Are Payments From a Structured Settlement Annuity taxable?
John Darer • March 7, 2019
It's a trick question
Shocking Fact About Structured Settlement Annuities
A common misconception is that structured settlement annuity payments are always not taxable. This is not true. While many
types of cases are resolved using structured settlements, there are instances where structured settlement annuity payments could be taxable. The fact is that structured settlement annuities have absolutely nothing to do with the taxation of structured settlement annuity payments.
A structured settlement is merely the vessel on which the damages travel to the payee.
The Proof is in the Damages
It is the damages that the annuity payments represent that affects the taxation of the annuity payments.
- If the payments represent damages on account of personal physical injury, physical sickness, or wrongful death, then the damages will be tax free, consistent with and within the meaning of IRC Section 104(a)(2)
- If payments represent workers compensation, then such payments will be tax free , consistent with and within the meaning of IRC 104(a)(1)
- If the payments represent damages as compensation for wrongful imprisonment, such payments will be tax free, consistent within and within the meaning of IRC 139F
- If payments represent taxable damages, then such structured settlement annuity payments will be taxable.
The cap rate on index linked structured settlement annuities is a limit set by the insurance company on the maximum interest rate that can be credited to the annuity based on the performance of the underlying index that also helps provide the downside prtection..
Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can inlcude one or more customized payment streams and types.
USAA Life Insurance Company, an A++ rated insurance company, issues structured settlement annuities with 1%, 2% and 3% COLAs. USAA Life structured settlements are exceptionally compatitive on lifetime benefit payments with long duration certain periods for ages under 35.
Owners of highly appreciated NY businesses or NY real estate may benefit from a structured installment sale tax deferral program as an alternative to a 1031 exchange. MetLife's structured installment sale program is now available in NY and in all 50 states. Call 888-325-8640 for more info
A qualified assignment is part of the process to establish a structured settlement that enables a Defendant, Insurer, or Qualified Settlement Fund, to achieve a complete novation of the future periodic payment claim established by suit or agreement, through a substitution of obligors.
An annuity and a structured settlement walked into a bar, how do you tell them apart? 4structures' John Darer reviews the differences for you right here.
A lifetime structured settlement annuity turns part of your settlement recovery into guaranteed income you can’t outlive that is contractually guaranteed by a regulated life insurance company. A lifetime annuity is sometimes referred to as longevity insurance.
Structured settlement annuities can be very helpful to the budgeting process by providing guaranteed income streams and deferred lump sum payments tailored to specific budget needs and time frames identified in the settlement planning process.
Structured settlement receivables are often deceptfully marketed to investors as annuities. When the originating structured settlement factoring company buys structured settlement payments in a structured settlement factoring transaction, they are buying a receivable not an annuity.
Avoid constructive receipt if a structured settllement or structured attorney fee is to be established. Care must be taken to avoid constructive receipt.
