by John Darer® CLU ChFC MSSC RSP CLTC
Allstate Life Insurance Company issued new guidelines July 19, 2010 which tightened its requirements on settlements involving minors and incompetents. The requirements give us a good reason to review the structured settlement process for our readers and to examine the elements of a structured settlement transaction.
A critical element to how structured settlements work is the proper documentation of a promise to make future periodic payments as consideration (See Step 1 below).
With settlements involving minors, the further step of a Court Order is necessary. The Court has the task of determining whether the overall settlement (including the structure) is in the minor's best interest. A Court is also required to approve any future transfers of structured settelment payment rights that were created at the time of settlement.
Petition is submitted detailing the settlement plan the Plaintiff hopes to accomplish . If. after review, the Court is satisfied with the settlement plan for the minor (or incompetent) it will sign the Infant Compromise Order and authorize the guardian to enter into the structured settlement with the defendant as well as execute the necessary documents to implement it. The Court may require the child and the child's guardian to make an appearance in Court and may ask questions to be assured the settlement plan meets the best interest of the infant.
Some forms of Infant compromise are quite lengthy, while others such as those found in the California court system are standardized forms replete with sand check boxes.
Regardless of the form or the state, the Court Order should specify the periodic payment schedule and reference the qualified assignment. For the sake of simplicity some lawyers attach exhibits to the Order while others include them in the body of the Order and repeat in the release and qualified assignment.
What one must avoid is an Order that is silent on the structure and/or simply obligates the Defendant to buy an annuity. This leads to needless delays in getting the annuity issued.
Allstate Life Insurance Company issued new guidelines July 19, 2010 which tightened its requirements on settlements involving minors and incompetents. The requirements also apply to cases placed with Allstate Life Insurance Company of New York
Note: The aforementioned chart details structured settlements where there is a qualified assignment. Where there is no qualified assignment, the transaction is known as a "buy and hold" and the annuity is purchased and owned by the Defendant or its insurer.