Income Tax Reduction and Deferral Strategies for Trial Attorney Contingency Fee Income: Part 1—Structured Settlement Annuities Using Private Placement Variable Deferred Annuities

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Originally published in ABA Section of Taxation NewsQuarterly in the Summer of 2012.

Overview -

Structured settlement annuities (SSA) have been recognized by federal law since 1983. The original use of these arrangements was for physical injury cases. The typical arrangement for cases involving physical injury and sickness as defined under section 104 provides for the defendant to make a “qualified assignment” of the periodic payment obligation as prescribed under the settlement agreement between the plaintiff and defendant to a qualified assignment company.

The qualified assignment company is the applicant, owner, and beneficiary of the annuity contract, which it uses to make payments to the plaintiff. The plaintiff receives tax-free annuity payments and the defendant or its casualty insurance company receives a tax deduction in the year the payment is made. The defendant is released from further liability or obligation in the year it is made.

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Tax

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gerald Nowotny, Law Office of Gerald R. Nowotny | Attorney Advertising

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