Setting the Record Straight: Structured Settlements

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Setting the Record Straight: Structured Settlements

The scenario is common: you're either up late, unable to sleep or home sick and are flipping through the channels of late night TV or daytime drama and you hear the now familiar operatic jingle, "I want my money and I want it now". Before you flip to the next the channel, you think "What are they singing about anyway?"

As a financial advisor, you know that a structured settlement arises from a settlement in which the injured person can elect to receive a series of periodic payments in the future specifically designed to meet his or her needs and, usually, some amount of cash at the time of settlement. The future payments are usually funded by a commercial annuity, called a structured settlement, offered by highly rated life insurance companies. Like retail annuities, annuities that fund structured settlements are governed by the Department of Insurance in each state; are influenced by interest rates and other economic factors; and provide a stream of guaranteed income to annuitants. However, true structured settlements, as directed by Sections 104(a) and 130 of the U.S. Tax Code, assist a very unique population of annuitants-people going through a legal settlement who have been injured in some manner.

Most cases involve some type of physical injury, such as car accidents, medical malpractice claims, injuries to children and work-related injuries. For any case involving a physical injury, the settlement money is tax-free under 104(a) of the Tax Code. Other types of cases can also be structured such as those involving emotional distress, discrimination, wrongful termination, etc. & are referred to as 'non-qualified' since the entire settlement is taxable to the claimant. The benefit of a structured settlement to claimants is either a completely tax-free or tax-deferred stream of payments, depending on the type of settlement.

Today, almost every structured settlement case involves both a consultant on the defense side as well as on the plaintiff side. What does this mean to attorneys? A structured settlement consultant on the defense side of the case works to ensure that their client's (usually the adjuster and defense counsel) policies and settlement language conform to their guidelines. A structured settlement consultant on the plaintiff side assists the plaintiff attorneys to ensure that the injured parties' financial needs are met when considering a structured settlement and to make sure enough of the proceeds are left as cash so that the plaintiff will not have to call a factoring company for "cash now".

Structured settlement consultants perform many duties and services for attorneys and clients on both sides without charging any fees-reviewing cases, reviewing medical records, attending mediations, assessing complex financial needs & providing sometimes 20-30 quotes. Since it is now so common for structured settlement consultants to respectively assist attorneys on the defense and plaintiff sides of legal settlements, the industry has evolved, much like the real estate industry, to an amicable division of responsibilities as well as equal sharing of the commissions generated from a structured settlement, which is paid directly by the life insurance company issuing the contract.
Structured settlements are truly a unique solution for claimants because they are a unique population of our society. When the injured person is facing mounting medical expenses, or can no longer work due to their injuries, their pressing need for secure, regular guaranteed income or payments for future medical needs is critical.
The structured settlement industry is expanding; new market-based programs and fixed-indexed annuity solutions are now available in the marketplace in order to diversify the offerings for injured people and the potential for increased earnings. Our consultants look  forward to assisting plaintiff attorneys and injured parties for many decades to come.

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