Sovereign Funding Group Glossary of Terms
There can be, what seems like confusing terms, or legal jargon and technical verbiage used in settlement cases. Below we have prepared a glossary with the most used terms in structured settlements, annuity or lottery buy-outs.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Accumulated Value:
The accumulated value is defined as the full or “complete” value of an annuity contract, including the principal plus the gain.
Annuitant:
An annuitant is an individual whose life, or the annuity, is based on. The annuitant is typically the person which receives the annuity payment, or is entitled to the annuity payment.
Annuitization:
Is the time an annuity starts to pay out, usually over periodic monthly income payments or agreement.
Annuity:
An annuity is a tax-deferred contract. This contract provides a specific income, over a specified period of time. It can be spread out over any number of years. An annuity can also be spread out for the life of the receiving individual.
Annuity Benefits:
The annuity benefits offer guaranteed periodic, potentially monthly,payments. It is the specified guarantee which will be paid out to the owner during a period of time.
Annuity Contract:
The annuity contract or agreement between the insurance company and the customer. This contract stipulates the specific features of the annuity. It also stipulates the responsibilities of each party involved.
Annuity Deferral: A means which allows you to delay buying an annuity when rates are low when you reach retirement age.
Annuity Issuer:
An insurer that has issued a contract to fund periodic payments under a structured settlement.
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 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.
B
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 fact finder rather than the jury.
Beneficiary
The person(s) or entity who receives the death benefit when the insured dies.
C
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.
D
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: 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 present value of future payments determined by discounting such payments to the present using the most recently published Applicable Federal Rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service
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.
E
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.
Estoppel Attorney
This phrase is used to describe the attorney who represents the client or seller in a financial transaction. Equivalent to Independent Professional Advisor.
F
Face Amount
The amount that will be paid in case of death (life insurance) or at maturity (bond or other investment).
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.
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.
G
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
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
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.
I
Immediate Annuity
An annuity in which the annuity payout period begins immediately or within one year of the purchase date.
Independent Professional
Advice Advice of an attorney, certified public accountant, actuary or other licensed professional adviser
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.
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.
J
Joint Annuitants
Two or more recipients of the same monthly benefit payment or a joint and survivor option.
L
Legal Representative
A person acting for and legally authorized to execute a contract for an individual.
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.
N
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 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.
P
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.
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.
Q
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.
R
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.
S
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
An arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim or for periodic payments in settlement of a workers’ compensation claim
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.
T
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 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.
Transfer
Any sale, assignment, pledge, hypothecation or other alienation or encumbrance of structured settlement payment rights made by a payee for consideration; provided that the term “transfer” does not include the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution, in the absence of any action to redirect the structured settlement payments to such insured depository institution, or an agent or successor in interest thereof, or otherwise to enforce such blanket security interest against the structured settlement payment rights.
Transfer Agreement
The agreement providing for a transfer of structured settlement payment rights.
Transfer Expenses
All expenses of a transfer that are required under the transfer agreement to be paid by the payee or deducted from the gross advance amount, including, without limitation, court filing fees, attorneys fees, escrow fees, lien recordation fees, judgment and lien search fees, finders’ fees, commissions, and other payments to a broker or other intermediary; “transfer expenses” do not include preexisting obligations of the payee payable for the payee’s account from the proceeds of a transfer;
Transferee
A party acquiring or proposing to acquire structured settlement payment rights through a transfer
U
Underwriter
The insurance company receiving premiums and accepting responsibility for fulfilling the policy contract.
W
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.
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