Features of the Structured Settlement Annuity!

Transcription

1 Features of the Structured Settlement Annuity! Jeanne Ragusa, CSSC Berkshire Hathaway Group Structured Settlements

2 A quote from the NSSTA website! The real benefit of a structured settlement comes when the structured settlement consultant shows the variety of payment options and all the parties see how far they can make the money go. Carolyn Israel Stein, Esq. Attorney & expert in medical negligence

3 Customization! Payment types COLA Frequency Commutation Endorsements Owned/Assigned

4 Case Design! What does your client need? Life care plan? MSA Annual funding temp life/term certain Professional administration fees Medical care: Lump sums for new equipment/future surgeries Income replacement: bi-weekly or monthly payments Whatever the need, you can design a plan that fits!

5 Payment Types! Lifetime Period Certain Lifetime with Period Certain Lump Sums Joint life with or without period certain Temp Life

6 COLA! Acronym stands for Cost of Living Adjustment Is the COLA defined in the contract or is it based on some other factor?

7 Payment Frequency! Monthly Semi-Annual Annual Lump Sum Can you have more than one payment stream?

8 Payment Types and Document Language! (P) Period Certain Definition: Guaranteed periodic payments for a specified period of time. Payments paid to payee or payee s beneficiary Example: $1,000 Monthly 20PC Sample wording for documents $1,000 payable monthly, guaranteed for 20 years, beginning 5/1/2014 with the last guaranteed payment on 4/1/2034

9 Payment Types and Document Language! (G) Guaranteed Lump Sum Definition: Single cash payment. Guaranteed to payee or payee s beneficiary. Example: $10,000 due on 18 th Birthday Sample wording for documents: $10,000 paid as a lump sum on 2/1/2031

10 Payment Types and Document Language! (L) Life Only Definition: Life contingent payments. Payments cease upon death of the payee no payments due beneficiary Example: $1,000 monthly for life Sample wording for documents: $1,000 for life, payable monthly, beginning on 5/1/2014

11 Payment Types and Document Language! (L) Certain and Life/Life with X Years Guaranteed Definition: Periodic payments guaranteed for a specific period of time, followed by life contingent payments. If payee is living at the end of the guarantee period, payments continue for life thereafter. If payee dies during the certain period, remaining guaranteed payments will be paid to beneficiary Example $1,000 monthly for life, 20 years certain Sample wording for documents: $1,000 for life, payable monthly, guaranteed 20 years, beginning on 5/1/2014 with the last guaranteed payment on 4/1/2034

12 Payment Types and Document Language! (E) Endowment Lump Sum Definition: Single cash payment to be made only if payee is living. No payment to beneficiary should payee die prior to payment date Example: $10,000 due on 65 th birthday Sample wording for documents: $10,000 paid as a lump sum on 2/1/2031, if living

13 Commutation! Payment of Commuted Value Upon: Death of Annuitant Assigned vs unassigned Term certain benefits only Elimination of Liability Typically done for Worker s Compensation cases Marriage/Re-Marriage School enrollment Other reason Assigned vs unassigned? Can include Term Certain and Life Contingent benefits

14 Why Choose Commutation?! Beneficiary may not want periodic payment stream Pay final expenses Estate Taxes SNT Satisfy state requirements for reimbursing Medicaid

15 Documents for Commutation! Settlement Agreement Annuity Application/Payee Info Sheet Payment upon Death of Annuitant Know your annuity issuer guidelines. Payment of commutation may be paid automatically upon processing of death claim or beneficiaries may choose to continue scheduled annuity payments Each life company issues a unique rider/ endorsement Calculations are specific to each life company

16 Commutation Calculation! Question: If death of the payee occurs soon after contract issuance, is the commutation calculation likely to be more than, less than or equal to the premium to fund the contract?

17 The Answer..! Less - likely much less Why?

18 Commutation! Is it possible to have a commutation of just part of the periodic payments? Yes! Can commute a portion of the payment. Be sure documents are clear on this point!

19 To Assign or Not Assign! Can all cases be assigned? State law may prohibit/limit assignability What is the significance of the date 8/5/1997 for WC? What are the benefits of assignment? What can you do if case is not eligible for assignment? Buy and hold Carrier/Employer-Owned Annuity Watch for premium tax states e.g. California! Reinsurance Agreement Non-Qualified Assignments

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