By: Richard G. Halpern
Most plaintiff attorneys
are under the erroneous impression that all structured settlements are
subject to treatment under Section 130 of the Internal Revenue Code.
They also believe that Section 130 somehow benefits the plaintiff. The
reader will soon discover that Section 130:
- Only applies to structured settlements wherein the
defendant/liability carrier desires a qualified assignment of liability;
- Provides significant benefits to the
defendant/liability carrier;
- Provides significant benefits to the qualified
assignee (an affiliate of an insurance company);
- Provides no significant restrictions or limitations
or restrictions for the assignee or the defendant/liability carrier;
- Provides absolutely no benefits to the plaintiff and
- Places significant, draconian and harmful
restrictions and limitations on the plaintiff so that the
defendant/liability carrier can enjoy income tax breaks and be relieved
of any future liability for the payment stream.
Sadly these erroneous
impressions have been promulgated by exactly the same people who, for more
than a decade, convinced the plaintiff's bar that "cost disclosure would
deprive the plaintiff of the tax-free benefit of a structured settlement".
This was in spite of the fact that the Internal Revenue Service had
published a ruling saying that this was untrue!
What features would a
structured settlement offer if it were exempt from Section 130 of the
Internal Revenue Code?
- The plaintiff receives all of the benefits contained
in a traditional structured settlement
- The plaintiff suffers none of the restrictions of a
Section 130 structured settlement
- A payment stream that cannot be sold to after market
structured settlement buyers
- No defense involvement required
- A payment stream that is free of federal income tax
- Emergency invasion privileges
- Automatic adjustment to future economic conditions
- All excess earnings are distributed to the plaintiff
- A full refund of the reserve at the end of the period
certain or the death of plaintiff
- The heirs have the right to reconfigure the income
stream to meet their own specific needs after the death of the plaintiff
- Automatically pays for uncovered health and life care
expenses
- Automatically pays for medical insurance premiums
- Automatically pays for all educational expenses as
incurred
Don't all structures have
to comply with Section 130?
No - only those where the defendant or its liability
carrier want a tax break and to be relieved of any future responsibility
for the payments
What came first structured
settlements or Section 130?
Structured Settlements were first used to settle
personal injury claims in the 1960's in the Thalidomide baby cases.
Section 130 as it exists today was created by the Periodic Payment
Settlement Act of 1982 which became law 1/1/83.
Continued...
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