The typical structured settlements arise and are structured, for the example, and injured party (the claimant) settles a tort suit with the defendant pursuant to a settlement agreement that provided by structured settlement company. The defendants, or the property insurance company, thus find itself with the long-term payment obligation to the claimant. It either purchases an annuity from a life insurance company.
In an unassigned case, the defendant in structured settlement company insurer retains the periodic obligation and funds it by purchasing an annuity from a life insurance company, thereby offsetting its obligation with a matching asset. The payment stream purchase under the annuity matches exactly, in timing and amounts, the periodic payments agreed to into the settlement agreement that provide by the structured settlement company. An assignment is said to be qualified if it satisfies the criteria set forth. A qualified assignment is also advantageous for the claimant as it will not have to rely on the continued credit of the dependant or property/casualty company as a general creditor of the structured settlement company.
The assignment company is the third party, will require the dependant or property/casualty company to pay it an amount sufficient to enable it to buy an annuity that will fund its newly accepted periodic payment to the structured settlement company. The method of substituting the obligor is desirable for dependants or property/casualty Company that do not want to retain periodic payments on their books. Qualification of the assignment is important to assignment companies because without it the amount they receive to induce them to accept periodic payment obligations would be considered income for federal income tax purposes.
To fund this obligation, the property/casualty insurer generally takes one of two typical approaches; it either purchases an annuity from a life insurance from the structured settlement company or it assigns it periodic payment obligation. In an unassigned case, the defendant or property/casualty company does not wish to retain the long-term periodic payment obligation on its books. Accordingly, the defendant or property/casualty company insurer transfers the obligation, trough the legal device called a qualified assignment that given by the structured settlement company. If any periodic payments are life-contingent, then the claimant (or whoever is determined to be the measuring life) is named as the annuitant or measuring life under the annuity. The structured settlement company also provides the qualified assignment to satisfy their client and to proof to their client that they are the trusted structure settlement company.
