Our Favorite Things – April 6, 2012
Happy Friday, Happy Passover, Happy Easter and Happy Weekend to everyone! Here’s Our Favorite Things this week. Enjoy!
- “Taxation with representation ain't so hot either” – The real truth about taxes and your payment options.
- Financial Literacy Month – 5 Tips for improving your finances.
- Help Wanted – These companies have jobs but can’t find people who want them.
- More than just coffee – Starbucks wristbands have raised more than $7 million and the program will create approximately 2,300 jobs.
- It’s taxing – The best and worst places to live based upon taxes.
Court approval: Why do I need it?
When a potential client contacts us regarding selling their structured settlement annuity for a cash lump sum two questions always seem be asked. Why does it have to be approved by a judge and do I need to appear?
The reason selling your future payments requires court approval is to protect your best interest. Since you have to look out for number one, wouldn’t it make sense that you would want to be there to explain why you need the money to the judge?
Before 1970, when a lawsuit was settled the injured party would receive a cash lump sum. Then there was a case in Canada and Europe that resulted in many catastrophically injured people. These individuals needed their settlements to last throughout their lifetime. For over 20 years, the federal government has been encouraging the use of structured settlements. Originally used to pay out large settlements in tragic cases, they are now being used to fund cases as small as $5,000.
In 1982, a bipartisan coalition of legislators in Congress came together to pass legislation that amended the federal tax code by enacting The Periodic Payment Settlement Act of 1982 (Public Law 97-473). This act specifies tax rules to encourage the use of structured settlements to resolve physical injury cases. Section 104(a)(2) of the Internal Revenue Code offers tax advantages to the plaintiff by guaranteeing that the full amount of the structured settlement payments is tax-free to the victim. On the contrary, the investment earnings on a lump sum payment are usually fully taxable.
In order to protect the rights of the annuitant, forty-six states and the federal government have enacted additional consumer protection statutes that establish strict conditions when an annuitant sells some or all of their future payments. Under the federal law, court oversight and approval is required for individuals who chose to sell payments from a structured settlement to a third-party company. The details of the statues vary by state but the courts approval is necessary to protect the annuitant and to ensure that the annuitant is receiving a fair amount for their payments.
Top 5 things to do with your tax return
In 2011, the average federal income tax refund was $2,985 and two-thirds of taxpayers are expecting a tax refund this year. While some individuals will use the money for every day purchases, vacations or big ticket items, here’s a list of more frugal things to do with your money.
- Pay off debt – This one is obvious but paying off your high interest debt can save you money and give you piece of mind.
- Start an emergency fund – Avoid getting in debt by create an account specifically for emergencies that crop up such as home or car repairs, job loss and vet visits.
- Fund your retirement – The longer you contribute money into IRA accounts, the more compound interest you can accumulate.
- Save for the medium term – Save money for future purchases such as a newer car or new hot water heater.
- Start a 529 account – By contributing $2,985 into a 529 account for your child and it grew at a rate of 6.5% annually; you would have about $9,587 after 18 years.
If you are not receiving a tax refund this year or you owe taxes there are still ways to pay off your debt as well as fund your savings. By selling some of your future periodic payments for a cash lump sum to use to pay off your debts or taxes. Once your debts are paid off, use any remaining money to fund your emergency fund. In addition, the money that you previously allocated towards debt should be reallocated towards funding your various savings accounts. Need help figuring out your finances? Visit our helpful tools to get started.
Former insurance agent sentenced to 75 months for stealing $1.05 Million
Former independent insurance agent Jasmine Jamrus-Kassim was sentenced to 75 months in prison for stealing more than $1million in retirement funds from her elderly clients.
Kassim, who sold annuities for Bankers Life and Casualty Company, was arrested in March 2011 after investigators from the Washington Insurance Commissioner’s office found she had taken $1.05 million from 5 clients.
Kassim pleaded guilty in October 2011 to 21 counts of first-degree theft and one count of attempted first-degree theft. Other charges included a vulnerable victim aggravator since the five victims ranged in age from 74 to 90. This was the primary reason she received such a lengthy sentence.
Kassim’s clients cashed out large portions of their annuities thinking their money was being re-invested. She took the money and deposited into the personal accounts of her daughters as well as herself. According to Insurance Commissioner Mike Kreidler, Kassim stripped her victims of their entire life savings. Kreidler said that Kassim’s financial records indicated that she spent thousands of dollars on psychics, clothes, jewelry and trips.
Bankers Life and Casualty has agreed to repay the victims along with any tax penalties they incurred.
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