Understanding Non-Qualified Structured Settlements:

Non-qualified structured settlements are an innovative financial solution that provides tax-deferred payments to claimants in various types of cases. Unlike traditional structured settlements, which typically qualify for income tax exclusion under the Internal Revenue Code, non-qualified settlements offer flexibility and benefits that can significantly enhance the overall financial strategy for those involved in non-physical injury claims.

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What is a Non-Qualified Structured Settlement?

A non-qualified structured settlement involves transferring future periodic payments and obligations from a defendant or their insurance carrier to a third-party assignee. This approach is particularly useful for cases that do not meet the criteria outlined in Section 130 of the IRS Code, which restricts tax-free structured settlements primarily to physical injury claims.

Key Features of Non-Qualified Structured Settlements:

• Taxation: Claimants are only responsible for taxes on the payments received during a given tax year, allowing for tax-efficient income management.
• Growth Potential: Settlement funds continue to earn interest on a tax-deferred basis until they are withdrawn.
• Customizable Payment Plans: Payments can be tailored to meet the financial needs of the claimant, including options for cost of living adjustments (COLA) to combat inflation.

Eligible Claims for Non-Qualified Settlements

Non-qualified structured settlements can be applied to a variety of claims, including but not limited to:

• Employment Litigation: Wrongful termination, discrimination, harassment, and emotional distress claims.
• Contract Disputes: Issues arising from breached agreements that require resolution.
• Environmental Claims: Settlements related to environmental damages or violations.
• Errors & Omissions: Claims against professionals for negligence or failure to perform duties.
• Punitive Damages: Compensation aimed at punishing the wrongdoer and deterring similar conduct.

Benefits of Non-Qualified Structured Settlements

Non-qualified structured settlements come with several advantages that can aid in maximizing the settlement outcome:

• Tax Deferral: By deferring taxes on a lump sum settlement, claimants can effectively manage their tax liabilities and minimize immediate tax burdens.
• Stable Income Stream: Claimants receive a reliable and predictable source of income over time, which can be essential for financial planning.
• Flexibility: Payment structures can be designed to align with significant life events, such as purchasing a home or funding a child’s education.

The Assignment Process

The assignment process for a non-qualified structured settlement resembles that of a qualified assignment but includes a few distinct differences. Once all parties agree on the periodic payment terms in the settlement agreement, the defendant or insurer assigns their obligations to a non-qualified assignments company. This company will fund the payment obligation by purchasing an annuity contract, which is managed to ensure payments are made according to the established schedule.

Conclusion

Non-qualified structured settlements provide an invaluable option for claimants navigating the complexities of non-physical injury claims. By understanding the benefits and processes involved, individuals can make informed decisions that align with their financial goals. If you’re considering a non-qualified structured settlement or want to learn more about how it can benefit you, don’t hesitate to reach out for personalized guidance and solutions.

For more information on structured settlements and non-qualified assignments, please contact us today. Your financial future deserves careful planning and expert advice.