Financial Transaction: Structured Settlement

Financial Transaction: Structured Settlement Stage 1: Periodic Payment Structured Settlement: History Stage 2: Structured Settlement 1982 2001 Stage 3: Settlement Planning Lump Sum • Single Recovery Rule • Workers Comp • No-fault Insurance • Annuity Financing • Annuities Trusts Custodial Accounts • Blends • Assignments • Transfers • Commutations Annuity Financing Qualified Assignments 468B Funds Special Needs Trusts • Transfers Key Influences 1965 Social Medicare Security Omnibus Security Act Reconciliation 2001 CMS Medicare Secondary Payer Rule policy memos 2001 1980 1996 Medicaid HIPAA Omnibus Reconciliation 1993 Social Act Budget Act 1977 Structured Periodic 1986 1988 Tax TAMRA 1996 Small 1982 2004 Victims s of Terrorism Tax Relief American Jobs Creation settlement Payment Reform revenue Settlement Act rulings 1980 Model Periodic Business Job Protection Act 1999 Taxation Act Act Act 1990 Uniform Periodic Payment of Judgments Act 2004 NAIC Model Structured Unfair Trade Compensation Disclosure 1984 2000 2001 CA Supreme Revised Model State NAIC Model UCC Article 9 State Court Legislation Payment of Approves Judgments Act MICRA Settlement Practices Protection Act Act Amendment 1980 Interest 1985 NSSTA 1991 1st Executive Weil Life 2001 SSP Founded 2005 Macomber NAMSAP Founded 1989 1992 1999 Gramm- Leach- 2004 Other Rates Peak Founded Transfer Lawsuit V. Insolvency Bliley Act Travelers Structured Settlement : Transaction Diagram Key: Interested Parties Paye Claimant/Beneficiary Primary Market Settlement Release Secondary Market Agreement Promise to Pay $ Periodic Payments Defendant Assignment Alternative Payees MSA Payments 468B Fund MSA Arrangement Transfer Transfer Request Approval e Trust Payments Court Settlement Preservation Trust Transfer Lump Sum Payment Trust Funding Company Transferee Notification Payments Special Needs Trust Non-qualified Payments Structured Corpu Death Settlement Assignee State Annuity Ownership/ Obligation to Pay Annuity Issuer Non-Profit Post-transfer Annuity Payments POSITIVES Annuity Payments - 100% Income Tax Free - May be established for various timeframes - Provides ongoing income to meet living expenses STRUCTURED SETTLEMENTS TWENTY DO - May be structured to provide additional payments for anticipated needs - May be structured to provide payments to a beneficiary - Large sum of money is immediately available LUMP SUM PAYMENT - Assets can be invested to earn potentially higher returns Issue/Concern Structured Settlement Variable Annuity What types of securities/insurance products support the payments? A variable annuity contract issued by a life insurance company. Consists of two stages: accumulation and payout. Assets may be invested in variable income options and/or in fixed interest accounts to seek interest or capital appreciation. A fixed annuity contract issued by a life insurance company. Can this option provide a stable, lifetime income? Yes. Payments and distribution schedule are determined up front. Can provide a dependable, predictable income stream that you cannot outlive. No income until you select an annuitization (1.e., payout) option. Usually paid as a lump sum or an income stream of lifetime payments. Is there a guarantee with this option? If a variable payment is elected, the amount of the benefit will depend on underlying investment performance. If a fixed payment is elected the annuity issuer guarantees a monthly benefit amount as defined by contract terms. Yes. The annuity issuer guarantees payments as provided by the terms of the structured settlement agreement. Guarantee is based on the claims-paying ability of the issuer. What are the costs and fees No additional cost to annuitant. Costs may include front and back-end associated with this option? sales charges, mortality and expense charges, management fees, and other applicable expenses. A cost of living adjustment (COLA) feature is available that can help offset the effects of inflation. This option must be elected when the settlement is designed. Will this option keep pace with inflation? Return (and thus the amount available for payout) depends on the performance of underlying investments. Earnings accumulate tax-deferred during the accumulation phase. During the payout phase, payments consist of principal plus earnings. Liquidation of earnings is subject to ordinary income tax and if taken prior to age 59%2, a ten- percent federal penalty may apply. What are the tax consequences? Income provided by a qualified structured settlement is TAX-FREE, provided the damages received as periodic income (other than punitive damages) are the result of personal physical injuries or physical illness or wrongful death. Is this option affected by market fluctuations? No. Benefit payments are determined and Yes. Investment performance will affect the payout amount. fixed. Most variable annuities provide for withdrawal of a specified amount free of charge. Withdrawals in excess of that amount may trigger surrender charges. Liquidation of earnings is subject to ordinary income tax and, if taken prior to age 59½, a ten-peroent federal penalty may apply. Can I make changes to this option after I select it? No. Payment amount and schedule are fixed and may not be changed or accelerated. Catalina Structured Funding, Inc. National Experts You Can Trust. Get More Cash, Faster... Guaranteed. ONEHUNDRED D OLLARS