Structured settlements expert John Darer reviews the latest structured settlements and settlement planning information and news, and provides expert opinion and highly regarded commentary. that is spicy, Informative, irreverent and effective for over 20 years.
The STRUCTURED SETTLEMENTS 4REAL® Blog is a highly regarded source for structured settlement news, information, and commentary, led by structured settlement and settlement planning subect mater expert John Darer CLU ChFC MSSC CeFT RSP CLTC. With two decades of operation, the blog and 4structures.com are recognized as comprehensive resources, offering detailed guides and specialized insights. Established in 2005, the blog caters to a broad audience, including legal professionals, injured individuals, families, and various stakeholders, providing reviews and opinions on settlement planning. John Darer, President of 4structures.com LLC, is a seasoned structured settlement expert with over 40 years of financial services experience and 31 years specializing in structured settlements. Based in Stamford, CT, he is a Certified Financial Transitionist and Registered Settlement Planner, holding insurance licenses in 45 states and the District of Columbia. John Darer is dedicated to transparency and advocacy, he emphasizes the importance of engaging trained and licensed professionals for settlement planning, offering valuable insights through his investigative journalism and professional commentary.
A common misconception about structured settlements is that they are the same as annuities
Structured settlements are not annuities.
Structured settlements are a form of settlementthat may be partially funded with annuities, although they are not always funded with annuities.
Unfortunately the misconception is being proliferated by firms that should know better. What a pity!
Just Because They Say Structured Settlemens are Annuities Doesn’t Mean That They Are Annuities
Here are some examples of misinformation about structured settlements from a Google search performed on July 31, 2021:
“Structured settlements are tax-free annuities that provide payment options to the Claimant” New York structured settlement broker website
“All structured settlements are annuities…” and “Structured settlements are annuities” Structured Settlement factoring company…” associated with New York settlement planner. The same settlement planner refers to ” investment backed structured settlements” in a November 2020 blog.
“In fact, a structured settlement is an annuity” Boston area structured settlement broker
“Structured settlements are annuities that receive special tax treatment” Florida Special Needs Law Firm website
” A structured settlement is an annuity..” NJ Elder Law Firm
” A structured settlement is an annuity” Las Vegas personal injury law firm
” A structured settlement is an annuity” Boston personal injury law firm
” A structured settlement is an annuity contract…” Workers Comp Help
” A structured settlement is an annuity” Bellevue WA personal injury law firm
“Structured settlements are annuities” Insurer 10-K
from which is borne a litany of misinformation by structured settlement factoring companies, tertiary market companies, financial advisors sourcing from secondary market and tertiary market companies and lead generators for such companies [ all below as of August 3, 2021]
“Structured settlements are annuities awarded as recompense in a civil lawsuit” CBC Settlement Funding in the Conshohocken PA based JG Wentworth spinoff’s tediously titled “Tax Implications of Structured Settlements Implications”
” A structured settlement is an annuity” AnnuityExpertAdvice.com
” A structured settlement is an annuity awarded to a plaintiff…” and ” Investors can have peace of mind that their investment is safe when they purchase these types of annuities Totalstructuredsettlements.com [ the trifecta of B.S. (1) structured settlement is not an annuity; (2) structured settlements are not awarded (that’s why it’s called a settlement); and (3) investors in other people’s structured settlement payments are not buying an annuity
Structured settlements are not funded by tax-free annuities
You can’t simply buy a structured settlement annuity and receive payments tax-free.
Actually a plaintiff or claimant cannot buy a structured settlement annuity at all.
Any tax benefit that may be realized by the payee on the payments is because of a settlement agreement that sets forth an obligation to make periodic payments and the nature of the injury/damages that the payments represent.
According to IRC 5891(c)(1), the term ” structured settlement means an arrangement—
(A) which is established by—”
( i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or
(ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and
(B) under which the periodic payments are—
(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and
(ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.
The firm that made the misrepresentation about being funded with tax-free annuities knows better. Their messaging does not show this. Greater care should be taken before publishing.
Unfortunately it is reasonably foreseeable that careless misinformation will be picked up by writers and researchers for structured settlement cash now companies who then spread the information further. That is not in consumers’ best interest. That’s why this needs to be called out, in my opinion.
The National Structured Settlements Trade Association states that “”structured settlements are an innovative and proven method of compensating injured plaintiffs in legal settlements”.
The Internal Revenue Service states “Structured settlementsaresettlements of tort claims involving physical injuries or physical sickness, and workers’ compensation claims, under which settlement proceeds take the form of periodic payments, including scheduled lump sum payments. [ IRS Structured Settlement Factoring Audit Guide]
