by John Darer CLU ChFC MSSC CeFT RSP CLTC
Does a Structured Settlement Commutation Rider Simplify Inheritance?
Yes , says Factoring Company. Let’s Examine…
“A commutation rider can simplify 
inheritance. Without a commutation rider, a beneficiary must go through the process of selling their future payments to get access to cash sooner than scheduled”, says Annuity.ORG, an Orlando based shill for factoring company CBC Settlement Funding of Conshohocken PA.
Let’s examine their claim…
- A structured settlement payee is contractually permitted to name and/or change beneficiaries by notifying the annuity issuer in writing and in a form acceptable to the annuity issuer. Most current annuity issuers have forms that can be downloaded for this purpose.
- Commutation riders were introduced in the late 1990s to provide liquidity for paying estate taxes, during a period when estate tax exemptions were significantly lower than they are today.
- Commutation riders were also later used where structured settlement payments feed into a Special Needs Trust (referred to in New York as a Supplemental Needs Trust). The local Medicaid agency will seek reimbursement of funds it spent at the death of the Payee/Trust Beneficiary. Some agencies even make a Commutation Rider mandatory (e.g. New York City area counties).
- In both scenarios, the commutation rider must be established at the time of settlement and include the language required by the annuity issuer. The second of my prior blogs, highlighted below, discusses a 2019 decision in the Northern District of Georgia stemming from a June 1998 settlement in a wrongful death case. In that case, denial of a commutation to survivors of a survivor of a decedent in the 1996 ValuJet crash was upheld because the Settlement Agreement, Qualified Assignment and Release, and Annuity Application lacked specific required language.
- A structured settlement factoring transaction may take 60-90 days in the best of circumstances. It requires the approval of a state court judges who must determine if such structured settlement transfer is in the best interest of any applicable beneficiaries. Rates of such transcations may exceed structured settlement commutation rates.
- Commutation Riders often adjust future payments after deducting commissions paid to structured settlement brokers. If death happens soon after settlement, it can be a big financial blow, especially with a high commutation percentage exceeding what’s truly needed to cover a lien. Berkshire Hathaway introduced a Responsive Commutation Rider that may limit commutation using an objective formula tied to the amount of a Medicaid lien, estate taxes, or death taxes.
John Darer’s Prior Blogs on Structured Settlement Commutation Riders
Estate Cannot Commute Structured Settlement to Lump Sum IF… (4structures.com) May 26, 2020
Can Structured Annuity Issuer Just “Refund” Annuity Premium to a Payee If They Change Their Mind? – Structured Settlements 4Real® December 21, 2024
Structured Settlement Commutation Riders with SNTs Best Practices (4structures.com) April 24, 2022 Updated January 15, 2024
Last updated July 30, 2026