments that are backed by large well capitalized insurance companies. Five of the life insurance companies currently writing structured settlements have been in business since the 19th Century! Structured settlements provide valuable tax benefits for all types of damages.

New York Life Insurance Company, Metropolitan Life Insurance Company, The Prudential Insurance Company of America, United States Life Insurance Company in the City of New York and Pacific Life Insurance Company have each  been in business since the 1800s.

If you like the stock market's yo-yos, you have to watch the video below.  Have a thirst for more risk?  Try "  Yo-Yo Ma".  If you want safety, stability and guaranteed income, get a structured settlement.

Image Source Giphy

And if a shady structured settlement buyer in cahoots with a financial adviser, is trying to get you to sell your structured settlement payments for a fraction of their value to buy mutual funds or other investments, watch this video again.

Use of Annuities Supported by CDC Stats

by John Darer® CLU ChFC MSSC CeFT®  RSP CLTC

According to the Centers for Disease Control, life expectancy for a man reaching age 65 has increased from 13 years in 1970 to 18 years in 2011.  A woman’s life expectancy at age 65 has increased from 17 years in 1970 to 20 years in 2011.

Life expectancy has been increasing for several reasons, according to Robert Anderson, PhD, chief of the Mortality Statistics Branch with the CDC's National Center for Health Statistics. who added, "improvements in heart disease and stroke mortality have had a big impact. That's a large proportion of total deaths and that's where the action really is in terms of improved life expectancy. That's really what's driving the trend."

A recent analysis by the Institute of Medicine suggests that increases in life span in the United States are not matched by increases in "health span" -- time spent living in good health, Katz said.

"A long life with a high burden of chronic disease -- such as diabetes, heart disease and chronic obstructive pulmonary disease (COPD) -- means more time living with illness and disability," he noted.

Structured settlements annuities can provide a "steady job for life" providing stable guaranteed income that is income tax free if paying for damages that qualify under IRC sections 104(a)(1) or 104(a)(2).

Structured Settlements Lock-In | When Should a Lock in Be Used?

by John Darer® CLU ChFC MSSC  CeFT ® RSP CLTC

With interest rates that naturally fluctuate, a structured settlement lock-in is an important tool to help stabilize the process of placing structured settlement annuities for structured settlement brokers, settlement consultants, settlement professionals and settlement planners. A structured settlement lock-in may offer a significant benefits to claimants, plaintiffs, defendants and insurers alike at the time of case resolution.

A Lock in helps stabilize the structured settlement process

What is a structured settlement lock-in?

A structured settlement lock-in means that the structured settlement annuity issuer will guarantee the cost of a structured settlement providing a specific payment stream in exchange for the "quid pro quo" of a commitment to accept or purchase. The guarantee could be a week or, even a year.  It is important to note that it is NOT a rate lock-in, it is the cost for a specific set of benefits.  There is an internal rate of return associated with the cost/benefit combination that you are essentially locking in, but you cannot instruct a life insurance company to lock in a rate. You have to submit an illustration to lock-in.

Are the fees for a structured settlement lock-in?

While most structured settlement annuity issuers will lock-in with out charge for 30-60 days, the longer lock ins generally require a rate commitment fee that is typically 0.2% of premium for each 30 days. The reason for applying a fee is that a life insurer has a regulatory obligation to purchase assets to cover its liabilities and they run a risk if the purchase commitment is not honored.

Examples of where a structured settlement lock-in is helpful

• To secure the cost of structured settlement payments that must be expressly stated in a petition for Court approval of a settlement for minors or wrongful death action and in all settlement documents.
• Protect against downward interest rate fluctuations during the time period between the date that the parties have reached agreement to settle and the date the structured settlement is funded. 
• Where the Defendant will  not fund the structured settlement funding amount prior to receiving all settlement documents, courts orders etc.
• Where an unfavorable rate change has been announced by one of the structured annuity companies and the settlement is not likely to be funded prior to that date.
• Critical on larger cases where there is often an intricate blend of annuities from different companies as part of an integrated structured settlement plan with more than one structured annuity issuer, where two only do home office daily rate quotes  and where daily rates may be otherwise involved.
• To increase parties satisfaction with the overall structured settlement process

The potential consequences of no structured settlement lock in:

• If the Court takes months to approve a minor's settlement  or wrongful death settlement at which time it is possible that the benefits in the petition cannot be funded at the same price. This would require the submission of a new petition for a revised (possibly lower) benefit stream and needless further delays.
• The intricate balance of different annuity issuers in an integrated structured settlement plan  could be disrupted requiring recalculations and possible re-selling.
• You might get lucky and structured settlement rates will move in a positive direction for you between the date that the agreement to compromise is reached and the date that settlement documents are executed (note this difference!).  The settlement documents expressly state the specific periodic payment obligation.
• If the structured settlement payment stream is composed of deferred periodic payments the wrong guess, if interest rates move in the wrong direction, could be devastating

A Privilege Not A Right!

It's important to note that a lock-in is a commitment. It is a privilege granted by the annuity issuer. It is not a right. If you are going to gamble then gamble. If you want assurance then lock in. But you must understand that when a lock-in is submitted the carrier has to purchase assets to secure the benefit stream.  If the case is not funded the annuity issuer may have to sell the bonds. Holding higher yielding bonds in a downward interest rate environment may not be a problem, but the reverse is true in a generally upward rate environment. 

 

How Much Are Structured Settlement Payouts Taxed For The Beneficiaries?

by John Darer  CLU ChFC CSSC RSP CLTC

Structured settlement payments are income tax free to payees provided that the payments are for damages that qualify under Internal Revenue Code Section 104(a)(2)  [physical injury or physical sickness] or 104(a)(1)  [workers compensation]. Payments retain their income tax status when paid beneficiaries.

Structured settlements for damages that do not qualify under these sections of the Internal Revenue code offer tax deferral. Payments are generally taxed when received. For example, in an employment setting,  structured settlements can be used in legal cases involving sexual harassment, wrongful termination, failure to promote and disicrimination settlements. There is a wide variety of lawsuits and disputes where a non qualified structured settlement can be very helpful in resolving cases.

Work with a credentialed structured settlement advisor to be sure that your structured settlement is established correctly.

My Structure Gave To Me | Structured Settlement 12 Days of Christmas Parody

by John Darer®  CLU ChFC CSSC RSP CLTC

My Structure Gave To Me | The Benefits of Structured Settlements

(click on video below to read with soundtrack)

• On the 1st day of Christmas my structure gave to me,  a lifetime of security
• On the 2nd day of Christmas my structure gave to me, 2 lump sums and a lifetime of security
• On the 3rd day of Christimas, my structure gave to me, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 4th day of Christimas, my structure gave to me,  4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 5th day of Christmas, my structure gave to me, MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 6th Day of Christimas, my structure gave to me, 6 A+ 'comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 7th day of Christmas, my structure gave to me, all tax-free payments**, 6 A+ "comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 8th day of Christmas my structure gave to me, 8 structured sa-les,  all tax-free payments**, 6 A+ "comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 9th day of Christimas, my structure gave to me ,  "Nein" Oba-ma-care, 8 structured sa-les,  all tax-free payments**,  6 A+ "comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 10th day of Christmas, my structure gave to me, 10 years a-certain,  "Nein" Oba-ma-care, 8 structured sa-les,  all tax-free payments**, 6 A+ "comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 11th day of Christimas, my structure gave to me, 11 streams of payments!, 10 years a-certain,  "Nein" Oba-ma-care, 8 structured sa-les,  all tax-free payments, 6 A+"comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security
• On the 12th day of Christmas, my structure gave to me, 12 calls from Wentworth, 11 streams of payments!, 10 years a-certain,  "Nein" Oba-ma-care, 8 structured sa-les,  all tax-free payments**, 6 A+ "comp-nys", MY PEACE OF MIND, 4 years of college, 3 percent increases, 2 lump sums, and a lifetime of security

** for payment of damages excludable from gross income pursuant to IRC 104(a)(1) and IRC104(a)(2)

 

Dog Image: © Daniel Budiman | Dreamstime.com

Structured Settlements | Don't Run Out of Money Before You Run Out of Life

by John Darer CLU ChFC MSSC RSP CLTC

Your money or your life? How easy is it to deal with a lump sum settlement?  An oft cited statistic is that "90% of people have no money left after 5 years" focuses on stereotypical wasteful dissipation.

The failure rate for retirement account withdrawals, when accounts run out of money, using the old "rule of thumb" of 4 percent per year withdrawal rate is as high as 57 percent according to Retiring on CDs Not Viable, by Sheyna Steiner April 17, 2013, for Bankrate.com. Even a 3% withdrawal rate has a more than 20% failure rate for all asset allocations. Steiner observes "... that it may be a very long time before Americans can feel safe in retirement without purchasing a guaranteed income product. She asks "Is this going to be the age of annuities?"

In a fair extrapolation from the retirement study, which appears to be based on a Monte Carlo analysis,

1. Structured settlement annuity guarantees are an essential part of the settlement recovery to produce core income
   
2. Structured settlement annuitants should think long and hard about an aggressive sales pitch from a buyer of structured settlement payments teasing them into a discounted lump sum
   

4structures.com LLC offers a variety of income annuities and other income planning solutions, which provide contractually guaranteed income backed by some of the largest financial institutions in America.

• Structured Settlement Annuities
• Structured Attorney Fee Annuities
  
• Deferred Income Annuities  (DIA)
• Single Premium Imemdiate Annuities  (SPIA)
• Treasury Funded Structured Settlements (TFSS)
• Insurance Company backed Funding Agreements
• Periodic Payment Reinsurance.

In addition, the company offers other income protection solutions such as disability insurance, disability ovehead expense plans, disability buyout, key person disability coverage and long term care solutions.

For more information please contact me at 888-325-8640 or cell 203-561-6560

Our Settlement Plan for Special Needs Child Survived Parents' Divorce

by John Darer® CLU ChFC CeFT® MSSC RSP CLTC

This week a New York medical malpractice attorney related to another claimant, with me on the phone, something that was extremely gratifying. It comes under the heading of "you know this stuff really works!" It does.

The New York medical malpractice attorney had recently heard very positive feedback from another client of the attorney for whose daughter I put together a comprehensive settlement plan 14 years ago, in 1999. 

The attorney's client's daughter had suffered a serious neurological injury. The 1999 settlement plan approved by the presiding judge included , among other things, a supplemental needs trust, permanent life insurance on both parents/caregivers, and a diversified structured settlement portfolio with COLAs. The structured settlement obligations were ultimately guaranteed, respectively, by a surety bond from Allstate Insurance Company (for part) and a corporate guarantee from GE Capital Corporation (for another part) which yielded an average of 7.62% income tax free!  [Those were the days my friends, and they'll be back again...  ]

I might add that the case was resolved and all the attendant settlement planning was completed without a qualified settlement fund.

The mother of the child is grateful for the stable income that the structured settlement provides to help with her daughter's care. The NY personal injury attorney related how the young parents I worked with in 1999 are now divorced.. The life insurance is owned by a trust and a portion of the structure provides for an annual payment to assure that there are always sufficient funds to pay for the level life insurance premiums. Permanent life insurance was selected over term insurance because the parents were young, resources were available and we simply could not risk an insurability issue with either of the parents at the end of the term guarantee period.

Permanent insurance may also a good insurance policy in some settlement planning situations to assure the continuance of the intended plan,  in the event of the divorce of parent/caregivers of a severely impaired child or adult.  Each situation must be evaluated on its own individual facts and circumstances. It is however possible that having a child with a severe disability can also drive families apart or into a state of chronic stress or crisis. In the case in question we underwrote the parents for life insurance at a young and healthy age and the premiums stay level. The divorce has no effect on the life insurance, as the premiums are paid for by the trustee from the child's account.  There is no need for acrimony with the ex-spouse on the issue,  or for either spouse to spend additional legal fees litigating the issue of life insurance at the end of a term guarantee period, for reentry underwriting, or risking a large balloon in term insurance premiums to keep the overage thereafter if unable to get that completed.