Special consideration needed to comply with tax requirements
Structured settlement documents must be carefully drafted to reflect the proper consideration for settlement
Where a structured settlement is part of the settlement, the consideration will be in the form of “cash and future periodic payments”. The periodic payments must be specified as part of the consideration in the release or an Incorporated addendum/exhibit.
The Rush to Tender | Avoid conflicting release documents
Where a structured settlement is part of the the settlement of any legal case, special attention must be paid by defense and plaintiff counsel to avoid conflicting language in settlement documents. A Settlement Agreement and Release typically includes a paragraph which states that the document is a General Release. Yet it is possible that a defense counsel will insist on a separate General Release that states consideration as a lump sum of cash and the fatal words “receipt of which is hereby acknowledged”. Plaintiff lawyers in a hurry to tender to set statutory payment clock running may overlook this issue if not careful. It could be costly.
A plaintiff in constructive receipt or actual receipt of cash cannot structure.
Furthermore, if there is documentation of two releases in the file, which one will stand up in the face of an audit by the IRS or state or local taxing authorities?
An unwind of a qualified assignment due to a tax compliance issue could be costly to defendants and their insurers. Work with an experienced structured settlement expert on every case involving a structured settlement.
