Call Now (800) 681-1295

Any disadvantages to a structured settlement agreement?

Table of Contents

    There are some risks with a structured settlement agreement. First, one main concern for defendants is that a third party assignee or payor may become insolvent. With structured settlements, it is important that the plaintiff not own the annuity. That is why, normally, the defendant makes a single lump sum payment to a third party assignee (usually a life insurance company) who then becomes obligated to make payments to the plaintiff. The insurance company then purchases or funds an annuity that thereafter funds the plaintiff’s periodic payments. In this way, the plaintiff does not own the annuity.

    Second, the plaintiff typically cannot alter the amount of annuity payments once the structured settlement is finalized. This could be unfortunate if the plaintiff’s financial circumstances were to change, and he finds himself needing more or all of the annuity immediately (e.g. to pay for unanticipated or unexpected expenses).

    Third, the plaintiff typically holds no rights to the annuity greater than that of an unsecured general creditor. As mentioned above, it is important that the plaintiff not be the owner of the annuity—otherwise, it may trigger inclusion in gross income of the entire settlement amount (and thus taxation) for the current year under the doctrines of economic benefit and constructive receipt.

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934