The Convertible Lump Sum
Important Announcement & Request.
Creative Capital Structured Settlements, on behalf of The National Structured Settlements Trade Association (NSSTA), is gathering input on an exciting (potential) new benefit option within the structured settlement market place – a Convertible Lump Sum (CLS). Your input is being requested to determine the viability of this concept. We invite you to participate in the short survey (7 questions) after we define the concept. If we get a sufficient number of positive responses some or all of the life insurers offering structured settlements will endeavor to develop and offer this new benefit to all plaintiffs. Thank you in advance for your time. Completion of the 7 item questionnaire should take fewer than 2 minutes.
Convertible Lump Sum Defined
A CLS is not a “new” product. Instead, it simply adds another option to structured settlement lump sums. Imagine a Guaranteed Lump Sum structured settlement payment of $1,000,000 payable in 15 years. If the plaintiff is no longer living on the payment date, the $1,000,000 payment will be made. If, however, the plaintiff is living on the date that the lump sum is due, AND if the plaintiff opted for a conversion of that lump sum in the original settlement agreement, then instead of being paid a single lump sum, the plaintiff would receive scheduled future periodic payments at interest rates then available.
Please note the CLS only exists for living Payees - if the Payee is deceased, the lump sum is paid to the beneficiary or estate either when it is due or when it was commuted at death.
For living Payees, however, the CLS works as follows:
The convertible feature for the Payee is triggered on the due date.
The lump sum automatically converts into a predetermined/preselected design of structured settlement payments (e.g. monthly payments for 20 years certain or monthly payments for 20 years certain and life thereafter, etc.) at the new/current interest rates in effect at the time of the conversion.
The lump sum payment amount (e.g., $1,000,000) is used to fund the previously negotiated and agreed upon stream of periodic payments, but priced at the then current rates.
Many plaintiffs choose structured settlements for a very good reason, certainty of scheduled payments without having to worry about stock and bond market fluctuations. Some plaintiffs choose deferred lump sum payments (in addition to their monthly payments) in order to be able to reinvest at presumably/hopefully higher future interest rates. However, without this new option when they receive their lump sum payment and reinvest it, their new investment will be taxable. But with the Convertible Lump Sum the new payment stream will be ENTIRELY TAX FREE. No plaintiff will be required to do this. This survey seeks your opinion as to whether you would like this OPTION available to your clients. Thank you for your feedback.