These FAQs have been compiled to answer basic questions about structured settlements frequently asked by attorneys. To use the accordion feature, simply click on the question and the the answer will appear.NOTE: There is no charge for what we do. If you have a specific question about structured settlements, call or e-mail us directly by using our contact page.
Can Class Action Attorney Fees Be Structured?
An informative article by Robert W. Wood.
Yes. Click Here Yes. Click here to use our MICRA rates tool for easy rate calculations. These are approximate numbers, not exact, due to recent MICRA changes.
There are no costs to create a structured settlement for the plaintiff attorney or injured party. The insurance broker's commission for arranging and purchasing the structured settlement annuity is paid by the life insurance company and does not reduce the amount of the annuity for the plaintiff and/or the attorney.
Structured settlement brokers are typically involved in initial and ongoing consultations with the attorney and injured party. They prepare annuity price-benefit analyses, create and review settlement documents, attend court hearings, arbitrations, and settlement conferences, and are responsible for issuing the annuity policy to the plaintiff.
Brokers can assess settlement offers during a mediation session for the plaintiff's current and long-term benefits. As negotiations move forward during the mediation process, the broker can comply with any alterations requested by the mediator or either counsel.
The issuing life insurance company guarantees annuities. Only those highly rated by the rating agencies (Moody's, A.M. Best, Standard & Poor's) are selected for structured settlement annuities.
In California, companies offering structured settlements must first be approved by the California Department of Insurance. The department evaluates the insurance carrier's solvency and whether the carrier complies with California regulations. Carriers are also subject to mandatory annual audits and other financial compliance requirements. By regulation, all annuity reserves must have assets that are equal to or exceed the corresponding payment obligations. In addition, the assets supporting these reserves may not be removed from the insurance company. Reserve sufficiency is mandatory and is frequently monitored by state legislators and auditors.
State insurance commissioners have developed these regulations to preserve the solvency of general accounts that hold assets, ensuring that contractual obligations to policyholders are met. These general accounts support only the obligations of the insurance companies–and not the obligations of a parent company or other subsidiaries.
In California, companies offering structured settlements must first be approved by the California Department of Insurance. The department evaluates the insurance carrier's solvency and whether the carrier complies with California regulations. Carriers are also subject to mandatory annual audits and other financial compliance requirements. By regulation, all annuity reserves must have assets that are equal to or exceed the corresponding payment obligations. In addition, the assets supporting these reserves may not be removed from the insurance company. Reserve sufficiency is mandatory and is frequently monitored by state legislators and auditors.
State insurance commissioners have developed these regulations to preserve the solvency of general accounts that hold assets, ensuring that contractual obligations to policyholders are met. These general accounts support only the obligations of the insurance companies–and not the obligations of a parent company or other subsidiaries.
The types of cases that qualify for a structured settlement include personal injury, workers' comp, employment and discrimination, molestation, Medicare, environmental and property loss. The types of cases in which structured settlements are allowed have grown substantially over the last five years. A structured settlement broker can provide the latest types of qualified injuries.
Note: Non-qualified settlements are discussed below.
Note: Non-qualified settlements are discussed below.
Market-based settlement assets allow a portion of a client's financial settlement or your attorney fees to be invested in mutual funds--such as those offered by Vanguard or Fidelity. They are invested in these mutual funds to capitalize on market growth and inflation protection, and as an alternative to traditional fixed-income annuities or lump-sum settlements.
Funds are held in a structured settlement trust, separate from the injured party's personal assets. The claimant or attorney does not have direct access to these funds. A third-party financial planner or the mutual fund company manages the assets on behalf of the trust. Portfolio adjustments can be made up to twice per year.
Note: Additional information on market-based settlement assets can be found here.
Funds are held in a structured settlement trust, separate from the injured party's personal assets. The claimant or attorney does not have direct access to these funds. A third-party financial planner or the mutual fund company manages the assets on behalf of the trust. Portfolio adjustments can be made up to twice per year.
Note: Additional information on market-based settlement assets can be found here.
Yes. Special Needs Trusts (SNTs) are often used together with structured settlements. When used in tandem, SNTs and structured settlements offer complimentary benefits that can enhance the quality of life for severely injured plaintiffs and their family. Structured settlements provide a steady stream of income to an injured party through an annuity purchased by a defendant. A SNT enables the disabled individual to retain Medicaid and SSI benefits (or become eligible for them if under age 65) and other medical care not covered by government assistance. Funds are also available for needs not covered by government programs including additional home care, companions, vehicles and in some cases, a residence.
When setting up a SNT/structured settlement, advisors must be cognizant of federal and state requirements and follow them properly so not to forfeit the client’s ability to access these government benefits. If estate planning documents are incorrectly drafted, the government may demand reimbursement of government payments prior to the injured party’s death.
When setting up a SNT/structured settlement, advisors must be cognizant of federal and state requirements and follow them properly so not to forfeit the client’s ability to access these government benefits. If estate planning documents are incorrectly drafted, the government may demand reimbursement of government payments prior to the injured party’s death.
Yes. Federal law permits a first-party Special Needs Trust (SNT) to hold assets (such as structured settlements) of injured parties under age 65 while preserving their needs-based public benefits, such as California's Medi-Cal, Medicare, and SSI.
However, under federal law, individual Special Needs Trusts cannot be used by individuals aged 65 and over without disqualifying them from receiving public benefits. A plaintiff who, for example, is eligible for Medi-Cal must be below the asset limit of $130,000.00 for one person, add $65,000.00 for each additional family member (up to 10 people).
Fortunately, a first-party Pooled SNT can overcome these disqualifying hurdles. An injured party of any age or settlement amount can combine a Pooled SNT with structured settlement assets to preserve government benefits while receiving income for nonmedical needs. Pooled SNTs are a state-approved master trust that is established and managed by a charity. Because they are created through a nonprofit entity, support a "pool" of individuals rather than a single individual, and the settlement money remains in the trust and is not owned by the plaintiff until distributed, the income from these trusts is not counted against needs-based public benefits. When the trust is terminated and the state lien has been paid, the remainder passes to heirs just as it would with an individual SNT.
Because the Pooled SNT is a state-approved master trust, the trust documents are created and provided within three business days. While Pooled SNTs can be used by individuals of any age, this is the only type of special needs trust available to people aged 65 or older. Much as the SNT is used to preserve a plaintiff's eligibility for Medi-Cal, a Medicare Set-Aside Arrangement (MSA) is used to preserve a plaintiff's future eligibility for Medicare.
When the plaintiff is receiving (or soon will receive) both Medi-Cal and Medicare, an MSA is placed inside a Pooled SNT but must be professionally administered. Currently, only one California Pooled SNT has the ability to provide plaintiffs' protection of their settlement recovery from both Medi-Cal and Medicare: the California Charities Pooled Trust (CPT) at www.snthelp.com.
For more, click here.
However, under federal law, individual Special Needs Trusts cannot be used by individuals aged 65 and over without disqualifying them from receiving public benefits. A plaintiff who, for example, is eligible for Medi-Cal must be below the asset limit of $130,000.00 for one person, add $65,000.00 for each additional family member (up to 10 people).
Fortunately, a first-party Pooled SNT can overcome these disqualifying hurdles. An injured party of any age or settlement amount can combine a Pooled SNT with structured settlement assets to preserve government benefits while receiving income for nonmedical needs. Pooled SNTs are a state-approved master trust that is established and managed by a charity. Because they are created through a nonprofit entity, support a "pool" of individuals rather than a single individual, and the settlement money remains in the trust and is not owned by the plaintiff until distributed, the income from these trusts is not counted against needs-based public benefits. When the trust is terminated and the state lien has been paid, the remainder passes to heirs just as it would with an individual SNT.
Because the Pooled SNT is a state-approved master trust, the trust documents are created and provided within three business days. While Pooled SNTs can be used by individuals of any age, this is the only type of special needs trust available to people aged 65 or older. Much as the SNT is used to preserve a plaintiff's eligibility for Medi-Cal, a Medicare Set-Aside Arrangement (MSA) is used to preserve a plaintiff's future eligibility for Medicare.
When the plaintiff is receiving (or soon will receive) both Medi-Cal and Medicare, an MSA is placed inside a Pooled SNT but must be professionally administered. Currently, only one California Pooled SNT has the ability to provide plaintiffs' protection of their settlement recovery from both Medi-Cal and Medicare: the California Charities Pooled Trust (CPT) at www.snthelp.com.
For more, click here.
Yes. Attorneys may structure all or a portion of their contingency fee into guaranteed, tax- deferred periodic payments instead of receiving the entire fee as a lump sum. Payment schedules can be customized using a fixed annuity, a market-based structured settlement, or a combination to help meet individual financial goals.
Structured attorney fees are taxable as they are received, rather than entirely in the year of settlement. This may provide tax- deferral benefits and allow income to be spread over multiple years.
Structured attorney fees are taxable as they are received, rather than entirely in the year of settlement. This may provide tax- deferral benefits and allow income to be spread over multiple years.
Yes. Several life insurance companies write attorney fee structured annuities for just about every type of non-qualified case–as long as the attorney fee agreement meets with the insurance company’s specific criteria. This means fees generated from class action settlements, cases involving environmental claims, construction defect, age, sex and employment discrimination, property damage, fraud and non-physical injury cases can all qualify for fee structuring.
Yes. "Factoring" companies buy structured settlements from injured parties. In return, they pay the injured party a lump-sum payout. However, factoring companies' high fees and discounting practices often leave the injured party with only a small percentage of the original settlement and an insufficient lump sum that can be rapidly depleted.
In 2009, a California law (SB 510) was passed that gives consumers a better understanding of the costs associated with selling their structured settlements, so they can make a more informed decision about whether selling the annuity is worth the high costs and discounts that come with the sale. For SB 510 text, visit this link.
In 2009, a California law (SB 510) was passed that gives consumers a better understanding of the costs associated with selling their structured settlements, so they can make a more informed decision about whether selling the annuity is worth the high costs and discounts that come with the sale. For SB 510 text, visit this link.
Yes. They are called "non-qualified" structured settlements. Non-qualified structures are for non-physical injury settlements that fall outside the tax-free physical injury claims definition outlined by the IRS tax code. These taxable settlements often involve employment litigation, punitive damages, contract disputes and construction defect claims. Settlement proceeds are placed in an annuity and withdrawn over time. Taxes are due only when funds are withdrawn.
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