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

What is a Qualified Assignment Release and Pledge Agreement (QARP)?

by John Darer CLI ChFC MSSC CeFT RSP CLTC

A Qualified Assignment Release and Pledge Agreement (QARP) is a legal document, the execution of which sets the second stage of a structured settlement transaction in motion (see below).

Qualified Assignment Release and Pledge Agreements (QARPs) are used in personal injury structured settlements, or wrongful death structured settlements, where there is a desire for the Payee to have secured party status.  

What are the components of a QARP?

1. Structured Settlement: A structured settlement is a negotiated financial arrangement where as part of the consideration for the release of claims, the defendant or its/their insurers agree to make one or more customized streams of periodic payments to the plaintiff (injured party). A structured settlement is not an all or nothing  arrangement.  

2. Qualified Assignment: A qualified assignment is type of assignment used to establish a structured settlement, that complies with the requirements of the Internal Revenue Code (IRC) Section 130. A qualified assignment is an intrinsic part of a structured settlement transaction where the periodic payments represent damages for personal physical injury or physical sickness, wrongful death or workers compensation claims. Meeting the requirements is essential so that the assignment is considered "qualified" for tax purposes, and the defendant or insurer can generally claim a tax deduction for the qualified assignment.

3. Release: The plaintiff typically agrees to release the defendant or insurer from any further liability related to the original claim in exchange for the promise to make the periodic payments (structured settlement payments).This release is a crucial part of the agreement.

4. Pledge:   In the Pledge part of the QARP, typical language includes "the Assignee-Debtor pledges and grants to Claimant-Secured Party a lien on and security interest in all of Assignee-Debtor's right, title, and  interest in the Annuity and all payments therefrom in order to secure the obligation of Assignee-Debtor to make the Periodic Payments. Assignee-Debtor and Claimant-Secured Party shall notify Annuity Issuer of the lien created under this Agreement, and Assignee-Debtor shall deliver  Assignee-Debtor shall have all rights of ownership and control in the Annuity, including the right to receive and retain all benefits under the Annuity, which are not inconsistent with the security interest granted inthe QARP, and Claimant- Secured Party shall have no right to anticipate, sell, assign, pledge, encumber, or otherwise exercise any right with respect to the Annuity, so long as Assignee-Debtor has not failed due to insolvency or bankruptcy to make any of the Periodic Payments. If such a failure occurs and is
   continuing, Claimant-Secured Party shall have all of the rights and remedies of a secured party
   under the law then in effect in the State of________________

All settlement documents should be carefully drafted to comply with both federal and state laws governing structured settlements and assignments. Additionally, individuals entering into such agreements often seek legal and financial advice to ensure they make informed decisions.

Sampling of other John Darer Reviews of topics and sub-topics of Qualified Assignments:

• Structured Settlements with Inclusive Qualified Assignments (4structures.com)
• Qualified Assignments With Multiple Family Members on Same Form | Why Its May Not Be Such a Good Idea - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)
• If You See a Qualified Assignment and Release Like This, Seek a Second Opinion - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)
• Qualified Assignments and Tax Rules Concerning Structured Settlements - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)
• What is a Qualified Assignment? (4structures.com)

Last updated June 18, 2024

The Difference between Structured Settlements and Annuities? Why JG Doesn't Get Full Marks

by Structured Settlement Watchdog

What's the difference between structured settlements and annuities?

JG Wentworth gets partial credit in a recent Facebook post, but the 800 lb gorilla gets an incomplete for dropping the banana on structured settlements:

• Annuities are an insurance product designed to secure a fixed income stream,
  starting either immediately or in the future.
• Structured settlements are a type of annuity that results from a lawsuit.

Why doesn't JG Wentworth Get Full Credit for Structured Settlements 101?

1. A structured settlement IS NOT an annuity

2. According to IRC 5891,  the section of the Internal Revenue Code that is the "Mack Daddy" at the core of the stuctured settlement factoring business,  JG Wentworth's business:

With all due respect to Axar, who indeed is their Daddy, what does JG Wentworth's Mack Daddy  (IRC)  say?

 

IRC 5891 (c)(1) states "The term “structured settlement” means an arrangement—

 

A) which is established by—

(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a(2), or (ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and

 

(B) under which the periodic payments are—

(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and

(ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

 

So no, we're NOT speaking about

1. An arrangement of flowers

2  dead gourds for the harvest arrangement (after all it is almost the season), or

3. an arrangement of music, such as the Viking chorus in JG Wetnworth's commericals

 

A structured settlement is not an annuity but it is often funded with an annuity.

 

In the context of structured settlements an annuity is one of the acceptable forms of qualified funding asset

[see IRC 130(d)]

 

 

 

 

 

 

 

 

Lanclos v United States | US Court of Federal Claims Rules Against Executive Life of NY Annuitant

by John Darer CLU ChFC MSSC CeFT RSP CLTC

In a January 7, 2021 decision in JENNIFER LANCLOS, Plaintiff, v THE UNITED STATES, Defendant.  No. 15-358C, the court ruled in favor of the United States and the result is that the United States does not have to make up the annuity shortfall arising out of the Executive Life of New York insolvency and liquidation.

What does "guarantee" mean in a promise to purchase an annuity in a settlement agreement?

Since 2013, a number of breach of contract lawsuits have seen payees of Executive Life Insurance Company of New York structured settlement annuities attempt to recharacterize the term "guarantee" in settlement agreements to mean a minimum number of payments whether or not the payee survives the payment schedule.  

Plaintiff filed her complaint in this matter in 2015, alleging that defendant breached a 1986 settlement agreement resolving claims against the United States Air Force.

The settlement agreement with The United States included a provision in which plaintiff agreed to accept in “full satisfaction and final settlement” of her claims:

The purchase of an annuity which will provide the following:

$1,500 per month – from commencement of payment for a period of five
years
$2,000 per month – years 6-10
$2,500 per month – years 11-15
$3,000 per month – years 16-20
$3,500 per month – years 21-25
$4,000 per month – years 26-30
$4,500 per month – years 31-life

According to the January 7, 2021 decision in JENNIFER LANCLOS, Plaintiff, v THE UNITED STATES, Defendant, the agreement further provided that “[a]ll monthly payments above are guaranteed for 30 years or the life of [plaintiff], whichever is longer.” Id. at 8. Defendant duly purchased the annuity from Executive Life Insurance Company of New York (ELNY), however, after financial difficulties, ELNY became unable to make the payments in full in 2013. See id. at 3. Plaintiff alleged that defendant guaranteed the payments in the settlement agreement and that it breached the agreement when it failed to ensure the full payment was made.

In the court’s view, the distinctions plaintiff raises are insufficient to overcome the language present in plaintiff’s agreement that the Federal Circuit construed in Shaw. The Circuit reviewed the guarantee language in the Shaw settlement and concluded in citing Shaw v. United States, Case No. 17-2136 (Fed. Cir. filed June 8, 2017).

[R]elatively little significance can be given to this guarantee language. In the context of annuities, “guaranteed” is generally used as a term of art to
establish that an annuity that is measured by an annuitant’s life will continue to make payments in the event of death before the end of the guaranteed
period. In the Shaws’ agreement, the use of the term “guaranteed” indicates that the monthly payments will be made until 20 years have passed or until
the death of the annuitant, whichever is later.

In Granting the motion for reconsideration, vacating thee prior order and granting the United States's motion to dismiss, the Court concluded that "like in Shaw, the agreement here does not provide that the payments made by the annuities discharge defendant’s obligation; rather, the agreement
provides for the “purchase of an annuity,” and a lump sum payment, “in full satisfaction and final settlement” of plaintiff’s claims

Following are links to an assortment of blog posts that I've written over the last 13 years, which address the terms " guarantee" and " certain" as they apply to structured settlement annuities:

Period Certain Annuity...What is It? March 6, 2007

Structured Settlement Payments: The Label "Guarantee" Comes With Caveat   August 24, 2009

What Does Certain and Life Annuity Mean? Annuity 101  June 17, 2010

Structured Settlement Annuity | Certain vs Guaranteed  March 4, 2017

US Court of Appeals Rules that US Army Must Cover ELNY Annuity Shortfall   December 18, 2019  

US Court of Appeals Rules that US Army Must Cover ELNY Annuity Shortfall   December 18, 2019  

Maryland EXCLUDES Acquired Structured Settlement Payment Rights From Guaranty Fund Cover

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Bad news for investors in structured settlement payment rights in Maryland

You aren't going to get any protection from the Maryland Life and Health Guaranty Corporation in the

Bad news for investors in factored structured settlement payments

event the insurance company issuing the investor's checks goes insolvent and liquidates.  To be clear, the latest revision to Maryland law affects investors who buy other people's structured settlement payment rights.

EFFECTIVE DATE: July 1, 2020

SENATE BILL 186 / HOUSE BILL 141 (CHAPTER 74 / CHAPTER 73) - LIFE AND HEALTH INSURANCE GUARANTY CORPORATION ACT -- REVISIONS

• Revises the Life and Health Insurance Guaranty Corporation Act.
• Incorporates the 2017 changes to the NAIC’s Life & Health Guaranty Association Model Act (#520) whose purpose was to provide a mechanism to more fairly assess for receiverships involving long term care insurers.
• Includes health maintenance organizations (HMOs) as assessable ‘member insurers.‘
• Excludes coverage for a person who acquires rights to receive payments through a structured settlement factoring transaction.

Guaranty Fund Exclusion of Investors in Acquired Structured Settlement Payment Rights Is a Thing

The Maryland move is part of a trend to exclude such investors and rightly so, in my opinion. According to the National Association of Life and Health Guarnty Associations (NOLHGA) "State life and health insurance guaranty associations provide a safety net for their state’s policyholders, ensuring that they continue to receive coverage (up to the limits spelled out by state law) even if their insurer is declared insolvent. Working together through NOLHGA, the guaranty associations form a national safety net, protecting insurance consumers all across America in their time of need". 

Acquired structured settlement payment rights are often marketed to investors using terms such as SMA, SMIA, recycled structured settlements, used annuities and by the tertiary market scam label "secondary market annuities" (even though these instruments are most certainly not considered annuities, according to case law and the National Association of Insurance Commissioners).

Those marketing efforts have unfortunately have included a few corpulent "wolves in sheep's clothing" settlement planners who potentially endanger their personal injury victim and attorney clients with their intentional misrepresentation of such investments. Guaranty Fund coverage is limited as it is.

Clearly the purpose of the state guaranty laws is protect insurance consumers. Investors are not insurance consumers because what they are buying is not insurance.

Fiduciary Duty

Trustees of trusts for injury victims and fiduciary financial advisors also need to be vigilant of the new Maryland development and that it is reasonably foreseeable that the trend of exclusion of investors in acquired structured settlement payment rights will continue.

Postscript: As of July 2023, 80% of USA states had adopted the 2017 Revisions to the Life & Health Guaranty Association Model Act (#520), which contains the aformeentioned exclusion.

 

 

 

 

Structured Settlement | What is a Structured Settlement | Definition of Structured Settlement

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

What is a Structured Settlement?

A structured settlement is a negotiated financial or insurance arrangement through which a claimant or plaintiff agrees to resolve a personal injury tort or wrongful death claim by receiving all or part of a settlement in the form of periodic payments on a agreed customized schedule, rather than as a lump sum.

A structured settlement is a negotiated agreement

Definition of Structured Settlement per IRC §5891(C)(1)

The term "structured settlement" means an arrangement—

(A) which is established by—

(i)

suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or

(ii)

agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and

(B) under which the periodic payments are—

(i)

of the character described in subparagraphs (A) and (B) of section 130(c)(2), and

(ii)

payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

 

 

 Read What You Need to Know About Structured Settlements

 

 

Non Qualified Structured Settlements

Structured settlements can also be used for taxable damages, or for tax exempt damages that are not specifically included in IRC §130  (e.g wrongful imprisonment, wrongful conviction which are exempt under IRC §139F).

How Are Structured Settlements Funded?

Structured settlement payments are generally funded and backed by highly rated and regulated life insurance companies, a number of which have been in operation for more than 100 years.  Structured Settlements can also be funded with obligations of the United States Government (Treasury Funded Structured Settlements)

Structured settlements have received widespread bipartisan support from the U.S. Congress since the enactment of the Periodic Payment Settlement Act of 1982. 

Last updated August 5, 2023

 

 

Structured Settlement Planning | Settlement Planners' Love/Hate Relationship With Structured Settlement "Hot Potato"

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Is a Structured Settlement a Hot Potato? 

In a case of "Boise* will be boyz", for a while some industry free radicals, seeking a plausible " eggsplanation" of purpose, scrambled to relabel their practices.

It started with the Lake Oswego special "Settlement Planning starts from the premise that structured settlements are not the answer to everything that everyone needs or wants to do with their settlement dollars". Settlement Professionals Inc. 2011   No, settlement planning still DOES NOT start from that premise.  But others were almost apologetic about structured settlements as they tried to position themselves for the bounty on offer from trial lawyers.

Oh my god, it's a Structured Settlement.  Don't' worry dude, I'm a "Structured Settlement Planner".

Yet a few years on many are using the term "structured settlement planning", including an SPI spinoff.  I can see the term "planning with structured settlements", but "structured settlement planning"?  Is the term settlement planning not resonating enough?   Maybe. Back in 2007-2008 or so, the late Richard Halpern shared with me that The Halpern Group had market tested the term and found that settlement planning had no resonance and found that recovery was more well known and so recovery management was born. Settlement planning has come a long way since then.

Structured Settlement is Not Such a Dirty World After All

Fast forward to March 2018, where members of firms representing more than 50% of the industry premium are using the term "structured settlement planning" so I guess the term structured settlement is not such a dirty word, or a word to be fearful of after all.

• Structured settlement planning conflict of interest  "In this edition of The Settlement Channel, host Mark Wahlstrom, whose firm is an affiliate of SPI, looks at the issue of compensation disclosure, compliance and what standard the planner is bound by who is offering your client a structured settlement, or settlement plan. Too often structured settlements are put forward with out a clear indication of who is being paid and who the agent or broker is working for".
• The term structured settlement planning is referred to in a seminal text.
• Settlement Planning Services....structured settlement planning services  Jacksonville Florida plaintiff structured settlement brokerage March 2018
  
• Two firms from Houston
• An Orlando firm
• A Chicago firm
• Two national firms from California and a large CA producer for an Atlanta based firm.
• Several Buffalo NY firms
• A Tallahassee firm
• Even Annuity Sold fraudsters Ryan Blank and Richart Ruddie have used the term "structured settlement planning" with Einstein Structured Settlements to advertise a fake " structured settlement planning" seminar in Chicago in 2014,  so they could generate lead for their companies, (Annuity Sold JRR Funding, Greenspring Funding et al ) which are now banned in Maryland for 7 years, in their case for various acts of fraudulent business conduct (according to the Maryland AG press release 1/8/2018).
  

What is Structured Settlement Planning  ("SSP")?

What exactly is structured settlement planning?  

A. A key word grab that recognizes the drawing power of  the distinct key word structured settlement with something that gets lost on the web, with an organized assortment of human beings planning living communities.

B. An amalgamation of structured settlements and settlement planning for people who do not want to go "all the way".

C. An amalgamation of structured settlements and settlement planning that implies planning using structured settlements or planning using periodic payments as a separate and distinct service

D. An amalgamation of structured settlements and settlement planning that implies planning using structured settlements or planning using periodic payments as part of a broad range of services and/or business models

E. A "devious plot" to hijack the Society of Settlement Planners' acronym ("SSP")

Somewhere in the irreverence the answer may be a combination of choices.

The Silver Lining to "Structured Settlement Planning"

The fact that "settlement planners" are using the term "structured settlement planning", separate and distinct from "settlement planning" is recognition that there is specialized knowledge and skill in planning with structured settlements. A structured settlement is a core settlement planning tool and it is also a tool, which, if effectively used, can bring about settlements that result in the satisfaction of the parties.  Planning ahead adds an additional dimension to the process and allows participants to see issues and mind the gap.

Lastly, much as AIG found during a brief branding switch to Chartis during the financial crisis of 2008-2009, the AIG brand was alot stronger than anyone thought, it is clear that improving interest rates, re-imagining usage of the structured settlement tool as part of comprehensive solution and various other reasons have led to a broad realization that "structured settlement" is a term that resonates with stakeholders.

The use of the term structured settlement planning and the ability to shape a discipline is also a way to differentiate from those misleading charlatans and fraudsters that reside in the structured settlements secondary market who give unlicensed and unqualified financial advice.

*Boise Idaho (as in Idaho Potatoes)

 

 

 

 

 

 

 

 

What is a Structured Settlement Annuity?

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

What is a structured settlement annuity?

A structured settlement annuity is a type of annuity that is used as a 'qualified funding asset', to pay periodic payments as consideration for a release in the settlement of lawsuits.  A structured settlement annuity may include immediate or deferred payments,  payments for a fixed duration or for life, , deferred lump sum payments, payments with fixed increases, payments that adjuts based on changes in an index such as the S&P 500 or other indexes with or without a cap.  For more detail, see Types of Structured Settlement Payments | 2024 Structured Settlement Options (4structures.com)

More than one type of payment can be in a single annuity contract which makes a structured settlement annuity an ideal funding vehicle for someone who has a myriad of different needs at different times and would like a core stable income plan for the future. The measuring life, whose life is used to calculate the cost of life contingent payments, may be medically underwritten to provide a rated age. If  rated age is obtained it will reduce the cost of providing such payments with the company that has given the rated age.

Who can you get a structured settlement annuity from?

A structured settlement annuity is a regulated insurance product issued by a life insurance company and can only be placed by licensed insurance agents or brokers who authorized by the annuity issuers to offer the product..  5 companies who currently issue structured settlement annuities have been in business since the 1800s. Structured Settlement Companies | Top Structured Settlement Companies 2024 (4structures.com)

What has to happen before a structured settlement annuity is placed?

A settlement is  a negotiated compromise . A structured settlement is a negotiated compromise whereby a claimant agrees to resolve a personal injury or tort claim by receiving some part of the settlement in the form of periodic payments on an agreed schedule. As part of the negotiations, a structured settlement can be offered by the defendant or demanded by the plaintiff. A key point is that there has to be an agreement and the agreement must include periodic payments as part of the consideration for the release of liability.

How are payments from a structured settlement annuity taxed?

The taxation of structured settlement payments depends on the type of damages that the structured settlement payments represent. For workers compensation payments and for payments that represent damages for personal physical injury, physical sickness or wrongful death [i.e. excluded from gross income pursuant to IRC 104(a)(1), or IRC 104(a)(2)] payments are income tax-free. Payments for other types of damages are taxable.  A structured settlement can be purchased in a taxable damage case but payments are taxable when received by the payee. In taxable cases, the structured settlement annuity issuer will issue a 1099 to the payee for the tax year such payments are made. The important takeaway when it comes to structured settlement taxation is that it is not the structured settlement annuity that governs the taxation it is the type of damages that the annuity payments represent.

Can just anyone buy a structured settlement annuity?

No, a structured settlement annuity can only be purchased by a defendant, an insurer, a qualified assignment company, or a non qualified assignment company.  However anyone who receives payment of damages can benefit from a structured settlement annuity.

Can the court award a structured settlement annuity?

No, a court awards damages. If a structured settlement annuity is to be placed on a minor's case and certain other types of cases, a judge's approval may be necessary.

In New York, where judgements exceed certain threshold for future damages, portions of future danages are structured. 

New York Civil Practice Law and Rules Law Article 50-A (2022) - Periodic Payment of Judgments in Medical and Dental Malpractice Actions :: 2022 New York Laws :: US Codes and Statutes :: US Law :: Justia

New York Civil Practice Law and Rules Law § 5041 (2022) - Basis for Determining Judgment to Be Entered. :: 2022 New York Laws :: US Codes and Statutes :: US Law :: Justia

What is the cost of a structured settlement annuity?

A licensed insurance agent or broker who is appointed or authorized by the annuity issuer to use its software may calculate the cost of the structured settlement annuity very easily, even at a mediation, in the courthouse, in a lawyer's office, at the plaintiff's home or in a coffee shop. Sometimes a daily rate is available that is better than the software generated rate.  Licensed insurance agents and brokers who are authorized by the annuity issuer may contact the annuity issuer after a plan has been decided to see if a better daily rate can be obtained.

Last updated February 16, 2024

 

 

 

 

 

What is a Structured Settlement Policyholder?

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

Members of the settlement community have a responsibility to accurately describe structured settlement and/or settlement planning related terms and jargon.  Who better than the experts? 

Inaccurate use of industry jargon gets picked up by content generators without the expertise to correct the inaccuracy, which then proliferates to the detriment of consumers and the industry as a whole. 

A good example of this is where factoring companies claim to buy structured settlement annuities and tertiary market companies claim to sell structured settlement annuities under the label "secondary market annuities" 

Some other examples:

• Awarded a settlement
• Sell your settlement

Structured Settlement Annuitants inaccurately described as a Policyholders

 Let me break it down for you.

• A structured settlement is a method of settling a lawsuit in exchange for part of the damages being paid in a negotiated stream or streams of future periodic payments.
• A tax-exempt structured settlement is funded with a "qualified funding asset", which is often a structured settlement annuity, however it may also be funded with obligations of the United States Government (Treasury Funded Structured Settlement)
• When a structured settlement is funded with an annuity, the terms of the annuity are set forth in an annuity contract issued by a life insurance company.
• The purchase of a structured settlement annuity contact can be done in several ways:

A. Buy and hold method

Buy and hold is where the structured annuity is purchased and held by the purchaser.  When it comes to establishing a structured settlement the purchaser cannot be the payee, so if the buy and hold method is used the purchaser is either the Defendant, or the Defendant's Insurer.  In a buy and hold, the policyholder is the Defendant or the Defendant's insurer.

B. Qualified Assignment method

When a qualified assignment is used in an annuity funded structured settlement,  the future periodic payment obligation is assigned, with the consent of the parties, to a qualified assignment company, which is generally a subsidiary of the life insurer or a related entity in the corporate family. The qualified assignment company then purchases the qualified funding asset. With the qualified assignment method, the qualified assignment company is policyholder.  See How Structured Settlements Work | Structured Settlements Explained (4structures.com)

C. Non Qualified Assignment method

A tax deferred structured settlement method used when a structured settlement is desired but damages are taxable. When a non qualified assignment is used in an annuity funded structured settlement,  the future periodic payment obligation is assigned, with the consent of the parties, to a non qualified assignment company, which may be an offshore company**, often in Barbados,  and an unrelated entity to the annuity issuer. The annuity issuer may provide a guarantee of performance or a keep well agreement of the assignment company.  Similar to a qualified assignment, the non qualified assignment company then purchases the qualified funding asset. With the non qualified assignment method, the non qualified assignment company is policyholder.

D. Reinsurance Method

Reinsurance, in its simplest terms, is insurance of an insurance company, a form of risk transfer.  In terms of risk bearing there is a similarity to the buy and hold and assignment concepts when using three party reinsurance agreements in lieu of assignments.  A three party reinsurance with release sees the releasing party consent to look to the insurer for future payments instead of its reinsured, the insurer of the defendant.  With a two party reinsurance agreement there is still contingent liability for the insurer (reinsured) similar to a buy and hold.  Regardless of the reinsurance method, the person who receives the reinsurance structured settlement payments is not a "policy holder" or a  reinsured for that matter.

So what is the person receiving the payments called?

The Payee, The Annuitant, the Measuring Life, or possibly in the case of Reinsurance, the Reinsured ( In some cases more than one of these)

You may enjoy my parody of an old joke to help illustrate the difference  An Annuitant, A Measuring Life, A Payee and a Beneficiary Walked Into A Bar...  April 12, 2012

Can a policyholder receive payments from a  structured settlement annuity?

Yes, where a Defendant or Defendant's Insurer has used the buy and hold to purchase an installment refund annuity or a cash refund annuity.  This would occur where a Defendant or Defendant's insurer has a large New York judgment to pay subject to New York CPLR Articles 50A or 50B. or other elsewhere where a significant life contingent cash flow being structured elects to insure against mortality risk where there obligation only exists where the plaintiff is alive.

PostScript  

**Since 2021, there are a number of entities that have domestic non qualified assignment companies. 

AGL Assignment Company is a non qualified assignment company for non qualified structured settlement ustilizing annuities and funding agreements issued by Corebridge Financial subsidiaries, American General Life Insurance Company  (all states except New York) and United States Life Insurance Company in the City of New York  (New York cases). A Funding Agreement is not an insurance policy. Ergo, payee is not a policyholder for that reason as well.

MetLife Assignment Company, Inc. is domestic assignment company used for BOTH qualified assignments and non qualified assignmnet where the annuity issuer is Metropolitan Tower Life Insurance company.

Last updated February 16, 2024

 

Supreme Court Justice Snubs Lawyer's Frame of Structured Dismissal as "Structured Settlement"

by Structured Settlement Watchdog®

A "Structured Dismissal" in a bankruptcy is not a structured settlement, "so-called" or otherwise

Fortunately former Supreme Court Justice Stephen Breyer was up to the task when a Washington DC lawyer attempted to frame the mischaracterization in a recent hearing. Unfortunately Breyer's subtle efforts could not prevent another Washington DC law firm from amplifying the mischaracterization in its commentary in JD Supra Business. featuring "key takeaways" from oral arguments on December 7, 2016 in the bankruptcy case Czyzewski v. Jevic Holding Corp.

Definition of Structured Settlement in Internal Revenue Code at IRC 5891(c)(1) 

The term “structured settlement” means an arrangement

(A) which is established by—(i)suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or(ii)agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and(B) under which the periodic payments are—

(i)of the character described in subparagraphs (A) and (B) of section 130(c)(2), and (ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

Part of my mission as the Structured Settlement Watchdog®, is to clear the path for legitimate structured settlement information via critical commentary/education. In this case, four Washington DC attorneys at Orrick Herrington & Sutcliffe LLP  have co-authored a review of oral arguments in a Supreme Court case and have muddled up the term  "structured settlement". 

Here is their review as published online at JD Supra Business on December 12, 2016:

"The United States Supreme Court heard oral arguments on December 7, 2016 in Czyzewski v. Jevic Holding Corp. The case poses a question that has divided the Second, Third, and Fifth Circuits: Whether a bankruptcy court may authorize the distribution of settlement proceeds in a way that departs from the statutory priority scheme in the Bankruptcy Code, including through a so-called “structured settlement.”

Key Takeaways

1. The Supreme Court heard arguments in Jevic to consider whether structured settlements can depart from the absolute priority rule.
2. Several Justices suggested that, even if pre-plan settlements can depart from the priority hierarchy in exceptional cases, this may not be such a case.
3. We expect the Court to rule on this matter in early 2017"

Justice Breyer Kills The Confusion by Asking " What's a Structured Settlement?"

According to the transcript of the hearing which the lawyers at Orrick graciously linked to their article,  after the term "structured settlement" was interposed for structured dismissal and batted around like a beach ball between the lawyers and Justices Kennedy and Sotomayor, Justice Stephen Breyer, stepped in and astutely asked the following:

Justice Breyer  "But that's --I see that point, which you've made several times, is a very good point. I --clarify a basic misunderstanding on my part. What's a structured settlement?"

Bob Landau, another Washington DC attorney responds "Well, I think a structured settlement is --it's not a legal term. It's something they've come up with in this case".  (emphasis added)

Justice Breyer: Why not just call it a settlement?

Bob Landau: I think you could. And I think in that -

Justice Breyer: Let's call it a settlement.

Bob Landau: Perfect.

Download 15-649 Jevic Holding SCOTUS hearing transcript structured dismissal v structured settlement Breyer snub  [excerpt appears on page 41 lines 3-18]

Mr. Landau's highlighted comments speak for themselves.

Supreme Court Justice Stephen Breyer Was Not Fooled By Misuse of the Term "Structured Settlement" in December 7, 2016 Oral Arguments

Image: Wikipedia

Who is Justice Stephen Breyer?

Justice Breyer was born in San Francisco, California, August 15, 1938. He married Joanna Hare in 1967, and has three children - Chloe, Nell, and Michael. He received an A.B. from Stanford University, a B.A. from Magdalen College, Oxford, and an LL.B. from Harvard Law School. He served as a law clerk to Justice Arthur Goldberg of the Supreme Court of the United States during the 1964 Term, as a Special Assistant to the Assistant U.S. Attorney General for Antitrust, 1965–1967, as an Assistant Special Prosecutor of the Watergate Special Prosecution Force, 1973, as Special Counsel of the U.S. Senate Judiciary Committee, 1974–1975, and as Chief Counsel of the committee, 1979–1980. He was an Assistant Professor, Professor of Law, and Lecturer at Harvard Law School, 1967–1994, a Professor at the Harvard University Kennedy School of Government, 1977–1980, and a Visiting Professor at the College of Law, Sydney, Australia and at the University of Rome. From 1980–1990, he served as a Judge of the United States Court of Appeals for the First Circuit, and as its Chief Judge, 1990–1994. He also served as a member of the Judicial Conference of the United States, 1990–1994, and of the United States Sentencing Commission, 1985–1989. President Clinton nominated him as an Associate Justice of the Supreme Court, and he took his seat August 3, 1994. 

Justice Breyer retired from the Surpreme Court in 2022 and was replaced by Justice Ketanji Brown Jackson, the first African American woman to be elevated to Supreme Court Justice.

Last updated August 20, 2023

The Difference Between Structured Settlements and Annuities

by John Darer® CLU ChFC MSSC RSP CLTC

A structured settlement is a negotiated compromise between a plaintiff and a defendant in which part of the settlement includes a promise to make future periodic payments. The future periodic payments are negotiated and may be tailored to the plaintiff's specific needs.

Structured settlement annuities are dependable stable core settlement planning tools that come in a variety of sizes and torque to address most settlement  and financial planing needs

How Are Structured Settlements Funded?

Generally structured settlements are funded with annuities, but under Federal tax law [IRC 130(d)] they can also be funded with obligations of the United States government [also known as Treasury Funded Structured Settlements]. 

What are Annuities?

Annuities are types of insurance contracts issued by life insurance companies that come in a variety of shapes and sizes to fit different financial needs. In general a premium is paid to secure a contractual promise to pay a defined set of payments, or payments calculated based on a fixed and determinable formula. While annuities are most often associated with retirement, billions are funded every year to meet the current and/or future income needs of personal injury victims, wrongful death survivors, employment settlement plaintiffs and more.

What's the Difference Between Structured Settlement Annuities and Regular Annuities?

Pull into your settlement planner's or financial adviser's "service bay" while your needs are elevated on "the service lift" for further examination.  Regardless of whether it is a structured settlement annuity or other type of annuity,  you will find that there is a variation of this financial tool to address most every need. There is a difference between structured settlement annuities and regular income annuities (SPIAs or DIAs). Structured settlement annuities can have multiple payment streams all in a single contract which is a major administrative convenience for people who receive structured settlement payments.

Types of structured settlement payments available with structured settlement annuities

Is a so-called "Secondary Market Annuity" Really An Annuity or a Structured Settlement?

Very simply, NO a Secondary Market Annuity, or SMA is not an annuity at all.  What is being misrepresented all over the Internet as an annuity, is actually the right to receive structured settlement payment, transferred from the original payee. The annuity itself is not transferred.   Structured settlement payment rights can be sold to you by every Tom, Dick or Harry,  structured settlement annuities can only be solicited and placed by licensed life insurance agents in your state.  Investors can easily verify if they are speaking with a licensed agent, broker,  or a bullshit artist, by checking the website of their state's insurance department, which is some states (such as New York) may be called the Department of Financial Services.

What is an Equity Indexed Annuity?

FINRA defines equity index annuities as complex financial instruments that have characteristics of both fixed and variable annuities. Their return varies more than a fixed annuity, but not as much as a variable annuity. So EIAs give you more risk (but more potential return) than a fixed annuity but less risk (and less potential return) than a variable annuity.

EIAs offer a minimum guaranteed interest rate combined with an interest rate linked to a market index,such as the S&P 500. Because of the guaranteed interest rate, EIAs have less market risk than variable annuities. EIAs also have the potential to earn returns better than traditional fixed annuities when the stock market is rising.

Equity Indexing and Structured Settlement Annuities

A form of equity indexing is available with structured settlement annuities. It's important to distinguish that in an indexed structured settlement annuity,  it is the income that is indexed, while the traditional equity indexed annuity is both an accumulation and decumulation product.  An Indexed Linked Annuity Payment Adjustment Rider (ILAPA) has been offered by appointed agents of Pacific Life Insurance Company and Pacific Life and Annuity Company (In New  York)  since April 2014, when Pacific Life received a favorable IRS Private Letter Ruling supporting the tax structure of the indexed structured settlement.

Differences in Tax Treatment between Structured Settlement Annuities and other Annuities

Generally structured settlement annuities are used to fund damages in lawsuits where the damages are exempt from taxation.  It is important to distinguish that it is not the annuity itself, but what the payments represent that governs the tax consequences.  For example on the one hand, properly structured settlement annuity payments for damages to someone who lost a leg in a construction accident are income tax exempt. On the other hand structured settlement annuity payments to an attorney or law firm are not tax exempt, but could shelp the attorney defer the tax on his or her contingency fees. Other annuities are used for tax deferral of interest. 

Differences in Structured Settlement Annuities and SPIAs

Structured settlement annuities can have deferred start dates longer than 13 months,  while traditional single premium immediate annuities cannot. Structured annuities can accommodate multiple payment streams in a single contract.

 Call 888-325-8640 for more information about structured settlement annuities