Structured Settlement Terms

As a Structured Settlement Expert, it is crucial to be informed. A Structured Settlement Expert should also be up to date. Sometimes referred to as a structured settlement attorney, secondary market annuity expert or secondary market annuity expert. Here we freely give a glossary of terms frequently used in the transfer of a structured settlement. Being a Structured Settlement Expert comes from knowing how to understand how these terms relate to a specific transaction.

Structured Settlement Expert

Glossary of terms:

Accelerated Death Benefits  A benefit of some life insurance policies that provide payments to policyholders who have a long-term, catastrophic or terminal illness while the policyholder is alive. Accelerated death benefits provisions vary from insurance policy to the insurance policy and from company to company. Also, know as “living benefits.”

Accumulated Value  The full value of the annuity contract, principal plus gain.

Annuitant  The individual on whose life the annuity is based and generally the person receiving or entitled to the annuity payments.

Annuitization  When an annuity begins to pay out periodic income payments.

Annuity  A tax-deferred contract that can provide an income for a specified time period, such as a number of years or for the life of the individual.

Annuity Benefits  The guaranteed periodic payments that will be paid to the owner during the payout period.

Annuity Contract  The agreement between the customer and the insurance company that stipulates the features of the annuity and the responsibilities of each party.

Annuity deferral  A facility which allows you to delay buying an annuity if rates are low when you reach retirement age.

Annuity Issuer  The insurance company that issues the annuity.

Annuity Owner  The person or people who make decisions about an annuity. The owner or owners have the rights to make withdrawals, surrender or change the designated beneficiary or other terms of the contract.

Annuity Purchaser A company or individual that purchases annuities for investments as a way to create wealth over time.

Annuity Payment Period  The period of time that the annuity payments are designated to last.

Annuity Start Date  The date designated for annuity payments to begin.

Assignment (of Policy)  The legal transfer of one person’s interest in an annuity to another.

Bankruptcy  A federally regulated process whereby individuals or entities that have liabilities greater than assets seek judicial protection from creditors.

Bankruptcy – Chapter 13  A type of bankruptcy in which an individual keeps some of his or her assets and pays creditors according to an approved plan.

Bankruptcy – Chapter 7  A type of bankruptcy in which an individual’s debt is eliminated, but his or her assets are liquidated to repay creditors.

Bench Trial  A trial where the judge serves as factfinder rather than the jury.

Beneficiary  The person(s) or entity who receives the death benefit when the insured dies.

Cash Surrender Value  The amount that the owner of a cash value life insurance policy is entitled to receive upon surrendering the policy to the issuing insurance company. This amount may be reduced by surrender charges or policy loans, if applicable. Also may be known as the policy’s “surrender value.”

Cash Value  The cash amount payable to a life insurance policy owner in the event of termination or cancelation of the policy before its maturity or the insured event.

Child Support  Court-ordered support paid by one spouse to the other who has custody of the children after the parents are separated.

Child Support Payoff Letter  A letter identifying the amount necessary to pay off outstanding support obligations.

Court Order  A legally binding ruling issued by a judge or properly empowered administrative officer.

Court Order Attorney  The attorney that files a petition for court approval of an annuity transfer.

Death Benefit  The amount to be paid out to the beneficiary(ies) when the person insured under the policy dies.

Deduction  An expense allowed by the Internal Revenue Service. This is deducted from income to establish taxable income.

Defendant  In civil cases, a person who is served with court papers by another aggrieved person.

Deferred Annuity  An annuity in which payments begin at a stated time in the future.

Deferred Income Annuity  A type of income annuity which enables you to purchase, with after-tax cash today, a defined amount of income to start at a future date. The annuitant benefits from tax deferral on the interest earned on the consideration placed in the deferred income annuity.

Dependents  A person dependent upon a contributor, including a domestic partner, natural children, stepchildren, legally adopted and children for whom the contributor is the legal guardian under the age of twenty years.

Discount Rate  The interest rate used to compute the present value of future cash flows.

Discounted Present Value  The net present value of future payments, this is determined by discounting the future payments to the present.

Divorce Decree  A divorce decree is a ruling that summarizes the rights and responsibilities of the divorced parties. It’s a document that states the basic information regarding the divorce, case number, parties, date of divorce, terms the parties have agreed upon.

Escrow  An arrangement typically holding money or documents in trust “in escrow” by a trusted party until certain agreed conditions are met.

Estate  A person’s property (including money), entitlements and obligations. It is often used in the context of will and probate. It may also be used in reference to real estate or in a bankruptcy.

Estate Planning  Preparing for the orderly administration, management and distribution of a person’s assets and liabilities during one’s lifetime and upon death. This can include a will, trusts, and insurance.

Estate Taxes  A progressive tax assessed on the transfer of a deceased’s asset to his or her heirs.

Estoppel Attorney  This term is used to describe the attorney who represents the client or seller in a financial transaction. Equivalent to Independent Professional Advisor.

Face Amount  The amount that will be paid in case of death (life insurance) or at maturity (bond or other investment).

Face Value  See: Face Amount

Federal Tax Liens  A claim against property for the amount of the owner’s tax obligations owed to the federal government.

Financial Affidavit  A sworn statement of income, expenses, property (assets) and debts (liabilities).

Fixed Annuity  An annuity in which the insurance company invests the assets on behalf of the contract holder and pays a fixed rate of interest.

Flexible Premium Deferred Annuity  An annuity that accepts additional premium payments prior to annuitization.

Full Purchase  When a client sells their entire annuity or structured settlement.

Funds Transfer  Money that is withdrawn from one account and placed into a different account.

Gift Tax  Tax imposed by federal or state government on an asset transferred as a gift to individuals.

Gross Advance Amount  The sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions to be made from such consideration.

Gross Purchase Price  See: Gross Advance Amount

Guaranteed Benefit  See: Guaranteed Payments

Guaranteed Payments  Payments made regardless of whether the annuitant is living or deceased.

Guardian  A person who has the power and duty to take care of another person and/or to manage the property and rights of another person, who is either a minor or considered incapable of taking care of his or her personal affairs.

Immediate Annuity  An annuity in which the annuity payout period begins immediately or within one year of the purchase date.

Insurance Settlement  The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.

Insured  The person who is insured under the policy.

Insurer  Party that provides insurance coverage typically through a contract of insurance.

Interested Parties  The payee, any beneficiary designated under the annuity contract to receive payments following the payee’s death and any other party that has continuing rights or obligations under the contract.

Joint Annuitants  Two or more recipients of the same monthly benefit payment or a joint and survivor option.

Key Employee/Key Man Insurance  Protection of a business against financial loss caused by the death or disability of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.

Lapse  The termination of an insurance policy when an individual fails to pay his or her premiums on time. If you allow a policy to lapse, you typically cannot collect any cash surrender value that would otherwise be available.

Legal Representative  A person acting for and legally authorized to execute a contract for an individual.

Legal Representative  A person acting for and legally authorized to execute a contract for an individual.

Life Expectancy  The number of years a person is expected to live based on a the average of a number of factors.

Life Only Payments  See: Lifetime Payments

Life Settlement  The sale of a life insurance policy by the policy owner covering a person (the insured). It allows the seller of an unneeded or unwanted life policy to obtain more funds than selling (cash surrendering) the policy back to the insurance company.

Lifetime Payments  An annuity income option that makes monthly payments of equal amounts for the remainder of the annuitant’s life, regardless of the length of time.

Liquidity  The ability to have ready access to invested money.

Lump Sum  A sum of money paid in a single installment.

Lump Sum Annuity  An annuity designed to make a single payment on a specified future date or series of balloon payments on specified future dates.

Lump Sum Payment  A sum of money paid in a single installment.

Net Advance Amount  The sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement payment rights after any reductions for transfer expenses or other deductions to be made from such consideration.

Net Death Benefit  The benefit amount specified in an insurance policy minus any unpaid premiums that are due and outstanding loan balances or other withdrawals.

Net Present Value  The amount of cash today that is the equivalent in value to cash to be received in the future based on a specific discount rate.

Net Purchase Price  See: Net Advance Amount

Net Value  The value of an estate after all debts have been paid.

Non-Qualified Annuity  An annuity contract you buy individually rather than as part of an employer-sponsored qualified retirement plan. The premium is paid with after-tax dollars.

Notarize  The act of a notary witnessing a person signing a document. Many legal documents require a notarized signature.

Partial Purchase  When a client sells only a portion of their structured settlement or annuity.

Payee  The party to whom money is paid. Usually the payee is the person who the annuity issuer makes annuity payments payable to.

Payment Stream  Payments received periodically from a structured settlement or an annuity.

Period Certain Payments  The period that structured settlement or income annuity payments will be paid whether or not the annuitant dies prior to the completion of the period.

Periodic Payments  Payments that are paid or received regularly, typically on a monthly or quarterly basis.

Personal Injury  An injury to a person’s body or mind, as the result of an accident.

Plaintiff  The aggrieved party in a civil or criminal case who bills papers against the defendant in court.

Premium Payments  The periodic payment required to keep a life insurance policy in force.

Premiums  The periodic payment required to keep a life insurance policy in force.

Premiums Tax  A tax assessed by certain states on the premiums paid into an annuity investment.

Present Value  The current worth of an amount to be received in the future. In the case of an annuity, present value is the current worth of a series of equal payments to be made in the future.

Purchase Price  This is the amount that the purchaser is offering to pay for the asset.

Qualified Assignment  An assignment of the obligation to make future settlement payments which satisfies the requirements of Internal Revenue Code for favorable tax treatment of a structured settlement. Typically, the insurance carrier for the defendant assigns its obligation to make the future payments called for in the settlement agreement to an assignee which takes on such obligations, often through the purchase of an annuity.

Quote  A stated price for assets or services.

Responsible Administrative Authority  With respect to a structured settlement, any governmental authority vested by law with exclusive jurisdiction over the settled claim resolved by such structured settlement.

Separation Agreement  A contract between a husband and a wife, signed when a legal separation has been granted or when they have agreed to live apart in contemplation of a divorce. The agreement is designed to settle any property, debt, alimony, child custody, visitation, insurance, tax, and child support issues that may lie between them.

Settled Claim  When the original tort claim or workers’ compensation claim is resolved by a structured settlement.

Settlement Agreement  The arrangement made between an insurer and a policy owner (or beneficiary) concerning the manner in which the insurer will pay the policy proceeds to the beneficiary.

Settlement Date  The date agreed on for transferring funds to complete a transaction.

Special Power of Attorney  Gives another person legal authority to act on your behalf under defined circumstances.

Spouse  A person’s partner in marriage.

State Tax Lien  A claim against property for the amount of the owner’s unpaid state taxes.

Stipulation  An agreement or concession made by parties in a judicial proceeding (or by their attorneys) relating to the business before the court.

Stream of Payments  Payments received periodically from a structured settlement or an annuity.

Structured Settlement  Settlement of claims or lawsuits by means of periodic payments.

Structured Settlement Agreement  The agreement, judgment, stipulation or release embodying the terms of a structured settlement, including the rights of the payee to receive periodic payments.

Structured Settlement Obligor  The party that has the continuing periodic payment obligation to the payee under a structured settlement agreement or a qualified assignment agreement.

Surrender Charges  Penalties assessed for withdrawals made in excess of the free withdrawal privilege during the surrender charge period of an annuity contract.

Surrender Schedule  The number of years and percentage amount of surrender charges applied to withdrawals from an annuity contract or life insurance policy.

Survivorship Life Insurance  A method of life insurance coverage that pays a benefit upon the death of the last surviving insured person. Also known as second-to-die or last-to-die.

Tax Deferral  A postponement of current income taxes until a later date.

Tax-Deferred Interest  Interest that is not currently subject to income taxation.

Term Certain  See: Period Certain Payments

Term Life Insurance  An insurance policy in effect for a specific period of time.

Term of Policy  Period for which the policy runs. For term insurance, this is the length of time the death-benefit protection is available.

Terms of the Structured Settlement  Includes, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order or approval of any court or responsible administrative authority or government authority authorizing or approving such structured settlement.

Tort  A body of the law which permits an injured person to recover compensation from the injuring party. When one person injures another, either intentionally or by negligence, a court may award money damages to the injured party so that they will suffer the pain caused by their action.

Underwriter  The insurance company receiving premiums and accepting responsibility for fulfilling the policy contract.

Universal Life Insurance  A life insurance policy that combines term insurance with a side investment fund.

Variable Annuity  The combination of an annuity contract with an investment company account. J.G. Wentworth does not purchase variable annuities.

Variable Life Insurance  This type of life insurance lets individuals invest their cash reserves in securities, such as stock and bond portfolios, that may offer fluctuating rates of return. J.G. Wentworth does not purchase variable insurance policies.

Viaticate  To sell a life insurance policy.

W-9 Form  A tax form for the United States which certifies an individual’s taxpayer identification number.

Workers Compensation  Compensation that covers the medical expenses and lost income of employees if they are hurt in the course of doing work-related activities.

Wrongful Death  When a person’s death is caused by the negligent or intentional act of a wrongdoer.

Independent Professional Advice is always strongly recommended. Just having a copy of the law and the definitions of a few key terms is not enough, you must possess a working knowledge of application.

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