Docstoc

Structured Settlement.txt

Document Sample
Structured Settlement.txt Powered By Docstoc
					==== ====

Hello.
rakaysanjaya.co.cc

==== ====
Structured Settlement

Implications of structured settlements:

The legislatures at state and federal level have realized the importance of structured settlement
laws and regulations. While the Internal Revenue Code works at the federal level to ensure the
application of structured settlement laws, the state structured settlement laws are taken care of via
structured settlement protection statutes and structured settlement payments of judgment statutes
that are made periodically. Even the medicare regulations exert a major impact on structured
settlements and in order to ensure the benefits, structured settlement payments are now being
incorporated within the special 'Set Aside Arrangements' and 'Special Needs Trusts'. This mode of
settlement ahs been endorsed by many disability rights organizations, to make it easier on the
special needs of the beneficiaries under their care.

The 'structured settlements' arrangement:

The meaning of structured settlements have been clearly defined and explained to meet the
application requirements for federal income taxation. It has been understood as an arrangement
that must be established via an agreement for periodic payment towards damages that are not
included within the established 'excludables' of the gross income under the legislation applicable in
the Internal Revenue Code. It is viewed as an agreement or arrangement for the segmented or
periodic payment of compensation, with regards to workers' compensation law that is not included
as per the Internal Revenue Code. Structured settlements are payable by an entity who is part of
the suit or agreement or a claim to workers' compensation. It is applicable to a person who has
taken on the liability involved in segmented payments, in accordance with Internal Revenue Code.

The legal implications in a structured settlement:

The legal implications in a structured settlement typically involve the request for a structured
settlement by the injured party, who is also the claimant, who agrees to a settlement with the
defendant or the insurance carrier, in order to dismiss the existent lawsuit in return for a series of
periodic or pre-set segmented payments over a stipulated period of time. Under such an
agreement, the insurer ends up with a long term payment obligation towards the claimant. In order
to fund the established obligation, the insurer can adopt any of the two approach roads. The
insurer can either purchase an annuity from some life insurance company or assign and delegate
the accepted periodic payment obligation to some third party. The latter is referred to as an
'Assigned case'.

Understanding the 'assigned case' of a structured settlement:

In an assigned case, the company basically prefers to refrain from the long term segmented
periodic payment obligation issued and accepted within the paradigms of law. Accordingly, the
insurer transfers this obligation via a 'qualified assignment' to some third party or the 'assignment
company'. The assignment company, which most of the time is the life insurance company from
which the annuity is purchased, requires the company to make a payment towards its securing an
annuity to fund the periodic payment obligation. However, if the claimant agrees to the transfer of
the segmented payment obligation, then the defendant and the company do not bear the liability of
payment. The 'assigned case' method is sought by companies that do not wish to carry the
periodic payment obligation. on their books.

Understanding the 'unassigned case' of a structured settlement:

In an unassigned case, the insurer bears the periodic or segmented payment obligation issued by
law and takes care of the obligation by purchasing an annuity from a life insurance company. The
annuity works like an asset that helps the company to fulfill its obligation. The payment option
agreed upon with the purchase of the annuity is exact to the legal acceptance, with regard to time
and amount. The property or casualty company owns the annuity and declares the claimant as the
payee, making arrangements for the stipulated payments to be sent directly to the claimant. In the
case of the segmented payment option being dependent on someone continuing to be alive, then
the claimant becomes the 'measuring life' under the annuity.

				
DOCUMENT INFO
Description: A structured settlement is a financial or insurance arrangement, defined by Internal Revenue Code as periodic payments; a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada after a settlement for children affected by Thalidomide. Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sum settlements. The increased popularity was also due to several rulings by the IRS, an increase in personal injury awards, and higher interest rates. The IRS rulings changed policies such that if the requirements were met then claimants could have federal income tax waived. Higher interest rates resulted in lower present values, hence annuity premiums, for deferred payments versus a lump sum. Structured settlements have become part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Structured settlements may include income tax and spendthrift requirements as well as benefits and are considered to be an asset-backed security. Often the periodic payment will be created through the purchase of one or more annuities, which guarantee the future payments. Structured settlement payments are sometimes called “periodic payments” and when incorporated into a trial judgment is called a “periodic payment judgment."