Frequently Asked Questions
Regarding Settlement Documents
Are
there differences in the assignee corporation supplied by the annuity providers?
In a structured settlement involving a qualified assignment. the
claimant insists that the defendant/carrier remain liable in case both
the life insurance company and the qualified assignee company default.
If the defendant/carrier agrees to remain
liable for the future annuity payments, can they still use a qualified
assignment?
How
important is it that a settlement agreement be drafted if a release has been signed by the
parties?
Why
do we insist that a self-insured defendant commit to a Qualified Assignment?
Other than the obvious reasons that the transfer of the contingent
liability to a third party and away from the defendant and that the cost is negligible are
valuable options for the defense, the most important reason is that the qualified
assignment satisfies the "all events test" of
IRC
Section
461. Many tax experts
agree that until all annuity payments have been made by the defendant (or its vendor - the
life insurance company) in a personal injury settlement to the claimant/annuitant, the
premium for the annuity purchased by the defendant would only be deductible in proportion
to the annual benefit paid to the claimant. Such a result would obviously impact on the
defendant's ability and desire to deduct all of the costs of the claims in the year it was
settled.
However, if a qualified assignment under
IRC
Section 130(e)
is
completed by the self-insured defendants (casualty insurance carriers have special
deductibility rules) then the interpretation is that the defendant has "paid"
the claimant and the all events test of IRC Section 461(h)(2)(c) is satisfied and the
defendant can deduct the entire premium (plus other claim costs) in the year of settlement
