Structured Settlement Annuity: When Payable To A Trust, Issue The Annuity With The Trust As Payee!

by John Darer CLU ChFC CeFT MSSC RSP CLTC

Structured settlement annuity issuers need to pay more attention to settlement documentation before issuing annuity contracts.

I recently had a case that involved multiple annuity issuers and payments being made into a Settlement Preservation Trust. With all but one of the annuities the Settlement Preservation Trust was to be the secured payee pursuant to a Qualified Assignment Release and Pledge Agreement. With one of the structured annuities, the payee was to be the Settlement Preservation Trust, but the annuity issuer did not offer a pledge agreement.

Four out of five companies issued annuities with the incorrect payees, despite it being listed in the Settlement Agreement and Release, each of the Qualified Assignments and each of the annuity applications.

Three out of five companies incorrectly listed the Trust beneficiary as the secured party as opposed to the party to whom payments are due to be made, despite language noting the correct secured party in the Settlement Agreement and Release and Qualified Assignment Release and Pledge that were executed by the annuity issuer's qualified assignment company!

There is an obvious need to review polices for errors prior to sending them to agents and there is an obvious need for agents to review the contracts before sending them out to their clients. The annuity contract must match up to the other documents.Here is a brief but not exhaustive list.

1. Check amount and terms of payments
2. Check that the Payee is correct
3. If there is a pledge agreement make sure that the secured party is the Payee.
4. If here is a guarantee agreement, make sure it runs to the Payee.

Errors such as those described are frustrating. The needless but easily avoidable delay is a waste of everyone's resources.

The time it takes to issue a structured settlement annuity contact has been in need for improvement for the entire time I have been in the structured settlement industry.

Inadequate "push" communication between the life insurance company and the structured settlement consultant. When I began my career with Northwestern Mutual in 1983,  NML agents received daily and weekly status reports regarding pending cases.  Despite the fact that technology is available and has been for some time, the best on offer ( if offered at all),  is "pull" technology. This involves memorizing passwords and the need to sign into multiple places to obtain information.  In the limited cases where there is "push" it is usually delivered infrequently and by fax.