Another structured settlement website: "Structured payments received by your estate or by your heirs are also received tax free. Please consult your tax advisor to figure out your exact savings."
FACT: Structured settlement payments are income tax free, but NOT estate tax free.
The present value of any unreceived structured settlement payments on the date of your death (or your client's death) will be included in the estate. If, together with the present value of the remaining unreceived structured settlement payments, the estate is over a certain size, it will be subject to federal and/or state inheritance taxes. An estate commutation rider may be incorporated in your structured settlement, but rider's terms must be set forth in the settlement papers that you or your client execute when your case is settled.
The commutation rider serves to commute (or reduce to cash lump sum) all or a portion of the present value of the remaining structured settlement payments at your death so that, among other things, there liquidity to pay off Medicaid liens or estate taxes.
The form of the required language varies slightly from annuity issuer to annuity issuer.
Unfortunately one cannot always count on plaintiff to see their tax advisor (if they have one) when they are in the vortex of settlement decision making. Who hasn't gone straight to the doctor when someone tells them to go? Therefore it's important that correct and complete information be disseminated by settlement planners and structured settlement consultants. The statement that "you should consult your tax advisor to calculate your exact savings" is not exculpatory.
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