by Structured Settlement Watchdog
Perhaps I should start my own "bad tipper database" for structured settlement tips and advice
At the time of posting Bitterwaitress.com was such a database that was well worth reading for entertainment value provided you don't find yourself on the list!
But this blog is about structured settlements and settlement planning so I'm here to gripe about "Structured Settlement Tips" webmaster Ken Austin and unserious, not well researched piece called "Is a Structured Settlement Equity Annuity In Your Best Interest?" which was posted on March 21, 2006 on Financial-Articles.com. Austin is one of a writing band of the unenlightened that believe that you can win a settlement or be awarded a settlement.
What is a Settlement?
A settlement is a compromise mutually agreed upon by the parties. While such an agreement may be reached in the hallways of a courthouse or in a judge's chambers, does constitute an award If the case proceeds to trial, the jury delivers a verdict on liability and awards damages resulting in a judgment rather than a settlement. In certain instances, a bench trial occurs, where the judge hears both sides, renders a decision and (if applicable) awards damages, which constitutes a judgment.
Austin states that "among your choices if you’re owed a settlement is to invest the money in a structured settlement equity annuity".
First of all you don't invest anything. The fulcrum of a structured settlement is the "promise to pay" future periodic payments by the defendant, his/her or its Insurer or the trustee of a qualified settlement fund. The periodic payments are based on a fixed and determinable formula which can include variable income as set forth in IRS Private Letter Ruling 121002-97 and embodied in the Settlement Plus structured annuity product manufactured by Metropolitan Life Insurance Company. Ken Austin mentions nothing about this PLR in his unschooled misinforming scripture.
The obligation to make the periodic payments to the plaintiff is then typically assigned, pursuant to IRC 130(c) to a qualified assignment company which then receives money from the defendant, his/her or its insurer, or the qualified settlement fund trustee which is then used to purchase a so-called qualified funding asset (most typically a specially customized structured settlement annuity)
Ken Austin crows on "Most of this information comes straight from the structured settlement equity annuity pros. Careful reading to the end virtually guarantees that you’ll know what they know". To what end? Sorry Ken but as a seasoned veteran of this business I feel confident that no licensed structured settlement professional gave you any information nor did any representative of any life company.
A properly structured settlement will enable the plaintiff to receive periodic payments (which incorporate principal and interest) free of any income taxes. Unlike the resilient weeble of yore, Ken Austin "wobbles and then (his advice) falls down" when he asserts confidently "With a structured settlement equity annuity, most or all of the money you get will be tax-free (or taxed very little). With Met Settlement Plus it can only be used in a situation that qualifies under IRC 104(a)(2) and 130(c) so there is no tax consequence.
Then comes Ken's Humpty Dumpty moment when he says in reference to the plaintiff lawyer "he or she can also help you pick a structured settlement equity indexed annuity that will give you the best long-term results.
First equity indexed annuities are not used in structured settlements. Then we have the tax issue. Maybe Austin is "tax impaired" because he thinks that you can take cash and then invest in a structured settlement annuity. Call Oscar Goldman! I think Austin needs a replacement. What's your tax bracket? Why would anyone give up a tax break that has been around since 1979? Sadly for Austin I don't think we can rebuild him. And if you take his advice in this article you may not be able to rebuild what you lose financially by taking the advice.
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Consumers and attorneys if you want structured settlement information or advice your best route is to contact an exprienced licensed structured settlement broker, consultant and professional.
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