by John Darer CLU ChFC MSSC CeFT RSP CLTC
Structured settlement receivables are marketed to investors by promoters including some settlement planners using QSFs in a wholly misleading way
Robert Wood, Esq. San Francisco tax attorney, author of treatise on Qualified Settlement Funds and Section 468B made these important points about Single Claimant Qualified Settlement Funds June 23, 2014:
Wood’s Silver Bullets
QSFs may sometimes be used inappropriately to defer receipt of monies for protracted periods
It seems more likely that the IRS would establish some sort of anti abuse rule addressing the inappropriate use of QSFs to defer income.
To be cautious one should try to establish QSFs where there are multiple claimants
Notwithstanding the transaction risk of structured settlement receivables, it seems clear that if you use a single claimant qualified settlement fund to invest in structured settlement receivables for a minor (or incapacitated person) paying out over an extended period of years, you do so at your peril.
While Wood opines in the 2014 article that what action the IRS would take, if it does, would be likely not be retroactive, that may not be enough to be prudent in the eyes of decision makers like judges and guardians ad litem who are charged with protecting the most vulnerable.
KEY POINTS
- Structured settlement receivables ARE NOT annuities
- Structured settlement receivables ARE NOT insurance products despite how they may be mischaracterized by certain settlement planners.
- Investment recommendations are unlikely to be covered by professional malpractice insurance and may be expressly excluded