Structured Settlements
Structured Settlements
Structured settlements are agreements between plaintiffs and defendants in which the defendant makes regular payments to the plaintiff over a specific amount of time. The amount of time can be for a few years, a few decades, or even for the plaintiff’s entire lifetime. Structures settlements are most often seen in accidents that caused severe and life-changing injuries to the plaintiff, though they are sometimes used in other kinds of cases.
In most cases, liability insurance coverage provides an annuity to the plaintiff. This annuity is a source of income for the plaintiff, and the contracts for annuity payouts can be very complicated. If the plaintiff does not control the funds, there are also tax benefits under a structured settlement, as the funds are paid out tax-free for the life of the annuity. However, if the plaintiff has too much control over the funds, the IRS may revoke this tax benefit.
Those receiving settlements in a lump sum are often out of money in a few years, and turn to government programs for living expenses. A structured settlement provides income for the length of its term, sometimes even up to the lifetime of the plaintiff. Another benefit is that structured settlements can be created for the plaintiff’s needs and situation, and can account for things that are expected to happen in the future. Some plaintiffs think that there is no way that a structured settlement can account for every situation or economic fluctuation, and that the annuity payments will not be large enough to cover all expenses. Structured settlements are managed by someone with professional experience in the management of annuities and settlements, so that the income stream is always there for you.
Even if the insurance company paying the structured settlement goes bankrupt, most states have laws protecting those receiving annuities. Some annuities are given to brokers without enough protection against economic failure, which is something that you should be aware of if you’re considering a structured settlement. Structured settlements can be created so that, if, in the future, there are medical advances that can help you recover, your structured settlement can pay for it. Some structured settlements can be arranged to come with an initial lump-sum payment to cover any immediate expenses stemming from the injury.
The practice of selling structured settlements for a lump sum payment has gained popularity in recent years. In Idaho, there are laws governing how these transfers can take place. In order to sell your rights to an annuity received under a structured settlement, you will need to petition the court and gain approval. Idaho insurance laws state that an insurance company paying a structured settlement is not required to pay a transferee unless the transfer has been approved in advance by the court. The court must find that it is in the best interests of the structured settlement payee (the plaintiff) and the plaintiff’s dependents for the transfer to take place. The transferee must have notified the payee in writing that the payee should seek independent advice regarding the transfer, and the payee must either get this advice or waive the advice in writing. The transferee must also provide disclosure forms to the payee that comply with state laws, and the transfer cannot break any laws or court orders. The payee must understand the agreement’s terms and conditions and the disclosure statement, and must understand what the transfer means and doesn’t wish to cancel the transfer. The main reason for Idaho enacting these stipulations to the transfer proceedings is to avoid a mandatory 40% excise tax imposed by the federal government, which can only be avoided if there has been a qualified order of approval by a court.
Other states have implemented similar laws, but Idaho’s is more complex in that notice must be given to the Off ice of the Attorney General of Idaho and the Attorney General can oppose any petition. Generally, though, someone at the Attorney General’s office reviews the petition and changes (if needed) are made to the petition so that it complies with Idaho law. As long as the changes are made before the court hearing, the Attorney General usually doesn’t object to the petition. Another aspect particular to Idaho law is that each county has its own superior court with its own county and local laws that also have to be adhered to.
As you can see, filing a transfer of a structured settlement in Idaho is a complex process, and it can take a long time, usually between 2 and 3 months. An experienced attorney familiar with Idaho’s complex transfer laws can help you through the process.
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