Sure it's an arcane topic and a very niche product, but Allstate Financial continued its legacy of product innovation in structured settlements by rolling out in greater detail it's structured divorce annuity product. At first blush most structured settlement planners and divorce attorney's are going to get all excited about this, but at the end of the day it has some limitations in it's current form and format that will make it a strategic planning tool vs a broad market sales opportunity.
To work out these difference in what people think this is and what it actually will be used for I asked noted tax law attorney Rob Wood to join me on Settlement Expert TV. Our discussion focused on exactly what IRC section 1041 defines as taxable and non-taxable marital transfers, why alimony and child support payments may NOT be sued with this product, ( thus curtailing a huge segment of the potential market) as well as the importance of planners and divorce attorneys to clearly and carefully define in settlements what is marital assets, alimony and child supports.
Yet even with these limitations it is my opinion that there are some very important potential uses for this product in divorce settlements and planning. While it might seem a simple split of assets would make it unlikely that any party to the settlement might want to spread out payments over time as there is no clear tax benefit to doing so, the uses for deferred planning are not really tax driven but in this case event or personality driven.
For instance, imagine a spouse with a noted history of drug or alcohol abuse that it is agreed by all parties is not capable or responsible in handling assets. Or what if the dissolution is caused by a criminal event and you have a partner in prison? In this case you could push payments into the future. Or more likely, what if the spouse is looking to qualify for medicaid or other benefits and needs to be under an asset or income limit? Obviously each case is unique but there are many reason's I could see why this could be used and I expect it will get traction in the legal and planning community if the structured settlement profession makes an effort to train and educate family law and divorce attorney's as to it's best possible application.