Structured Payouts: P/I Cases and More

The success of the traditional structured settlement with a novation is available for a wide range of situations, including:
Individual and Class Action Attorneys' Fees
Employment Cases
Commercial Transactions
And, of course, Physical Injury Cases

Advantages of a Structured Payout

• Taxation to payee - benefits are tax free in P/I cases
  and tax deferred in all other cases;
• Deductibility to payor - fully deductible in year of settlement;
• Payor's current and future creditworthiness is not a factor;
• No ongoing relationship between parties;
• Payor guarantees no other entity;
• Payor has no contingent liability;
• Both parties close files

The Structured Payout

• Utilizes techniques that have been employed for over 20 years and have proven reliable;
• Part of the settlement can be taken in up-front cash and the balance can be "structured" into an annuity plan;
• The annuity plan is tailor-made for the unique requirements of each situation;
• As part of the plan, the payor assigns the obligation of future payments to a third-party and receives a release thus completing the novation;
• A Fortune 100 company (with assets of over $110 billion) irrevocably guarantees the future payments.

Individual and Class Action 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 in taxable settlements too, whether or not the plaintiffs take a structure. And even though your fees are deferred, the defendant is able to deduct the entire amount in the year of settlement.

• Payable directly to the law firm or attorney;
• Various benefit streams available - period certain only and future guaranteed lump sums. Lifetime payments available in limited cases when paid to individual attorney and not to a firm;
• Stand-alone attorneys' fees - the plaintiff or plaintiff class need not opt for a structured settlement.

To receive more information, click here.

Employment Cases – ALERT – Click here to see positive developments regarding employment cases
Reasonable settlement offers often are rejected when the plaintiff calculates the tax consequences of receiving a single lump sum payment. Cash settlements forfeit the big tax advantages available only with a structured settlement. Negotiating a structure helps avoid wasted time and extra expense as tax incentives 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.

To receive more information, click here.

Commercial Transactions
You can help your clients achieve tax advantaged solutions to attain greater tax efficiency and help to complete a commercial transaction, to fulfill a negotiated obligation or to avoid expensive litigation. By structuring taxable payments over time, the payee achieves deferral of income while allowing the payor to deduct the full (present value) cost immediately producing a win-win situation for both sides.

A Solution for a Wide Range of Applications
Commercial business transactions: Sales of business, mergers and acquisitions, lease buy-outs, golden parachutes;
Avoid litigation: Lease termination, property disputes, employment cases, construction defects, environmental cases;
Claims: Non-bodily property and casualty claims, workers' compensation claims; class action attorney's fees, stand alone attorney's fees; divorce, defamation, other;
Financial transactions: Incentive fees, executive compensation, trustee fees, bonuses, agent compensation, sports or entertainment compensation. 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.

To receive more information, click here.

Physical Injury Cases
A lump sum payment may not be in the plaintiff's best interest when resolving personal injury claims. With no tolerance for investment risk, the plaintiff in a P/I case is at a disadvantage with today's volatile financial 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. A well-negotiated structured settlement will often bridge the gap between the plaintiff and defense and result in a more efficient settlement for both parties.

A structured settlement:

• Provides secure, tax-free periodic payments;
• Avoids premature exhaustion of funds;
• Maximizes benefits when employing age rating;
• Provides a higher rate of return than other funding vehicles;
• Meets the unique needs of clients as each settlement is individually designed.

A structured settlement can help both sides settle their differences because it also offers benefits for the defendant:

• A full deduction for the cost of settlement in the year of settlement;
• Ability to assign the payment obligation and not purchase/own the funding vehicle;
• No responsibility to guarantee the future performance of the life company issuing the annuity.

Leveraging the tax savings, a plaintiff receives greater benefits than a lump sum settlement can usually provide, making the defendant's offer more easily acceptable. These mutual advantages can foster cooperation and help settle cases more quickly and cost effectively.

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