Structured Settlements | Over 100 years of creation
Income Act 1918, Cap. 18, § 213 (b) (6), 40 Stat. 1057, 1066 (1919)
tax-exempt losses for “personal injury or illness” ffrom taxation, apparently because Congress considered it “questionable” whether such damage was “income” within thethen
the meaning of the sixteenth amendment and, therefore, whether they can be constitutionally taxed.
Damage from various non-physical injuries (for example, attachment alienation, defamation,
etc.) were also considered tax exempt
The IRS rules that the remuneration paid by the US / German Mixed Claims Commission to the surviving spouse of a passenger in Lusitania is tax exempt as the remuneration is intended to “recover [the decedent’s wife] to practically the same financial and economic situation that she had before the death of her husband.
The Great Depression
Investors began to look to annuities as a safe haven from volatile markets.
establishes that cash settlements in personal injury cases are tax-exempt.
Situations 1-3, 1960-1 CB 174, considers that a simple promise to pay, not represented by bills of exchange or secured in any way, does not constitute an income in the sense of cash receipts and payments.
Serious birth defects resulting from the use of the thalidomide drug resulted in more claims than manufacturers could afford to pay. Recurring payments from the fund were used to provide compensation for thalidomide victims more than was possible at the time with a lump sum payment in cash.
approved by the California Legislature in September 1975. According to MICRA, non-economic damage is limited to $ 250,000. Non-economic damage includes claims for pain and suffering, loss of consortium, both of which allow financial reimbursement for loss of limbs, loss of vision or hearing, ability to walk, and all other damages that are not directly related to economic loss. Lawyers’ fees are paid on a declining sliding scale. The statute of limitations has been shortened and doctors are allowed to pay remuneration over time. [see California Codes: Business & Professions Code Section 6146, Civil Code Sections 3333.1 and 3333.2, and Code of Civil Procedure Section 667.7. ]
Recurring payments are completely excluded if:
Private letter, Bylaw 7933078, May 21, 1979 Recurring payments are completely excluded if:
Income Ordinance 79-220… The IRS publishes Revenue Ruling guidelines that serve to ensure that recurring payments are tax-free in the event of personal injury and structured settlements. It should be noted that the order states that “the recipient may exclude the full amount of payments from gross income under IRC §104 (s) (2) of the IRS Code, and not just the discounted present value.” Payments made to the inheritance after the death of the recipient are also completely excluded. “
Insurers must first pay for Medicare recipients for reported injuries, with Medicare only liable as a “secondary payer”.
Recurring payments are completely excluded if:
Periodic Settlement of Payments Act 1982
(Also known as PL 97-473). Codified various tax regulations into law and created IRS Section 130, which allowed a qualified assignment of obligations to a third party (substitution of debtors).
Private letter 8333035… IRS response to private party that there is no tax on disclosed annuity benefits.
Damage resulting from this act of wrongful dismissal, age discrimination, and violations of the State’s Civil Rights Act for Persons with Disabilities were covered by personal injury and are not included in gross income. They also do not constitute salary for FICA, FUTA or income tax withholding purposes.
The portion that was paid for attorney’s fees, expenses and interest is included in gross income, but is not wages for FICA, FUTA, or withholding purposes.
TThe portion payable in annual payments for loss of wages and interest will be included in the gross income for the tax year received.
Only lost wages, not interest on them, will constitute wages for FICA, FUTA, withholding purposes
Section 50-A of the New York State Periodic Order Payments Act (CPLR 5031-5039)
The Civil Practice Act and Regulations effective July 1, 1985, requires, based on a number of calculations, that future damages for medical, dental and orthopedic malpractice judgments in excess of $ 250,000 must be paid in a structured judgment.
Founding of the National Structured Settlement Trade Association (NSSTA). represents licensed consultants, attorneys, insurance companies and other professionals who work with accident survivors and their dependents.
642 F. Supp. 635 (ND Ala 1986) All wrongful death damages, including punitive damages, are excluded in accordance with 104 (a) (2).
The Civil Practice Law and Regulations entered into force on August 1, 1986 and requires, based on a series of calculations, other types of future damages in the form of personal injury, property damage and misconduct in relation to death in excess of US $ 250,000 must be paid in the form of a structured judgment.
(TAMRA) removed the wording from section 130 of the IRS Code that read: “The assignee does not grant the recipient of such payments any rights that exceed those of a regular creditor.”
The IRS issues PLR to the private party regarding the taxation of annuity payments if it includes secured creditor status and a guarantee.
Liquidation of a structured settlement In re Monarch Capital
(See MONARCH CAPITAL CORPORATION Debtor No. 91-41379-JFQ (D. Massachusetts, August 12, 1991), 175 structured settlement annuities were defended despite filing for bankruptcy by the transferee, Monarch Capital, a non-insurance organization.
allows physically injured persons receiving massive civil claims payments paid to a special settlement fund IRC § 468B (d) (2) or a qualified settlement fund under §1.468B-1 to enter structured settlements, allowing the settlement fund to be treated as a “party in a claim or agreement “transfers its obligations of periodic payments to a third party
principled decision regarding structured attorney fees. The 11th US Circuit Court of Appeals ruled 89 F.3d 856 (11th Circuit 1996) that settlement documents controlled the timing of income and that constructive receipt doctrine did not apply.
abolished the exclusion of damages from gross income for damages received for punitive damages and compensations for non-physical damage, which were in force for 74 years!
amended IRC §130 (c) to permit qualified allocation of workers’ compensation claims filed after August 5, 1997.
Favorable IRS decision on the death penalty for structured settlements.
Led to the introduction of the Advance Financing Exchange Notice by Allstate Life Insurance Company and Allstate Life Insurance Company of New York. The IRS concluded in PLR 9812027 (issued December 18, 1997) that both the softened lump sum and any remaining non-softened structured payments) will continue to receive income tax exemption under IRC 104 (a) ( 2). The key factors in the ruling were:
Provided in the original structured settlement documents and annuity financing;
Caused by events beyond the control of the payee (for example, death);
The recipient of the payment does not have the ability to influence the possibility of replacing the payment; and
The switching is done to the beneficiaries of the recipient, not to the recipient.
Variable structured PLR settlement
issued by MetLife. IRS Private Letter 199943002 was posted on October 29, 1999.recurring indemnity payments, calculated according to an objective formula based on the Standard & Poor’s 500 stock index and / or a portfolio of mutual funds designed to achieve long-term capital growth and moderate current income, are “fixed and determined as the amount and timing of payment “According to § 130 (c) (2) (A)
In private letter No. 119273-97, the IRS concluded that the lump sum received from the sale of rights to structured settlement payments retained the same tax regime that was in place prior to structured settlement factoring.
transmitted. Included in the Structured Settlement Protection Act (SSPA), which establishes IRC 5891. IRC 5891 levies an excise tax of 40% on purchaser rights to structured settlement payments from sellers for inappropriate structured settlement transfers. IRC 5891 is the only place in the Internal Revenue Code that defines structured settlement.
is the first in a series of CMS Policy Memorandums on Medicare Withholding Workers Compensation (WCMSA), including structured settlements.
The Society of Settlement Designers was founded.
United States Court of Appeals, Sixth Circuit. Johnny Paul Young, Appellant v. United States of America, Appellant. No. 01-6362. Resolved: April 28, 2003
Under the Constitution, under the Sixth Circuit Court of Appeals, taxation of non-physical injury and non-taxation of damage caused by physical injury is constitutional. The taxpayer unsuccessfully argued that the difference in tax regime violated the law on equal protection.…
announcing the discontinuation of structured settlement annuities on July 9, 2003
Private IRS Letter PLR 200836019 Regarding the Use of Unqualified Structured Settlement in the Context of Employment (i.e. Taxable Damage), Affirmative Decision Regarding Unqualified Structured Settlement.
ELNY Liquidation… New York City’s executive life insurance company liquidated on August 8, 2013, 22 years after it began rehab.
Professional designation MSSC… First NSSTA Master Structured Settlement Consultant Certification Course at the University of Notre Dame in September 2014
Introducing ILAPA… Pacific Life Receives Favorable Private Letter from IRS 201435006 regarding the Index of Related Annuity Payments Adjustment (ILAPA). Payments are adjusted annually based on annual changes to the S&P 500 with a 5 percent cap and are not subject to income tax, provided that the reimbursement amounts are excluded in accordance with IRC 104 (a) (2). PLR Pacific LIfe also includes the ability to replace those in need
The class action lawsuit was filed on June 27, 2015. Within six weeks from August to October 2014, lead plaintiff John Griffiths and John Darer of 4structures.com LLC discovered that a Capital Service Agreement that was being sold as an internal part of the assignment to Aviva London Assignment Company, which was called “absolute, unconditional and permanent “, Was terminated unilaterally without prior notice. The plaintiffs actually paid an additional $ 500 of the amount allocated to the CMA structure. Griffiths contacted Darer as the watchdog of the structured settlements. Aviva paid $ 1 billion in premiums between 2002 and 2009 while its program was in operation. The sale of its U.S. operations to Athene ended in October 2013. The Griffiths v Aviv class action was eventually settled in 2018. Ultimately, Plaintiffs received a new Capital Maintenance Agreement and a small amount of monetary compensation. John Darer 4structures.com LLC has extensive entry and comments on the claim and settlement that you can read here
Ezell v. Lexington Insurance Company et al.
– In a lawsuit filed on January 4, 2017 against a disgruntled former structured settlements broker who became a lawyer as co-CEO, the plaintiffs argued that American International Group and several subsidiaries, including Lexington, made fraudulent statements and committed RICO violations because, among other things, life The insurance company that sold Lexington annuities diverted four percent to pay commissions to brokers who arranged deals with Lexington without disclosing information. All representative plaintiffs were represented in the underlying transactions by a highly qualified legal advisor who regularly hired structured settlement brokers and needed to know how brokers were paid. Ultimately, neither the District Court nor the courts of appeal found the plaintiffs’ arguments convincing.
on a poorly substantiated case on the Structured Settlement Watchdog blog.
Back to $ 6 billion Production in the structured settlement industry exceeded $ 6 billion for the first time in a decade.
exceeds $ 6.4 billion, this is the best year ever, despite low interest rates.
NSSTA hosts its first virtual annual meeting. Industry production declines after two record years of production, industry production declined due to coronavirus impact
as The Assura Trust introduces a structured growth settlement strategy that combines a fixed annuity with the Vanguard Fund for both plaintiffs and deferred attorney fees. Structures, LLC offers Fee Structure Plus and Settlements Plus (Closed Architecture), which instead of a managed portfolio offer a limited selection of ETFSs for finding electronic payment obligations.
Both the NSSTA and the Society of Settlement Planners are successfully conducting virtual annual meetings. While NSSTA and AASC were planning face-to-face educational meetings in October 2021, NSSTA decided to continue working in a virtual format, and AASC postponed its first meeting until February 2022.
New Hampshire becomes the 50th state to enact the Structured Settlements Protection Act. Along with the District of Columbia, there are currently 51 jurisdictions with the Structured Settlements Protection Act.
Life insurance company Wilcac enters the primary structured settlement market. The Wilcac name is owned by Wilton Re and the Continental Assurance Company, which was acquired by Wilton RE from CNA in 2014.