matrimonial/division of assets
Structured settlement annuities are often used in non-physical injury cases, most especially in divorce settlements. When involved in non-physical injury litigation, a non-qualified structured settlement can provide assurance to others and the court that payments are guaranteed to be made on time and in the proper amount. Situations involving fluctuating incomes due to bonuses, profit sharing agreements, and commissions can create problems or lapses in payments due in accordance with a divorce decree. A non-qualified structured settlement annuity can be a solution to this problem. The spouse who is set to receive future non-qualified annuity payments is not required to report that an annuity was secured to make these payments nor report to the IRS that these payments are being made at all until money is received. That said, it important to understand that the interest accrued on an annuity purchased to secure future divorce obligations should be reported to the IRS and paid by either the spouse who purchases the annuity or the spouse entitled to receive the annuity payment based upon the terms of the settlement agreement.
The settlement agreement and final divorce decree are the conduits for creating single or multiple income streams to provide short term payments, lifetime income streams, college tuition payments, retirement assets or security for other future needs as a part of a division of assets. Traditionally, the spouse entitled to receive future payments pursuant to a divorce decree must rely upon an ex-spouse's promise to pay. This need not be the case anymore, as a non-qualified structured annuity can eliminate the stress and fear of an ex-spouse’s inability to satisfy their obligation due to death, bankruptcy, becoming disabled, and/or losing his or her job or business.
Advantages of a Non-Qualified Structure
For the Receiving Spouse:
- Secure, guaranteed, customizable, and does away with broken promises
- Is not subject to former spouse's general creditors
- Provides for some level of asset protection, depending upon the state of residence
For the Paying Spouse:
- Ends the specific obligation to—as well as the need to interface with—the former spouse
- Savings associated with the discounted cost securing future payments today
- Peace of mind in knowing that your future financial obligations are paid in full