Structured Settlements: Physical Injury
Cases & MoreCreative Capital is dedicated to working with clients to craft solutions and
tailor products that meet their specific individual situations. With years of
experience and expertise in structured settlement consulting and brokerage,
we are uniquely positioned to facilitate settlement processes and support approaches
that work favorably for everyone.
In any situation where parties negotiate a payout over a period of time in
taxable or tax-free situations, we now have the ability to use a structured
settlement approach to help the parties achieve a better settlement.
Traditional Structured Settlements
Structured settlements with qualified assignments (novations) have been
used successfully for many years in:
Structured
Settlements for Other Situations
Now the success of the traditional structured settlement with a novation is
available for a wider range of situations, including:
SPIA - Single Premium Immediate Annuities
The SPIA provides a guaranteed income for life usually at higher yields than
CDs, bonds and other traditional financial products.
Estate Planning Life Insurance
Working with estate planning attorneys and CPAs, we provide high net-worth individuals
who want to protect their wealth and provide as much as possible for their heirs
with sophisticated life insurance solutions.
I.R.C. Section 468(B) Qualified Settlement Funds
I.R.C. 468(B) provides an excellent tool that allows defendants to globally
settle multi-plaintiff cases and remove themselves from costly litigation while
the plaintiffs resolve issues of allocation and distribution.
Don't
get caught in the single plaintiff case tax trap that may potentially devastate
the plaintiff recipient. In multi-plaintiff cases, 468(B) may be used to facilitate
settlement for both plaintiffs and defendants.
Periodic Judgments
Periodic judgment annuities and analysis include expertise under New York Civil
Practice Law and Rules Articles 50-A and 50-B. We perform pre- and post-verdict
analysis to measure the present value and potential exposure before trial and
the actual cost after trial. CCI is a leading provider of CLE credits on periodic
judgments in New York. We counsel and train the Bench and Bar on the use of
structured settlements and on the case law, mechanics and calculations required
on periodic judgments entered after trial.
Treasury Bonds
As a structured settlement funding vehicle, treasury bonds were popular as an
alternative to annuities during the early 1990s because of their safety. Pursuant
to Section 130(d) of the Internal Revenue Code, U.S. Government obligations
are the only other acceptable funding vehicle in structured settlements. As
insurance regulators across the country have tightened their control over insurance
industry practices to enhance the security of annuities, T-Bonds have declined
in popularity as a source of funding structured settlements. Higher yielding
and safe, annuities once again dominate the structured settlement industry.
Physical Injury Cases (since 1983)
With no tolerance for investment risk, the plaintiff in a physical injury case
is at a disadvantage with today's volatile market. A structured settlement provides
the means to ensure a secure future while avoiding the burden of investment
management, as well as the risk of fraud.
The claimant:
- Eliminates investment risk and investment management fees
- Guarantees a flexible future payment stream that is not subject to market
fluctuations
- Provides income for a fixed period and/or life
The defendant/insurer:
- Receives savings through the ability to settle quickly and avoid on-going
litigation
- Eliminates responsibility for future payments through assignment of the
obligation
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Workers' Compensation Claims (post-August 1997)
These claims can take advantage of the traditional structured settlement with
a Qualified Assignment, which has increased benefits for both claimant and employer/insurer.
The claimant:
- Receives a guaranteed tax-free income stream
- Avoids the risk of an individual, self-insured company not meeting its
obligation due to financial problems because the obligation/risk is transferred
to a financially strong life insurance company
The employer/insurer:
- Eliminates legal obligations through a Qualified Assignment under I.R.C.
Section 130(c)
- Removes the liability from their books and releases reserves
- Closes the gap in expectations with the claimant for a more timely settlement
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Attorneys' Fees – ALERT
– Click here
for new IRS guidelines regarding attorney’s’ fees
If you like the idea of an uncapped 401(k) plan, think about deferring your
fees for tax advantages and savings. You can structure your fees in physical
injury cases and now in taxable settlements too, whether or not the plaintiff
takes a structure. And even though your fees are deferred, the defendant is
able to deduct the entire amount in year of settlement. Payments are made directly
to the attorney.
For more information click here.
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Employment Cases – ALERT – Click
here to see positive developments
regarding employment cases
Avoid wasted time and extra expense; tax breaks for the plaintiff make reasonable
offers more apt to be accepted. Settlements are more quickly achieved when there
are advantages for both parties. The highest real benefit per settlement dollar
provides savings to the defendant (an amount paid at settlement can grow over
time) while producing more benefits for the plaintiff (through interest earned
and accumulated over time on deferred taxes). Both parties receive tax advantages
and closure.
For more information click here.
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Commercial Business Transactions
This approach provides businesses with the tool they need to satisfactorily
handle a plethora of transactions with advantages for all parties. Whenever
there is a situation with one party seeking a current tax write-off and the
other party seeking deferred compensation, this approach provides a beneficial
resolution. Transactions include (but are not limited to):
- Mergers and acquisitions
- Commercial lease buyout/termination agreements
- Deferred compensation*
- Sale of business
- Compensation for agents*
- Sports/entertainment compensation*
- Attorneys' fees - Click
here for new IRS guidelines regarding attorney’s’
fees
- Property disputes
*Recent legislation has created a new Section (409A) of the code establishing
rules that will need to be followed in order to structure these types of compensation.
Guidelines from the IRS are expected shortly.
For more information click here.
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Long Term Disability Cases
For the claimant security and protection are assured:
- Payments guaranteed with a major insurer
- Leverages greater benefit payments through medical underwriting
- Receives tax-free income stream for a fixed period and/or life
For the defendant/insurer:
- Reduces costs without reducing benefits through the use of medical underwriting
- Reduces claims reserves by passing the risk to a third party
- Eliminates on-going administrative costs
For more information click here.
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Old Workers' Compensation Claims (pre-August 1997)
Structured settlements in workers' compensation claims provide security for
the claimant:
- Guarantees a tax-free income stream designed to meet current and future
needs
- Funds on-going medical or rehabilitation costs, as well as other financial
obligations such as a dependent's college costs
- Provides worry-free investments at competitive rates of return
The employer/insurer:
- Eliminates the liability and payment obligation through a Non-Qualified
Assignment
- Closes the case more quickly
For more information click here.
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Non-Bodily Injury Claims
Reducing taxes by deferring compensation over time allows the plaintiff to generate
triple tax deferred interest: Money in a settlement annuity earns interest on
funds that would have otherwise been lost to taxes in year of settlement. Triple
tax deferred interest is earned on: 1) principal, 2) accumulating interest,
and 3) taxes deferred at settlement.
The defendant can take a deduction for the cost of settlement in the year of
settlement, and has no responsibility to guarantee the future performance of
the life insurance company that issues the annuity.
For more information click here.
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Punitive Damages
Avoid the problem of a lump sum settlement exceeding the Alternative Minimum
Tax (AMT) threshold by spreading the settlement payments over time. The defendant
also benefits by being able to take a full deduction for the cost of settlement
in the year of settlement while still allowing the plaintiff to defer taxation
over time.
For more information click here.
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SPIA - Single Premium Immediate Annuities
This flexible annuity allows you to pace the use of your money to maximize the
amount available to you and avoid living on a smaller income than necessary.
An income schedule is tailored to meet your financial requirements. Payments
can be fixed or have a pre-determined annual COLA, and can be designed to meet
your present and future needs.
An SPIA provides:
- Flexible, easy-to-manage income
- Guaranteed income with no investment risk
- Financial security
- Payments that can be set up for a guaranteed fixed period and/or life
- Retirees with an income that will not run out later in life
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Opinion on Single Claimant 468B Cases
Many major life carriers will not accept an assignment under Section 130 of
the Internal Revenue Code from a Section 468B Qualified Settlement Fund (QSF)
if there is a single claimant or single claimant family. Important issues of
allocation and economic benefit preclude them from accepting assignments on
single claimant 468B funds.
If there is only one claimant, an ipso facto prior allocation exists
at the time of the creation of the Qualified Settlement Fund, since all of the
money is paid on behalf of the sole claimant. This prior allocation would trigger
economic benefit and thus taxation on the gain, and an inability to do a Qualified
Assignment, under the requirement that all of the periodic payments must be
entirely excludable, pursuant to IRC 130(c)(2)(D).
The IRS has confirmed that the economic benefit doctrine does apply to a 468B
QSF in PLR
200138006 (May 7, 2001).
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Would you like to know how we could help you
tailor these products to your clients?
or call 800-327-9224 to arrange a consultation
