BrantHickey.com :: V.C.F. - Frequently Asked Questions

V.C.F - Frequently Asked Questions

Q: Can the plaintiff purchase an annuity for a structured settlement and still get the payments tax-free?

A: No. The defendant, the insurer or an assignment company must purchase an annuity to fund a structured settlement and maintain the tax-free status under section 104(a)(2).

Q: What are the tax advantages of a structured settlement?

A: A property configured structured settlement will provide tax-free future payments to the plaintiff. Both the principal and accumulated interest can be excluded from the plaintiff's gross income, because the plaintiff doesn't own or control the funding asset. Plaintiffs in higher tax brackets will enjoy even great tax benefits.

Q: Can a plaintiff know the cost of the funding asset used to fund a structured settlement without jeopardizing the tax advantage?

A: Yes. A plaintiff's knowledge of the cost of an annuity used to fund a structured settlement agreement does not constitute constructive receipt and therefore does not endanger the tax advantage.

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