Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

AICPA gives Press to Structured Sales

A great article on Structured Sales by San Francisco tax attorney Robert Wood "The Advantages of Selling Appreciated Assets via a Structured Sale" has been published in this month's Tax Advisor.  The Tax Advisor is published by the AICPA (American Institute of Certified Public Accountants), the largest national professional organization for Certified Public Accountants in the United States.  The AICPA has more than 330,000 members, including CPAs in business and industry, public practice, government, and education.

Link to Robert Wood's article in AICPA's Tax Advisor

For more information about structured installment sales for your or your client's business or real estate properties please follow this link to The Structured Sales Authority

Cost of Structured Settlement... Daily Rates

by John Darer CLU ChFC MSSC CeFT CLTC

What Are Structured Settlement Daily Rates?

Structured settlement daily rates are an important part of the pricing process of creating structured settlements, structured sale or secured installment sales of real estate or businesses,  and non qualified structures used for non qualified assignments. Annuity issuers of structured settlements circulate book rates (name "book rates" originated from "the old days" when a manual rate book or rate sheet and calculator were used) to structured settlement brokers on a regular basis. Book structured settlement rates change from time to time reflecting the general market conditions.

Structured settlement rates will vary by carrier according to the annuity issuer's investments, statutory guidelines as to reserves, surplus position, overall business plan and philosophy, whether or not there is a rated age and other factors. Structured settlement brokers that have access to the wide spectrum of markets can shop the market of structured settlement annuity issuers for the most competitive rates. Structured settlement book rates must be set responsibly considering the large and varying flow of premium income and the fact that statutory guidelines of most states require the matching of assets to liabilities.

Most carriers also offer daily structured settlement rate pricing. When a competitive structured settlement offer is being made or structured settlement is being finalized, the structured settlement broker will take the proposed payment stream to the structured settlement annuity issuer or issuers in an attempt to see if the proposed payment stream can be funded at a rate more competitive than book rates. Taking into account the statutory asset/liability match requirements it may be possible in the spot rates in the bond market to find assets to match to the proposed liability (to the annuity issuer) created by the proposed structured settlement (which will permit better daily rate pricing). Please note that this is not always a given, particularly in periods of declining interest rates.

Minimum premium for structured settlement daily rate pricing ranges from None to $2,000,000 depending on the structured settlement annuity issuer. Structured settlement daily rates may be extended until noon of the next business day to up to 10 days depending on the carrier with most being good "until the end of the next business day". If case negotiations are ongoing some will consider an extension on a case by case basis, if market conditions permit. One carrier will give greater extensions on cases with structured settlement annuity premium (to that annuity issuer) of over $3,000,000.

Good structured settlement brokers make it look easy but circus juggling talents are a prerequisite when rates are in flux.

The use of structured settlement daily rate pricing may be just the thing that bridges the gap between in negotiations over a hotly disputed item of damages. In another application it may be used to enhance the value of a policy limits offer where the defendant has limited coverage and no assets.

Artist Emil Rothengatter (a/k/a E. Ro or E.P. Roe). Images taken from "Art of The Circus"exhibit and used with permission of the Witte Museum, San Antonio, TX .

 

 

Growing Senior Use Of The Internet Justifies Need For More Protections!

For those of you, including structured settlement brokers, settlement planners,  accountants, lawyers, judges,claim adjusters and regulators, who think that the Internet is not an important space for the education of structured settlement and settlement planning prospects and clients, think again!  Some eye catching statistics worthy of your consideration:

• 28% of Americans 65 and older use the Internet.¹
• 66% of Americans age 50-64 use the Internet.¹
• There was a 47% increase in wired seniors between 2000 and 2004.²
• 94% of wired seniors have sent or received e-mail.²

The above statistics may surprise you about seniors. However the confusion created by certain factoring companies and sploggers is very real and the above statistics underscore that the confusion could be, and very likely is, extending to seniors. Some states have laws in place regarding marketing to seniors and one state, California even requires a special 8 hour continuing education course regarding the sales of annuities to seniors. What are these states and the federal government doing to create laws to protect seniors from bad information or gibersih provided by sploggers? What are these states doing to enforce their truth in advertising laws in cyberspace?

1 Seniors Online: How Aging Boomers Will Shake Up The Market, Source: www.emarketer.com
²Pew Internet & American Life Project Report 3/28/2004, Source: www.pewinternet.org

Structured Sales Are A Safe Secure Way To Defer Capital Gains

Rachael Emma Silverman's article in the June 4, 2006 Wall Street Journal is an informative piece that covers many of the ways that owners of properties or businesses can dispose of such property. Read more about structured installment sale on The Structured Sales Authority I have covered the article with some additional commentary that may be helpful.

New Non Qualified Assignment Facility from Pruco

More details have emerged concerning Pruco Assignment Corporation, a partnership with which enables Prudential Financial, through us and other appointed structured settlement brokers, to offer non qualified assignments. As I announced in my post about Pruco late Friday afternoon more details would be forthcoming and here they are:

Like the NABCO (Allstate) and BARCO (Liberty) facilities, Pruco Assignment Corporation is based in Barbados, British West Indies with its address at RBC Building Holetown, St. James, Barbados. Tel. 866-299-4018 FAX 866-266-3815  Website: www.pruco.bb (please note that phone numbers and website will be active during the week of May 5-12). With the Allstate facility the annuity issuer guarantees the performance of the non qualified assignee. A slightly different twist is available with the Pruco program in that, according to promotional materials, Prudential Financial, Inc. has agreed to guarantee payments required to be made by Pruco Assignment Corporation, under the terms of any (non qualified) assignment agreements that it enters into.

Why Barbados? The tax treaty between Barbados and the United States permits the taxing state to be the owner's state which in this case is Barbados. Barbados has no corporate income tax and thus the domicile enables greater value of the payment stream offered by the annuity issuer (which is mainland US based in all 3 non qualified assignment programs) to go to the payee. Absent the tax exclusion afforded by IRC 130 (since non qualified assignment payments are taxable), annuities owned in the US represent generate taxable income to the corporate owner and thus would eat into the income available to pay the payee, thereby making the return less attractive.

Several years ago I sat with an attorney who I felt did a tremendous disservice to a client of hers, dissuading the client and her husband from taking a non qualified assignment by falsely telling them the concept was a sham. She didn't want to know. In my opinion, her ignorance cost her clients hundreds of thousands of dollars in tax savings. Perhaps now that there are two A+XV rated life insurance companies, in addition to another well known insurer, who have chosen the Barbados domicile, awareness will be raised.

Sometimes a periodic payment solution is warranted but the damages do not fall within the constraints of IRS "physical injury or physical sickness" or "workers comp"  guidelines in IRC 104(a)(1) and IRC 104(a)(2). Plaintiff and defense attorneys alike would be well advised to learn more about non qualified assignments which can be used in a wide variety of applications such as:

Age Discrimination, Punitive Damage Awards, Americans with Disabilities Act, Construction Defects, Sexual Harassment, Divorce, Race Discrimination, Environmental Litigation, Legal Malpractice, Attorney Fees, Property Disputes

If you would like to know more about non qualified assignments through any of the 3 facilities mentioned above please let us know or click here.

*RBC stands for Royal Bank of Canada

According to National Geographic the grapefruit originates in Barbados?

©John D. Darer 2006. All rights reserved

Prudential Announces Non Qualified Assignment Facility

Prudential Financial announced a new partnership with Pruco Assignment Corporation for non qualified assignments late Friday April 28, 2006. Full details will be available in the next week and they will be posted here on Structured Settlements 4Real. Pruco Assignment Corporation will be a new facility for assignments in non qualified cases such as structured attorney fees, structured property settlements, structured punitive damages, structured interest, structured employment and environmental cases, structured policy buyouts, securing divorce payments and perhaps Pruco Assignment Corporation will even provide an additional facility for structured installment sales. 

There are now 3 facilities for non-qualified assignments . In addition to Pruco Assignment Corporation, Allstate Life Insurance Company, Allstate Life Insurance Company of New York and Liberty Life Assurance of Boston offer non-qualified assignments through NABCO Assignments, Ltd. (Allstate program) and BARCO Assignments, Ltd. (Liberty program), respectively. Moreover, I understand that further structured settlement annuity issuing market or markets expect to come on line with a program for non-qualified assignments before the end of 2006.

The benefits provided by products and services offered through these facilities for non qualified assignments can only be obtained through appropriately licensed insurance producers appointed by the relevant annuity or funding agreement issuers in these programs. Therefore it is recommended that you consult someone who is appropriately insurance licensed and appointed for the required information.

A Tsunami of Bad Information

In my opinion the Structured Settlement Authority blog is a tsunami of bad information... here's yet another direct excerpt:

"Have you ever considered getting cash from your structured settlement to use for investment purposes? People try to save money for the future and invest in various ways. Liquidating a settlement could be an alternative source of funds. Some invest in property, others in the stock market, all hoping that they can make a good return to live on comfortably in old age. For those who want to avoid major risks in investing a retirement fund such as a 401K plans might seem like a good option"

First of all, do not follow the advice of the Structured Settlement Authority in that last sentence!

Do the people that publish this blog read what they publish? Suppose you are receiving payments from a structured settlement , and you "want to avoid major risk", these ninnys suggest that you first sell your structured settlement payment rights at a deep discount and then put the deeply discounted proceeds into a 401(k). That's right... these ninnys want you to take it out of a guaranteed tax-free stable structured settlement, put it into a tax deferred trust with exposure to some volatility that carries with it a further 10% penalty if you withdraw prior to age 59 1/2**. The other thing is can you even do this? Such qualified plans have contribution limitations and defined contribution retirement plans are based on percentage of earned income. Hopefully this type of deal would never get past a judge.

To the author of Structured Settlement Authority, I'd like to send you a giant bottle of extra strength Pepto. Your blog runneth over!

** a similar flawed strategy was highlighted in our 3-22-2006 Structured Settlement Advertising Wall of Shame involving Dos Coyotes funding.

Short Term Structured Settlements Increasingly Attractive

Short term structured settlements are becoming increasingly attractive due to rising short term rates. Consider these figures:

April 11, 2003 compared to March 31, 2006

1 Year T Bill      1.25%  v   4.82%

5 Year T Bond    2.92% v   4.72%

Source: Federal Reserve H15 data

Certain transactions which might have been less attractive a couple of years ago may work better for you, your law firm, or your clients now. Where a few years ago you might not have considered structuring your attorney fees, or your firm's fees, over 5 years it might make sense now given that the yield curve is flat and short term rates virtually equal long term rates. Solo practioner lawyers and firms alike might like to smooth out cash flow and gain some tax benefits from even a short term deferral of fees.

The same applies to structured installment sales of real estate property and businesses. The seller can combine the now more competitive short term with long term cash flows to suit his/her needs with added security of the Allstate Life Insurance Company Agreement to Pay.

Introducing The Structured Sales Authority

The Structured Sales method for Business and Real Estate Sales is an alternative to IRC Section 1031 exchanges, a way out if you are having trouble finding "like kind " property and  the installment sales method of disposition has you worried baout the long term creditworthiness of the buyer of the property or business.

Structured Sales is a relatively new way to mitigate the amount of equity that is exposed to current tax provided the business or property sale qualifies for installment tax treatment under IRC 453.

Now sellers can receive a customized stream of periodic payments with a large or small portion of the property sale. The future payments are secured by an agreement to pay by an AM Best rated A+ (Superior) annuity issuer.

I have started a new blog "The Structured Sales Authority" (URL:www.4structuredsales.com) to provide an educational resource and commentary to buyers and sellers of businesses and real estate, their attorneys and CPAs, business brokers and financial planners. From time to time there are issues that will overlap with Structured Settlements 4 Real. These will be covered on both blogs and perhaps on the 4structures.com website.

Settlement Planning and Structured Settlements: What Is Broker Afraid of?

by John Darer® CLU ChFC MSSC RSP CLTC

One of my respected  competitors proclaims: "There is no interest in selling another financial product before, during or after the case is settled". It's like "Dr. Erythro", a student health center physician at my University, who seemed to prescribe Erythromycin no matter what she was presented with. My question is a big fat rhetorical WHY? What is the broker afraid of?

I have always felt that skill in developing and communicating creative solutions is one of my strengths in helping my clients to resolve a case. There are many settlement planning issues to deal with, and problems to solve, that arise around the the time of the resolution of a personal injury case regardless of who you represent.  A structured settlement annuity may or may not have a role in the settlement planning solutions.  As part of a settlement solution ("before, during or after a settlement") there might be the sale or placement of a structured settlement annuity or annuities, a variable structured settlement annuity, various types of trusts and administration services depending on need, life insurance on caregivers or to provide estate tax liquidity, disability insurance, long term care insurance. There may be the need to dispose of a business asset or real property as part of the settlement planning process. If the installment sale method is desired then a structured installment sale solution might be put together.

Staying on top of your game means being more than a "one trick pony". Developing and possessing the knowledge and skill to be able to deliver the concepts and solutions to your clients problems is your challenge in being a better settlement professional.