Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Best Dating Practices for Structured Attorney Fees and Non Qualified Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Your "dating habits" can get you into trouble when establishing structured attorney fee programs and attorney fee deferred compensation programs and structured settlements for taxable damages 

Settlement agreements are contracts that obligate payment be made on a certain date. In most cases that obligation is shifted to a qualified assignment company, which purchases an annuity to fund that periodicpayment obligation to payment on a certain date. But what if it comes in early?  

Avoid the agita! of payments being deposited in your account, arriving before the end of the year, in the end of the year rush, instead of after January 1. 

Good "dating habits" for taxable damages payments

Consider using a starting payment date at least 10 business days into January, when settlement documents are drafted. 

You may also want to consider inserting language in the settlement documents that addresss when the payment date is not a business day (i.e. if the payment date is on a holiday or a weekend) that payments will be made on the next business day. 

Be mindful that where January 1st (New Year's Day) comes on Monday, as it did in 2024, the preceding days are a weekend and the week before is a short week (with Christmas also on a Monday) with many on vacation and the Friday before January 1st is a half day for many, day that insurers or other payment providers may release payments early in an effort to meet their conatrctual obligations.

Pay Extra Attention to Payment Dates on These Types of Settlements

What are Non Qualified Structured Settlements and Non Qualified Assignments for Tax Deferral (4structures.com)

Structured Attorney Fees and Attorney Fee Deferral Experts | 4structures.com LLC

Last updated January 12, 2024

 

 

 

Can a Structured Settlement Annuity Be Sold?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

A structured settlement annuity cannot be sold.  Individuals with structured settlements do not own the annuities that fund their structured settlements. They cannot sell what they do not own. Structured settlement annuities are generally owned by qualified assignment companies or non qualified assignment companies. In the less common so-called buy and hold cases, the buying and the holding is by the Defendant or insurance company.

But Annuty Expert Advice Said I Could Sell My Structured Settlement Annuity? 

Shawn Plummer, the proprietor of Annuity Expert Advice, has won the Canard of the Week multiple times for just this sort of "fupped duck" answer. 

 

"Can I sell my structured settlement annuity to a third party without the court being involved? No, in most cases, the court must be involved when selling a structured settlement annuity. This is because you must first obtain court approval to sell your settlement payments legally".

 

Plummer's answer is wrong on the fundamentals.

• As previously stated if you are receiving structured settlement payments you don't own the structured settlement annuity. 
• A Court cannot order or approve you selling something you don't own
• A Court must be involved only when you are attempting to sell structured settlement payment rights

If that's what Plummer meant why all the muddled words?

We can all have a little laugh at a meme of a blow up duck to drive home a point, because when it comes to structured settlement annuity ownership, Plummer is simply providing misinformation on the subject. I don't think it is intentional. Plummer is simply not a structured settlement annuity expert, he's an annuity content creator. Plummer appears to have no professional credentials for structured settlements at the time of publishing.

 

Pacific Life A+ Superior Financial Strength Rating is Affirmed by A.M. Best

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Pacific Life is a Leading Issuer of Structured Settlement Annuities

On June 22, 2022, rating agency A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of Pacific Life Insurance Company and Pacific Life & Annuity Company (collectively referred to as Pacific Life Group). The companies are leading issuers of structured settlement annuities, the latter company being Pacific Life’s structured settlement annuity issuer in the state of New York. Both companies are headquartered in Newport Beach, CA.

Additionally, AM Best has affirmed the Long-Term ICR of “a” (Excellent) of the group’s intermediate holding company, Pacific LifeCorp (Wilmington, DE). AM Best also has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of Pacific LifeCorp. PacificLife Corp serves as the guarantor of Pacific Life and Annuity Services, Inc., the Missouri domiciled company that serves as the qualified assignee for periodic payment obligations under qualified assignments pursuant to IRC §130(c)and which purchases and owns Pacific Life structured settlement annuities as qualified funding assets pursuant to IRC §130(d)

The A.M. Best outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Pacific Life Group’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM). Pacific Life’s balance sheet is supported by a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its history of positive earnings trends, which are supported by being one of the industry’s leading sales organizations in its key product lines. The favorable business profile assessment reflects its prominence as a leader in the affluent market segment.

Pacific Life offers competitively priced fixed structured settlement annuities, medically underwritten life contingent structured settlement annuities,  index linked structured settlement annuities (ILAPA) and has a variable structured settlement annuity in development. Pacific Life & Annuity Company also issues structured judgment annuities in New York cases.

Pacific Life has been named one of the 2022 World’s Most Ethical Companies^®

2022 marks the fifth consecutive year Pacific Life has been recognized by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices. Pacific Life was evaluated on five categories, including its ethics and compliance program; culture of ethics; environmental and societal impact; corporate governance; and leadership and reputation. The Ethisphere Institute, which honors companies demonstrating exceptional ethics-focused programs and practices. Pacific Life was one of 11 insurance and financial service industry honorees.

What Do Structured Settlements Really Do for People?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

What are structured settlements and what do structured settlements do for people?  Here's the simple answer.

Sustainable income is income which is consistent and steady over time. Sustainable income for personal injury victims provides a level of calm and clarity while things are in flux. 

Thinking About Your Child's Settlement

Sustainable income post high school and/or college graduation to give them the improved options for independent living and a wider choice of career opportunities. Your child can explore career choices with greater long-term potential that may not pay as much on the apprenctice or training program level.

Thinking About Starting a Business?

Sustainable income means you can move forward with confidence, knowing you have money to pay your bills.

Over age 65 with medical expenses and want to age in place, but don't want to do a charitable pooled special needs trust?

Senior Living Senior Fears Study published March 28, 2022

• Nearly 1 in 2 older adults' biggest financial fear was not having enough money saved for retirement, and this ring truer for those between the ages of 55 and 64.
• 1 in 4 older adults fears they'll never pay off their existing debt.
• Forty-five percent of people between 55 and 64 fear having high medical bills, while 39 percent of those over 65, including many on Medicare, have the same fear.

Sustainable income, what does that mean to you?  What does it look like?

Last updated April 1, 2024

 

 

Structured Settlements | The Wonderful World of Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

I see streams of green, lump sums too; tax-free payments for you, you and you; and I think to myself, what a wonderful world, ohhh yeah.

The "streams of green" are a perfect metaphor for the stability of structured settlement payments what that represents

I saw this wonderful image from the Robert Harding library taken from the middle of a mangrove forest, in Quang Ngai, Vietnam, that captures the essence of structured settlements in a perfect metaphor "Streams of Green".

How Can Structured Settlements Be Used?

"Streams of Green", as in customized payment streams of money that can individually, in parallel, or in conjunction, be used:

• to replace lost income
• to give a young adult a baseline as they enter the work force
• to quantify and provide a source of funding for future medical expenses
• to help fund custodial care
• or housing
• to help fund college education, grad school, a wedding, down payment on a future home, seed money for a business
• for funding a Medicare set aside at a significant discount
• to fund legacy gifts to children and grandchildren (no matter what happens)
• to smooth out uneven cash flows for a law practice
• to fund premiums for life insurance or long-term care insurance, or to create legacy wealth and much more.

The interposed blue-sky reflection on the water add to the optimism that this image represents at a time when some need hope and a reason for optimism.

The lyrics of the 1967 song, "What a Wonderful World", which I've [parodied above, were written by Bob Theile (as "George Douglas") and George David Weiss, and first recorded by Louis Armstrong ("Satchmo") during the Vietnam War amid turmoil in the 1960s, talks about the beautiful things of the world such as the blue skies, the beautiful colors of the rainbow, the warmth and friendlessness most people show each other, the lovely cries of babies, etc.

Despite the numerous heartbreaking things that happen around us on a daily basis, the song’s lyrics try to make the listener understand that despite the ugly part of the world, the world also has beautiful side that is totally worth appreciating. Owing to the sheer power and beauty of the song, it has over the years been used to try to bring people of different races together.  Read more at: https://www.songmeaningsandfacts.com/meaning-wonderful-world-louis-armstrong/.  It appeared on the soundtrack of the 1988 movie Good Morning Vietnam, after which it was reissued as a single, rose to 32 in the Billboard Hot100 and Louis Armstrong's recording was inducted into the Grammy Hall of Fame in 1999.

What is a structured settlement?

 

 

 

 

 

 

Structured Settlement Annuities Are Not Tax-Free Insurance Contracts | Wait! What?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Tax-Free Structured Settlement Annuity |  No Such Thing

John Darer reviews the term "Tax Free Structured Settlement Annuity", which you may encounter on the Internet. Be mindful that there is no such thing as a Tax Free Structured Settlement Annuity. 

Don't worry annuitants, there IS a tax exemption, but not exactly the way it's being presented in many cases by competent settlement practitioners and reputable settlement companies that should know better. Please read on for clarification of what is tax-free.

Examples:

• One settlement planner's website says "Structured settlement annuities are not taxable — they're completely tax-exempt"
• Another settlement planner's website says "Tax-free Income: 100% of structured settlement annuity is tax-free – including the settlement award, principal, ongoing payments and interest earned".
• "a tax-free structured settlement annuity to meet medical and living expenses, or other financial planning tactics".
• "A tax-free structured settlement annuity qualifies for special tax treatment under IRC §§104(a)(2) and 130(c)"
• "A claimant cannot accept a cash settlement and then purchase an income tax-free structured settlement annuity on his/her own"
• The best time to start preparing for your financial future is right now. Consider the many advantages of a Tax-Free Structured Settlement Annuity.*"
• " I work with the Tax Free Structured Settlement Annuity Product and Various Trust products"
  

The Damages That the Structured Settlement Payments Represent is The Key

While some of the incorrect statements by some settlement planners may seem plausible, it is the nature of damages that the structured settlement payments represent that is a critical factor, not the structured settlement annuity contract itself. 

Think about the applicable tax code sections cited in every settlement agreement that involves a structure.  The word "annuity" does not appear in IRC Sections 104(a)(2) or IRC 130(c). 

"Annuity" appears in IRC 130(d), which  provides the requirements an annuity must meet to qualify as a qualified funding asset, including the requirements that (i) the periods of the payments under the
annuity contract are reasonably related to the periodic payments under the qualified
assignment, and (ii) the amount of any such payment under the contract does not
exceed the periodic payment to which it relates.

Furthermore, a structured settlement annuity is a versatile insurance contract that can be used for a variety of applications, including structured settlements being used as a funding vehicle for settlements involving periodic payment of taxable damages and structured installment sales. 

I encourage my industry colleagues to take greater responsibility, hopefully with the recognition that inaccurate statements end up getting parroted or cited by others.

See my comprehensive write up on Settlement News Network What's a "Tax-Free Structured Settlement Annuity"? (4structures.com)

Please note that other factors may apply such as avoiding constructive receipt.Constructive Receipt is Game Over for Structured Settlements (4structures.com)

Last updated July 17, 2024  

Are Structured Settlement Annuities Taxable? It's All About The Damages

by John Darer CLU ChFC MSSC CeFT RSP CLTC

“Is a structured settlement annuity taxable? And is the initial amount that I get from the settlement taxable?”

Asked by a rhetorical question posed by a settlement planning firm.

Here is their response:

"If the origin of the claim is based on a personal physical injury, Section 104[a][2] of the Internal Revenue Code states that the initial principal amount on the settlement that the client receives is not taxable. It is tax-exempt at the state, local, and federal levels. however, if the client decides to invest their settlement funds, then the interest that grows from the investment is taxable. One way to avoid this is to establish a structured settlement annuity for the client to receive their settlement funds. All of the interests (sic) that grow inside of the structured annuity will also be tax-exempt. Payments received from a structured settlement annuity do not need to be reported on any tax return form (1040) or any tax document. Both the principal amount and interests (sic) in the annuity are completely tax exempt".

Here's the thing...

1. The Internal Revenue Code is Federal tax code. While there may be state and local tax laws that are modeled after federal tax law, those are the dominion of the individual states or local governments and their respective departments of revenue. 
2. IRC Section 104 (a)(2) permits a taxpayer to exclude from gross income "the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or physical sickness" Source: Internal Revenue Service irs.gov

Key Structured Settlement Takeaway

The key take away is that under IRC 104(a)(2) it is the damages are tax exempt not the annuity

With a properly established structured settlement, that starts with an obligation to make future periodic payments as damages on account of personal physical injury, where the obligation is generally assigned by way of a qualified assignment, and then funded with a structured settlement annuity or structured settlement annuities as a qualified funding asset, each of the future payments is tax exempt.

Taxes and Structured Settlements. It's All About the Damages!

 

Last updated May 11, 2024

Structured Settlement Industry Production Was A Record Setting $6.4B in 2019!

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Structured settlement industry premium production increased for the second year in a row. 2019 was a record setting year for structured settlements, exceeding $6.4B,  a massive statement of relevance for the core personal injury settlement planning tool in an era of low interest rates and record setting stock market performance

Structured settlements remain a relevant core personal injury settlement planning tool that enables parties to address the personal needs of plaintiffs with a level of precision

In addition to traditional uses of structured settlements in personal injury, wrongful death and workers compensation settlements, there are many applications in the non qualified structured settlement area such as employment and commercial settlements, structured installment sales, wrongful imprisonment  (the latter has tax exclusion but cannot be assigned under IRC 130).

A round of applause goes to my industry colleagues, their employees and to representatives of American General, Berkshire Hathaway,  Independent Life, MetLife, New York Life,  Pacific Life, The Prudential Insurance Company of America, United of Omaha and USAA Life insurance companies , and our trade associations, with whom I share this success. A further round goes to legal counsel, insurers and adjusters who support structured settlements and take the time to stay current on the many applications of structured settlements and who choose to retain structured settlement experts.

4structures.com LLC recently introduced new advertising that focuses on one of the strengths of structured settlements,  " a custom fit for your life marathon".

 

What Happens to An Annuity When You Die?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

What Happens to an Annuity When You Die?

If the annuity is a retirement annuity, the policy is in accumulation phase  (payouts have not begun at the time of death) AND the owner has named beneficiaries, the value of the annuity on the date of death is paid to the primary beneficiary. An advantage of naming a beneficiary is that the funds are available much faster to the beneficiary than they would be having to go through probate. Some companies give options for extending the deferral of interest. Required minimum distributions may be necessary where the decedent was over 70 1/2 at the time of death.

If the annuity is a payout annuity, such as a deferred income annuity (DIA) single premium income annuity (SPIA) or structured settlement annuity (SSA), AND the annuitant has named a beneficiary, only periodic payments that are certain are paid to beneficiaries, when they are due.

If the annuity is structured settlement annuity (SSA) with a commutation rider that has been in place since the annuity was established, AND the annuitant has named a beneficiary, remaining certain payment are commuted to a lump sum using the formula stated in the contract and paid to the designated beneficiary.  In some cases the designated beneficiary may be a trust.

Why Not Naming a Beneficiary to Your Annuity, or Leaving It To Your Estate is a Bad Idea.

If there is no named beneficiary, payments are made to the Estate of the deceased annuitant payee. The value of the annuity on the date of death to must go through the probate estate and will be hit with any fee or charge that is based on the assets of the Estate.

Do you need to name an annuity beneficiary in your will?

No, you do not need to name an annuity beneficiary in your will because all it will do is delay the payment of proceeds while the Estate of the decedent is probated. Naming a beneficiary with the annuity issuer results in much faster and less costly distributions following the death of the annuitant payee.

When this post was first published, Elaine Silverstrini, a writer for the unreliable website Annuity (dot)org, lead generation company for CBC Settlement Funding, clearly did not have a handle on this. She wrote:

"After the death of an annuity owner, annuities can be left to a beneficiary selected by the owner. This means an annuity held by a parent, spouse or another loved can be willed to a person named as a beneficiary".

Ah...no. Not a good idea for the reasons stated above.

Name a beneficiary using the form supplied by the annuty issuer, submit and confirm

You can also name a primary beneficiary and a contingent beneficiary in case the primary beneficiary is not living at the time of your death.  With a payout annuity, such as a structured settlement, the beneficiary can name their own beneficiary once they begin receiving payments. Submit any changes on the form provided by the annuity issuer and don't forget to confirm receipt and that changes are properly recorded. Usually a letter goes out to confirm, but you should take practive steps yourself anyway.

Last updated August 5, 2023

 

Fixed Annuity Sales Hit 25 Year Record of 6 Straight Quarters Greater than VA Sales

by John Darer® CLU ChFC MSSC RSP CLTC

Fixed annuity sales declined in the second quarter of 2017. Sales were down 7 percent to $29.2 billion. All fixed product lines sales, except structured settlements, experienced declines. In the first half of 2017, fixed sales fell 11 percent to $56.7 billion.

401(k) specialist attributes the drop to Fiduciary Rule fallout. First half sales haven’t been this low since 2001, LIMRA Secure Retirement Institute reports in its Second Quarter 2017 U.S. Retail Annuity Sales Survey. Second quarter results for total annuity sales were $53.9 billion, a slight uptick from the first quarter, but an 8 percent decline from this quarter last year. This is the fifth consecutive quarter of decline in overall annuity sales. It is also the sixth straight quarter fixed sales have outperformed VA sales, which hasn’t happened in almost 25 years.

It' s not surprising that structured settlements have not declined  when compared to other business segments, because the main reasons why people do structured settlements include:

 

and, and , and, and... 

• Preventing a premature dissipation of funds
• Safe, secure stream of payments (i.e. " the job you can never be fired from)
• Customizable to the needs of the payee 
• Minimize concerns and costs of managing money