IRS looks at final rules on tax free status of structured settlements

In this weeks edition of Speaking of Settlements I look back at the recent hearings in Washington, DC where in the US Treasury had invited comment on the final rules related to the taxation of structured settlements, going all the way back to when the last modification to section 104(a)(2) was made in 1996.

As I commented in a previous video, in which Jack Meligan of SPI weighed in, that these hearings were flying very much under the radar in the settlement and tax community, despite the fact that this represented a great opportunity to speak with Treasury about expanding tax free status or clarification on sexual abuse, molestation and wrongful imprisonment.

There was a lot of comment and controversy about the fact that Attorney Dick Risk submitted a request to use the hearings to discuss Treasury's long standing decision to "not decide" on the topic of single claimant Qualified Settlement Funds, or 468B Trusts. Most of the feed back I got from that video and column was that it was the wrong forum to bring this up, while many in the SSP felt that the letter to the committee by NSSTA stating that they represent the opinion of "virtually all structured settlement producers, both defense and plaintiff" was a bit of a reach and not reflective of reality either.

So, today's video gives you a brief update, but as I state in the commentary, we have provided the full and complete transcript of the hearings, the positions put forth by John McColloch of IFS ( Integrated Financial Services ) are right there in the transcript, as are the other responses by NSSTA, SSP and Dick Risk.

Make up your own minds, read the information and decide for yourself if you think this was the appropriate forum to discuss the single claimant QSF issue, Treasury's reaction to it and the chances of expanding clear tax free status to sexual abuse and wrongful imprisonment cases.



Are annuities being overhyped? Structured settlement expert Mark Wahlstrom answers the question.

This question was asked in a recent Wall Street Journal article authored by writers Anne Turgesen and Leslie Scism, with the theme being that the recent news of promotion of annuities by the Obama administration is turning into marketing bonanza for life insurance agents  that could harm some investors.

A link to the full WSJ article is available by clicking here.

While I feel the headline was a little extreme, the premise of their story is dead on. That being that a rush to move people into fixed rate, immediate income annuities at the current historically low rates is going to hurt a lot of people long term when rates and inflation inevitably rise over the next 3 to 7 years.

In this weeks edition of Speaking of Settlements, I discuss this dilemma, which is faced by structured settlement experts such as myself on a daily basis. We all know that current interest rates are historically very low and will certainly go up over the next few years, but investors, savers or injury victims need to make decisions TODAY on whether or not immediate annuity income makes sense for them right now.

This will be part of a recurring series of conversations I will be having on the ideas and strategies for those looking to use annuities to fund or finance retirement, care plans, settlement plans and other conservative income strategies using insurance company products.



Treasury to hold hearings on IRC section 104(a)(2) on taxable damages

In today's edition of Speaking of Settlements I am joined by Jack Meligan, the President of SPI and former President of the SSP, to discuss the up coming hearings with Treasury on February 23rd on the clarifications regarding IRC section 104(a)(2). Mark Wahlstrom

These hearings are one of the first real reviews of the foundational tax code upon which the structured settlement industry is based, that being the exclusion from taxation of injuries caused as a result of personal physical injury. These hearings were originally scheduled to discuss expansions of that definition and modifications of the language, primarily to make clear the tax status of cases such as sexual abuse, wrongful imprisonment, illness caused by a hostile work environment, etc.

However, now an attempt is being made to raise the issue of 468B single claimant cases as part of the hearing, prompting a scramble by the various associations and interested parties to respond to the questions raised by this request.

Jack Meligan discusses his perspective on the always contentious single claimant 468B trust issue as part of this podcast, as well as raising awareness of the hearings and the issues to be discussed. Regardless of where you are on the politics and implications of this, you will want to watch the outcome of these hearings as they have a substantial impact on our profession, the definitions of what is a taxable damage situation and whether there will ever be clarity on the topic of 468B trusts.