Features of the Structured Settlement Annuity

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1 Features of the Structured Settlement Annuity Structures 101-Back to Basics February 20-22, 2013 Las Vegas, Nevada Jeanne Ragusa, CSSC Internal Sales Manager

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! Commutation Endorsements Payment types (Lifetime, Period Certain, Lump Sums etc) COLA Frequency

4 Commutations! Payment of Commuted Value Upon: Death of Annuitant Typically available whether assigned or unassigned Term certain benefits only Elimination of Liability Typically only available unassigned Term certain and life contingent benefits School attendance Upon Marriage/Re-marriage Typically only available unassigned Term certain and life contingent benefits Can choose a commutation amount from 1%-100% of scheduled payment(s)

5 Why Choose Commutation?! Beneficiary may not want periodic payment stream Pay final expenses Estate Taxes

6 Commutation! Must be agreed upon in settlement agreement Must be selected in annuity application Cannot be added after settlement/contract issuance Death endorsement will be paid automatically upon processing of death claim or may be done as an option check with annuity issuer Each life company issues a unique rider/endorsement Calculations are specific to each life company

7 Payment Types/Frequency! Lifetime Period Certain Lifetime with Period Certain Lump Sums Joint life with or without period certain COLA Frequency Monthly, Semi-Annual, Annual etc. Virtually any combination/design that meets the payee s needs

8 Payment Types and Document Language! (P) Period Certain Definition: Guaranteed periodic payments for a specified period of time. Payments guaranteed to annuitant or annuitant s beneficiary. Example: $1,000 Monthly 20PC Sample wording for documents: $1,000 payable monthly, guaranteed for 20 years, beginning 05/01/2013, with the last guaranteed payment on 04/01/2033

9 Payment Types and Document Language! (G) Guaranteed Lump Sum Definition: Single cash payment. Guaranteed to annuitant or annuitant s beneficiary. Must be combined with at least one other payment on the annuity 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! (E) Endowment Lump Sum Definition: Single cash payment to be made only if annuitant is living. No payment to beneficiary should annuitant die prior to payment date Example: $10,000 due on 18 th Birthday Sample wording for documents: $10,000 paid as a lump sum on 2/1/2031 if living

11 Payment Types and Document Language! (L) Life Only Definition: Life contingent payments. Payments cease upon the death of the annuitant no payments due beneficiary Example: $1,000 monthly for life Sample wording for documents: $1,000 for life, payable monthly, beginning on 05/01/2013

12 Payment Types and Document Language! (L) Certain and Life/Certain and Continuous/Life with Years Guaranteed Definition: Periodic payments guaranteed for a specific period of time, followed by life contingent payments. If annuitant is living at the end of the guarantee period, payments continue for life thereafter. If annuitant dies during the certain period remaining guaranteed payments will be paid to beneficiary. Example: $1,000 monthly for life, 20 years certain (20CC) Sample wording for documents: $1,000 for life, payable monthly, guaranteed 20 years, beginning on 05/01/2013, with the last guaranteed payment on 4/1/2033

13 Payment Types and Document Language! ( J) Joint & Survivor Definition:Periodic payments based on two measuring lives. May be written as a life only or with guaranteed payments. Should one measuring life predecease the other, a predetermined percentage of the benefits shall continue to the survivor for life thereafter Survivor benefits may be written as full (100%) survivorship to each or any percentage equally, or at different survivorship rates for each measuring life.. If both annuitants die during the certain period, remaining guaranteed payments payable to beneficiary of last survivor. Example: $1,000 monthly for life, 20 years certain (20CC) Sample wording for documents: $1,000 for life, payable monthly, guaranteed for 20 years, beginning on 05/01/2013. Payable jointly to Mary and Matthew Crawley, with the last guaranteed payment on 4/1/2033. Payments continue at 100% to the survivor

14 Payment Types and Document (T) Temporary Life Language! Definition: Life contingent payments for a specified period of time. (presentation note: Think about it as a life contingent period certain) Example: $1,000 monthly, if living, for a maximum of 20 years Sample wording for documents: $1,000 paid if living, payable monthly, beginning on 5/1/2013 for a maximum of 20 years

15 Payment Types and Document Language! (C) Cash Refund Definition: Difference of premium received minus periodic payments made. A single lump sum payment of the difference to the Beneficiary. Example: $1,000 for life, payable monthly Sample wording for documents: $1,000 for life, payable monthly, beginning on 5/1/2013. If the payee dies prior to receiving total payments equal to the single premium, a guaranteed single payment of the difference will be paid to the beneficiary

16 Payment Types and Document Language! (I) Installment Refund Definition: Total payments will be at least equal to the single premium. Example: $1,000 for life, payable monthly Sample wording for documents: $1,000 for life, payable monthly, guaranteed for 29 years and 6 months beginning on 5/1/2013 with the last guaranteed payment on 10/1/2042. Total payments will be at least equal to the single premium

17 COLA! Pre-determined annual increase Increase is typically an annual increase but can be done for other timeframes Can range from 1% 6% Example - $1,000 increasing 3% annually beginning 5/1/2013 5/1/2014 payment increases to $1,030 5/1/2015 payment increases to $1, /1/2016 payment increases to $1,092.75

18 Payment Frequency! What does your client need? MSA: typically annual funding of account Medical care: periodic lumps sums to replace equipment, pay for future surgeries Income replacement: bi-weekly payments or monthly payments? Whatever the need, you can design a plan that fits!

19 Questions

Features of the Structured Settlement Annuity!

Features of the Structured Settlement Annuity! Jeanne Ragusa, CSSC Berkshire Hathaway Group Structured Settlements A quote from the NSSTA website! The real benefit of a structured settlement comes when