by John Darer® CLU ChFC MSSC CeFT RSP CLTC
A rated age is established when the structured settlement annuity issuer concludes that the plaintiff has a diminished life expectancy. This rated age is utilized to determine the pricing of the structured settlement annuity or the life-contingent components of a New York structured judgment annuity, instead of relying on the plaintiff’s actual chronological age.
Rated Age Structured Settlements Can Boost Your Potential Lifetime Annuity Payout
- From the plaintiff’s perspective, rated age will serve to boost the yield per settlement dollar allocated to a structured settlement.
- From a defendant or insurer’s perspective, a rated age will serve to reduce the cost of settlement offers for paying life contingent future damages.
How does the use of a rated age contribute to reducing the cost of a structured judgment in New York?
A rated age could reduce the cost of a structured judgment in New York for a Defendant. Certain aspects of a structured judgment, pursuant to CPLR 50A or CPLR 50B are life contingent, future medical expenses and future pain & suffering. A rated age would most likely impact future medicals, which stretch many years into the future, Under New York law, future pain & suffering is compressed into 8 years for Article 50-A and 10 years for Article 50-B structured judgments, so it would need an exceptionally high rated age to have any impact.
High rated age structured settlements may hold an advantage over other vehicles and even a modest amount allocated from a large settlement, can effectively be used as an “investment backstop” to assure a certain level of future income, even if everything else is lost.
- Payments from structured settlements are income tax-free under Sections 104(a)(1), 104(a)(2), and 130(c) of the Internal Revenue Code.
- They provide contractual certainty compared to the risks of hypothetical investments. When combined with a settlement trust, like a Settlement Preservation Trust or a Special Needs Trust (called a Supplemental Needs Trust in New York).
- Structured settlements can offer plaintiffs liquidity, guaranteed terms, potential gains, and protection against losses.