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When representatives from Ringler Associates attend negotiations, 75 percent of the cases are resolved with a structured settlement, compared to only 15 to 20 percent being structured without their attendance.
There are
several Internal Revenue Codes
and rulings that regulate the
concept of structured
settlements. The Internal
Revenue Service Code Section
104(a) allowed that damages for
personal injuries were
excludable from gross income.
Revenue Ruling 79-220 raised the
question of whether the total
amount of the monthly payments
received in settlement or just
the discounted present value of
such payments, which is the
premium for the annuity, would
be excluded from gross income.
This ruling determined that the
full amount of monthly payments
should be excluded from the
injured party's gross income, tax
free.
The Periodic Payment Settlement
Act of 1982 codified all of the
prior revenue rulings. In order
to provide a tax-free benefit to
the injured injured party, such
periodic payments are required
to be fixed and determinable as
to amount and time of payment.
They cannot be accelerated,
deferred, increased, or
decreased by the injured party. More
importantly, this law allowed
defendants to assign their
obligations to make future
periodic payments to a third
party without retaining a future
obligation to the injured party. This
law enables the defendant to
enter into a structured
settlement without retaining a
future obligation to the
injured party because that obligation
under the settlement agreement
has been assigned to a third
party.
On August 5, 1997, Section 130
of the Internal Revenue Code was
amended to permit
seriously-injured workers’
compensation injured parties the same
financial security and stability
and tax-free settlements that
were previously available only
to tort victims.
