Tip #2 – Clarify structure ownership!

January 7, 2013

Top 10 Structure Tips - Tip #2

Welcome back to our series of 10 tips for lawyers and claims professionals working in the world of personal injury and structured settlements. For those of you experienced in the field of structured settlements, these tips will serve as a good refresher.  For those new to structured settlements, our tips will provide a helpful foundation on the basics of structure negotiations.

Tip #2 – Clarify structure ownership!

Now that you have confirmed the right to structure (see Tip #1), it's time to figure out which company will own the annuity.

In order for structure payments to be received tax free, the annuity contract must be owned by an insurer.  The plaintiff cannot own the annuity personally. 

Often, the casualty insurer providing the settlement funds will agree to own the annuity, but this is NOT the case for all structures. Where the contributor to the settlement cannot or will not own the annuity contract, Absolute Assignment is required.

In such situations, the structure broker will arrange for a third party insurer to step in to the "ownership position", thereby allowing the structure payments to flow, tax free, to the plaintiff.

Keep in mind that Absolute Assignment requires the consent of ALL parties to the structured settlement.  For plaintiff counsel, this is NOT your solution to structuring without involving the insurer, because the consent of the defence is still required!

So, when you've settled that claim and have obtained the right to structure, the next point to clarify (in writing please) is whether the structure will be owned, or Assigned.