A New Tool for Commercial Business Transactions
Many transactions - where one party seeks a current tax write-off and the other
party prefers deferred compensation - can be handled through a structured settlement.
Offering advantages for both parties, this approach can speed the negotiation
process and help parties reach an appropriate resolution.
Obligation not Litigation
A case/claim does not have to get to litigation before exploring structured
settlements. Whenever there is an obligation on the part of one party to make
payments to another, you should consider structuring to achieve a settlement
more quickly and cost effectively.
Win-Win Advantages for the Payee
- Although the amount is ultimately taxable, deferring compensation over
time results in less being lost to taxes
- Alternative Minimum Tax (AMT) rules may be legally avoided by spreading
the settlement payments over time
- Protection with a Fortune 100 company guaranteeing all payments
- Payments continue for a fixed period and/or life
- Counsel can negotiate deferred fees (like having an uncapped 401(k) plan)
Win-Win Advantages for the Payor
- A full deduction for the cost of settlement in the year of settlement
- Ability to assign the future payment obligation and not purchase/own an
annuity to fund future payments
- A complete and irrevocable novation is achieved that satisfies the Economic
Performance test
- No ongoing payment obligation or other costly administrative process
- No responsibility to guarantee the future performance of the life company
issuing the annuity
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