STRUCTURED SETTELMANT

Did you know that Structured Settlements can take on the form of either a “Qualified” Structured Settlement or “Non-Qualified” Structured Settlement depending on the type of case?

“Qualified” Structured Settlements allows the plaintiff to direct the placement of dollars awarded to them in a wrongful death, physical personal injury, and/or worker’s compensation lawsuit into a series of annuity type instruments that provides tax-free cash payments to the plaintiff on an installment or periodic basis.

In cases involving wrongful death, physical personal injury and State worker’s compensation cases, “Qualified” Structured Settlements are applicable. These cases “qualify” for Internal Revenue Code (IRC) Section 5891(c)(1), which gives these types of cases taxation benefits based on an arrangement that meets the following requirements:

1. The suit or agreement must include for periodic payment of damages
excludable from gross income under IRC Section 104(a)(2); or

2. The suit or agreement must include for periodic payments of compensation
under any worker’s compensation law excludable under IRC 104(b)(1).

Additionally, the periodic payments must be of the character described in subparagraphs (A) and (B) of the IRC Section 130(c)(2) and must be payable by a person or party who is party to the suit or agreement, or by a person or party who has assumed the liability for such periodic payments under a Qualified Assignment in accordance with IRC Section 130.

“Qualified” Structured Settlements allows the plaintiff to direct the placement of dollars awarded to them in a wrongful death, physical personal injury, and/or worker’s compensation lawsuit into a series of annuity type instruments that provides tax-free cash payments to the plaintiff on an installment or periodic basis.

Simply put, Structured Settlements provide a tax-free benefit, and do not subject the settlement to market risk. Because of these benefits, informing your client about this alternative to the lump sum award may now be a matter of law.

Investment earnings on lump sum awards are subject to taxation.

Early dissipation is a reality with approximately 90% of all lump sum awards gone within five years.¹

Introducing
Structured Settlements
into Your Practice

Introducing a plaintiff structured settlement planner to your client is an important step. To begin, you have fulfilled your fiduciary and ethical responsibilities of retaining a financial expert that represents your client's best interest.

The mere fact that the defense’s Structured Settlement Broker does not represent your client is the most important reason why you should retain a Plaintiff’s-Only Structured Settlement Planner to represent your client and thus, eliminate the liability of any conflict of interests.

In all other cases; such as, divorce, discrimination, wrongful termination, sexual harassment, and retaliation, “Non-Qualified” Structured Settlements are applicable. These cases do not receive the same taxation benefits as the “Qualified” Structured Settlements; however, they do allow a plaintiff or claimant to defer taxation until physical receipt of the periodic payments. This is an advantage for plaintiffs who are in a high marginal tax bracket, or to those plaintiffs who are adverse to market risk.

Additionally, including Structured Settlements as an alternative to the lump sum in your in-take procedures will make certain that your client’s interests are best served and that your fiduciary responsibilities have been fulfilled.