by John Darer CLU ChFC MSSC CeFT RSP CLTC
Does a Structured Settlement Commutation Rider Simplify Inheritance?
“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 1990 to create liquidity to pay estate taxes at a time when the estate tax exemptions were much 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 contain language required by the annuity issuer. The second one of my prior blogs highlighted below, addresses a 2019 decision in the Northern District of Georgia, emanating from a June 1998 settlement in a wrongful death case where 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 certain language.
- A structured settlement factoring transaction may take 60-90 days in the best of circumstances and 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 commute future payments NET of commissions paid to structured settlement brokers. If death occurs shortly after settlement it could be quite a hit if there is a high percentage commutation in excess of what is actually needed to help pay a lien. Berkshire Hathaway introduced a Responsive Commutation Rider that potentially limits commutation to an objectve formula based on the amount of a Medicaid Lien or estate or death taxes
Here are some of my previous blogs about about Structured Settlement Commutation Riders
Estate Cannot Commute Structured Settlement to Lump Sum IF… (4structures.com) May 26, 2020
Structured Settlement Commutation Riders with SNTs Best Practices (4structures.com) April 24, 2022 Updated January 15, 2024
Last updated May 3, 2026