I'm pleased to share with you today news of a brand new structured settlement option being introduced by Pacific Life, one of the leaders in the structured settlement annuity marketplace.
Almost as much fun to say as The International Silver String Submarine Band,
Pacific Life's Structured Settlement Indexed Linked Annuity Payment Adjustment Rider is now available for any claim currently eligible for structured settlements.
But before delving into this new structured settlement option itself, a little background on Indexed Annuities in general seems in order.Fixed Indexed Annuities
For several years now, our firm has been tracking the growing popularity of something called Indexed Annuities - a hybrid life insurance annuity product that combines the security features of traditional fixed annuities with an element of market upside potential.
Indexed Annuities have been particularly popular with the baby boomer set because many who still have retirement savings intact don't want to risk another market crash; however, they fear current fixed interest rates are "too low" for a long term commitment.
For them, Indexed Annuities represent the perfect compromise and we have been pleased to be in a position to present clients with this retirement annuity alternative in addition to the traditional fixed retirement annuities we offer.
Many clients choose Indexed Annuities because of a lifetime income rider which allows them, at some point in the future, to convert their accumulated funds to guaranteed cash flow that can never be outlived.
So how popular are these things?
Consumers plunked down a not-insignificant $39.3 billion last year to secure their futures with this innovative product that provides them with a minimum amount of guaranteed interest but, because it is also linked to a market index (hence the name), allows them to share in some, but not all, of the market upside should the index rise.
Indexed Annuities aren't for everybody and the inner workings of their design make them a little more challenging to understand. But for the right person in the right situation, they can be a perfect complement to successful retirement planning.Structured Settlements
Since Pacific Life already offered regular Fixed Indexed Annuities to the broader annuity brokerage community for retirement planning purposes, adding an indexed feature to its complement of structured settlement offerings seemed only natural.
In development for more than two years, Pacific Life welcomed news this past Monday that the Internal Revenue Service issued a favorable private letter ruling (PLR) maintaining that the income tax-free nature currently accorded non-indexed structured settlements under IRC � 104(a)(2) would be preserved for the taxpayer when using their new product offering.
As soon as the PLR is published, we will feature it on The Finn Blog
so please check back in the near future. (NOTE: PLRs may not be cited as precedent
Meanwhile, to learn more about the details of this exciting new option for personal, physical injury claims with structured settlement potential, just . . .
[Click Here] . . . to view the Pacific Life brochure on the subject.
As you might expect, pricing for this option will vary depending on a number of factors including age, deferral, duration, payout pattern, etc. Quoting officially begins tomorrow (April 17, 2014) so don't hesitate to ask us about this alternative next time you need structured settlement assistance.
For people who fear locking into a structured settlement today because they believe fixed interest rates are too low and they can do better on their own, this may be the perfect solution.
This rider solves that problem by preserving important features of traditional structured settlements - most notably their security and their income tax-free nature - while simultaneously providing a reassuring sense of confidence that clients won't suffer "buyer's remorse" should the market perform well in the future.Structured Attorney Fees
Just a quick word to say we expect this option to draw quite a bit of interest from contingency fee-based plaintiff attorneys who structure their fees.
Long a staple of the plaintiff bar, structured attorney fees
have helped many successful plaintiff attorneys effectively plan for retirement or transition into second careers as mediators, judges and a host of other professions and passions while better managing their tax obligations along the way.
Deferred attorney fees are still fully taxable; however, by adding a market component to income that's already being deferred on a tax-advantaged basis into a future tax year, attorneys can participate in the market with pre-tax dollars while eliminating their market downside risk.
Many attorneys already invest in the market with after-tax funds anyway so the ability to do so on a pre-tax basis should be very attractive to them.In Conclusion
Traditional structured settlements are still very much alive and will always be the appropriate choice for a majority of our clients. But we are definitely excited by the possibilities this new indexed option brings and are eager to see how our clients respond to it.
Congratulations to everybody at Pacific Life for their commitment to the structured settlements, claims and legal communities by bringing this creative new product to life.
Questions? We're here to help so please don't hesitate to reach out to us anytime we can assist you with your structured settlement, structured attorney fee and/or retirement annuity planning needs.
Thank you for the continued opportunity to be of service and all best wishes for continued success in your personal and professional lives.
Dan Finn, CPCU, CSSC
Certified Structured Settlement Consultant
NOTE: This newsletter is presented for educational purposes only and should not be construed as tax or legal advice. All rights reserved.