Can Structured Settlement Annuities Be Sold?
Things to Consider
1. A structured settlement annuity sold is a fallacy. Structured settlement annuities cannot be sold once established, since they are generally owned by a qualified assignment company,
By virtue of the agreement that creates the structured settlement the payee has no ownership interest in the annuity contract. Standard language in a settlement agreement & release:
"Neither Payee, nor any beneficiary of theirs, nor anyone acting on their behalf shall have any right of or incidence of ownership whatsoever in the annuity policy; shall have any right to accelerate or defer payments due from the Fund or Assignee; shall have any right to increase or decrease any payments due from Assignee; shall have any other right of dominion or control of or over the annuity policy, which shall be owned exclusively by Assignee,
2. When a structured settlement factoring transaction occurs it involves the sale and transfer of the right to receive a defined payment or series of payments in exchange for cash
Restating from above, while a structured settlment payee cannot sell the structured settlement annuity that's funding the structured settlement payment due them, they can sell stuctured settlement payment rights. This is an important distinction.
A judge must find that the sale and transfer as being in the best interest of the payee and applicable dependents. The transaction must comply with applicable state and federal law.
3. Should a structured settlement payee sell his/her/their structured settlement payment rights the lump sum IS NOT taxable.
This is what the IRS Factoring Audit Technique Guide says:
"When a structured settlement factoring transaction occurs, and the applicable requirements of Internal Revenue Code Sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the time the original structured settlement was entered into, the factoring transaction does not affectthe application of the provisions of such sections to the parties to the structured settlement in any taxable year. In other words, a structured settlement factoring transaction will not disturb the original tax treatment of the settlement for the parties to the settlement. IRC § 5891(d). [ at page 13]
It is well settled that factored structured settlement payment rights are not annuities
-
Structured settlement factoring is a sale of receivables.
A. DRB Capital – Structured Settlement Receivables Successfully Acquired | News & Insights | Arnall Golden Gregory LLP (agg.com) "DRB Capital, LLC, is a Florida-based specialty finance company that buys and sells structured settlement receivables, such as annuity payments and court-ordered payments" and "As a result of the deal, DRB, which has over $1 billion in committed capital and employs more than 150 people, was able to add a substantial inventory of structured settlement receivables to its balance sheet".
B. Genex Capital Corporation Issues "Recall Notices" on Certain Pre-2015 Genex Capital Receivables – Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com; also see
Examples of Misleading
Last updated September 18, 2023