US Government Bond Funding Vehicles

For the ultra conservative plaintiff, Structured settlements may be funded using obligations of the United States government as a "qualified funding asset" under IRC Section 130(d). This type of structured settlement is commonly referred to as a "Treasury Bond Trust" or "T-Bond Trust". While it offers ultra secure payments, it is not as popular as it was in the previous decade when there were multiple T-Bond Trust offerings. The increased confidence in structured settlement annuity issuing life insurance companies' ability to "weather the storm", and increases in ratings of such companies by rating agencies such as A.M. Best, Moodys, S&P or Fitch, has played a role. As a consequence, Plaintiffs often don't see the value in a "yield sacrifice" to go with a T-Bond Trust structured settlement.

Another limitation is the mode of payments issue. The underlying bonds do not have as many natural payment modes as do structured settlement annuities, which can even be paid in such payment modes as weekly, monthly or every couple of years, in addition to many others. For the T-Bond Trust to do so an intermediary (the trust company) must act. It must gather the income from the bonds and the trustee must hold it before disbursing. Structured settlement annuities are the only vehicle that can contractually guarantee lifetime income to plaintiffs.

Here are the details concerning T-Bond Trusts offered by one of our resources: