by John Darer ® CLU ChFC MSSC CeFT RSP CLTC
What is a Qualified Assignment?
A qualified assignment is the assignment of a liability to make future periodic payments that complies with the requirements of Internal Revenue Code IRC §130.
The future periodic payments must constitute damages owed by the defendant, its liability insurer, or from a Qualified Settlement Fund (QSF), and must be excludable from income
Qualified Assignment — The Statutory Transfer of Liability Mechanism Behind Structured Settlements
A qualified assignment is the statutory transfer of a defendant’s, liability insurer’s, or QSF’s obligation to make future periodic payments in a structured settlement, to a qualified assignment company under IRC §130. When the defendant or responsible party assigns its liability, the assignment company becomes legally responsible for making the payments and typically funds that obligation by purchasing a qualified funding asset — usually a structured settlement annuity issued by a licensed life insurer.
To qualify under §130, the assignment must meet specific requirements:
- The underlying claim must involve physical injury, physical sickness, or workers’ compensation;
- The periodic payments must be fixed and determinable;
- The assignment company must assume the liability without the right to accelerate, defer, increase, or decrease the payments;
- The claimant must receive payments tax‑free under IRC §104(a)(2) or §104(a)(1).
Qualified assignments are the backbone of modern structured settlements. They allow defendants to close their books, transfer long‑term payment obligations, and ensure claimants receive secure, tax‑advantaged periodic payments funded by highly regulated insurance products. They also prevent the claimant from “owning the annuity,” a point frequently misunderstood or misrepresented by secondary‑market actors.
This canonical clarifies the statutory architecture of qualified assignments and distinguishes them from non‑qualified assignments and factoring‑world terminology that misuses the word “assignment.”
🔗 Further Reference on 4structures.com®🚀
For a comprehensive explanation of qualified assignments — including statutory requirements, tax treatment, funding assets, and the role of assignment companies — see the authoritative reference page on 4structures.com®: What is a Qualified Assignment?
This page provides the full legal and technical context that underpins the canonical definition presented
A qualified assignment is a critical component of the structured settlement value proposition. A qualified assignment enables the combination of the tax exclusion with one or more customized payment streams
- In a structured settlement agreement, the original obligor (the defendant, insurance carrier for the defendant, or the trustee of a qualified settlement fund, assigns its obligation to make the future periodic payments called for in the settlement agreement to a “qualified assignee”.
- Generally, a qualified assignment company is a special purpose company, which does little more than hold an annuity as a qualified funding asset to back up the obligations it assumes from Defendants, Insurers or qualified settlement fund trustees.
- A qualified assignment company may actually be an insurance company itself. The qualified assignment company is usually related to the life insurance company issuing the structured settlement annuity.
- The qualified assignment company typically purchases an annuity from the related life insurance company to fund the liability to make future periodic payments it assumes.
- The annuity purchased to fund the the future perioidc payment liability assumed is known as a qualified funding asset and is subject to the terms of IRC §130(d).
- A qualified assignment requires the plaintiff’s consent. Judicial approval of the settlement may alos be required depending on the type of case (minor cliamants, death cases).
Common Misstatements About Qualified Assignments
Industry folks sometimes play wordsmith, claiming a qualified assignment means “to a financially stable insurance company” or “an assignment to the life company.” Nice try — but nope.
From the plaintiff’s perspective, some believe an assignment to a “financially secure insurance company” gives assurance of future payments. Others think it means the life company itself is taking the assignment.
The truth: among companies offering structured settlements, only the qualified assignee of New York Life (New York Life Insurance and Annuity Corporation) is an actual life insurance company.
Many annuity issuers provide a wraparound guarantee for the periodic payment obligations assumed by their affiliated qualified assignment companies.
Last updated August 22, 2026
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