With the presidential election only a few weeks away, candidates are spending a lot of time and money to educate the public on their political agenda. Whoever is elected to the highest office in the nation, we can expect changes to occur in all areas of government. For NSSTA, tax reform is always an urgent issue. This is especially true in these times of large scale changes in our governing bodies. Protecting the income tax-free status of structured settlements is a priority that we focus on 365 days a year.
Structured settlements are used as part of a comprehensive settlement plan to provide claimants with secure, guaranteed payments over a period of time. The federal government encourages the use of structured settlements for injury victims and their families by allowing the payments to be income tax-free for the life of the annuity. This favorable tax treatment was put into place through the Periodic Payment Settlement Act of 1982 which created section 130 of the Internal Revenue Code (IRC). As an alternative to a single lump sum payment at the time of settlement, the purpose of offering periodic payments in the form of a structured settlement was to ensure that settlement money would last into the future and be available for income replacement, medical needs and personal expenses. Structured settlements give the injured the financial security they need to live their lives with dignity.
Newly elected officials and changes in power can result in a lot of new initiatives, including changes in the tax code. This is especially true in presidential election seasons. A new leader brings new agendas, goals and priorities. If you read the tax policies of our current presidential candidates, you won’t find any mention of IRC Sections 104(a) or 130 or the favorable tax policies in place for structured settlements. However, any tax reform platform can affect structures even if it’s not intentionally done. Often, candidates will discuss the idea of simplifying or removing sections of the tax code – we need to make every effort to ensure that IRC 104(a) and 130 are not affected by these changes and be vigilant about protecting the financial security of those that are receiving settlements for physical injury or illness in the future.
The best way to prevent changes to the current tax code is through education. We often discuss the ways that NSSTA members can educate elected officials, like writing to or visiting members of Congress and participating in NSSTA’s Take the Hill initiative. There are also broader efforts that can be made to bring awareness about the value of structured settlements as part of a comprehensive settlement plan. These include educating attorneys and judges on the value structured settlements bring to the settlement process, publishing blogs and articles about the benefits of structures and partnering with organizations that support injury victims and their families. For more information on current NSSTA efforts, please visit our website at www.nssta.com.