by Structured Settlement Watchdog®
This post addresses misinformation delivered to the American public by David Springer’s Sovereign Funding Group, of Mt. Airy, Maryland, on today’s blog “Structured Settlement Annuities – The Cons” by Sovereign Funding Group posted June 2012
Strict Regulation of Structured Settlement Annuities
“While there are a lot of benefits that the plaintiff enjoys from the structured settlement annuities, the Internal Revenue Council is very particular as to the treatment of the income from such compensation. In circumstances when the IRC believes that the plaintiff holds too much control over the proceeds of structured settlement annuities, the tax shield that the plaintiff enjoys can be taken away. In fact, there is a list of prohibitions which should be considered by anyone who receives the structured settlement annuities to avoid getting taxed for such income.”
Comments
- In the United States it’s the “Internal Revenue Service“, not the Internal Revenue Coucil. The President of Sovereign Funding has lived in the US for over 10 years.
- The IRC in US tax speak, is an acronym the Internal Revenue Code
- The Internal Revenue Code is inanimate and not capable of believing anything. It is the tax law.
- The Internal Revenue Service (“IRS” ) is charged with implementing tax law.
- Why would strict regulation of structured settlement annuities be a con?
- The lack of broad regulation is the root of controversy on the topic of structured settlement factoring. For example there are no background checks or licensing for people in the part of the industry that Sovereign Funding operates in. There are are people operating in the industry who have been arrested and have criminal records in their past, who work for companies that are counseling people on the disposition of their only major asset and/or speaking with investors, that might not be possible in other aspects of the insurance or financial services industry.
Structured Settlements Cost Less to Insurers
“The receipt of structured settlement annuities is favorable for a lot of people especially those who are intent on saving up for the future. However, this is disadvantageous in the sense that the insurance companies who take over the task of paying off the structured settlement annuities need not pay a
fortune for such. Since the insurance companies are not required to disclose the amount of expenses that they incur for setting up such structured settlement annuities, these insurance firms can make a lot of money”.
Comments
- Unfortunately Sovereign Funding Group has delivered poorly articulated mumbo jumbo.
- Sovereign Funding Group and David Springer are out of touch.
- While only 4 states (New York, Florida, Massachusetts and Minnesota) have statutory requirements for cost disclosure when structured settlements are established, most structured settlement transcations do involve the disclosure of structured settlement costs.
- IRS Private Letter Rulings from the early 1980s make it clear that disclosure of cost will not put the plaintiff in constructive receipt of the amount being used to fund the structured settlement.
Sovereign Funding (David Springer) misinforms that insurance companies can go bankrupt, when there is a specific exemption under the Bankruptcy Code for insurance companies
- Life insurance companies can’t simply wander into Federal Bankruptcy Court and declare Chapter 11 the way ordinary corporations do.
- They’re carved out of federal bankruptcy jurisdiction entirely, which means they don’t get to reorganize under Chapter 11 or liquidate under Chapter 7 like ordinary corporations.
- They’re expressly excluded from the U.S. Bankruptcy Code, which means financially troubled insurers are handled through state‑run supervision, rehabilitation, or liquidation under the insurance code—not the federal bankruptcy system.
- This structure exists because life insurance is treated as a public‑interest financial product, and regulators insist on a controlled, policyholder‑centric process rather than the free‑for‑all of bankruptcy court. As one might say in a Monty Python sketch, “No one expects the State Insurance Commissioner”—but when an insurer falters, that’s exactly who shows up, clipboard in hand, ready to take charge.¹
- Further Comments It is worth observing that as of June 19, 2012 the Sovereign Funding Twitter feed promotes wholesale organic baby clothing, yoga tights and other non sequiturs to structured settlement factoring and structured settlements.
- One minute they’re claimaing that insurers can file bankruptcy, and the next they’re casually referencing in the Sovereign Twitter feed ( bags), discount baby clothing, and yoga tights as if these items were standard components of a receivership toolkit. The tonal whiplash is almost comforting: a reminder that, in insurance regulation as in Monty Python, the non sequitur is sometimes the most honest part of the script. And of course, nobody expects the Spanish Inquisition — least of all the insurer, who was fully prepared for a routine regulatory chat until the Commissioner arrived with the same sudden, bewildering energy as a red‑robed cardinal bursting into a living room to demand explanations, clipboards raised like instruments of truth.
Whether or not David Springer proof read the blog post personally, or delegated it to someone else to write and proof read, it is simply another example that heightens concerns about the solicitation practices of structured settlement factoring companies. There is is no need for such misinformation to be targeted to American consumers.
Footnote
¹ See 11 U.S.C. §109(b)(2) (excluding insurers from eligibility for federal bankruptcy); NAIC, Receiver’s Handbook for Insurance Company Insolvencies (detailing state‑based rehabilitation and liquidation frameworks); state insurance receivership statutes.
Leave a Reply