At the end of last year, Robert Wood, noted tax attorney and frequent commentator on tax issues, wrote an article on insurance company commutations. Mr. Wood’s article called into question the recent practice of a small number of structured settlement annuity companies who have begun offering annuitants a commutation option. Wood questions this practice and postulates that such commutations, no matter if guised as an IRC 5891 factoring transfer or not, may fall afoul of other applicable provisions of the tax code, most notably § 130. His conclusion is that there is a significant and perilous difference between factoring (by a 3^rd party) and acceleration or commutation.

I originally commented on this important article in my January 4, 2007 article “Insurance Company Commutations: The 3^rd Shoe Drops.” As a follow-up to that article, Mark Wahlstom of the Legal Broadcast Network and host of the Settlement Channel interviewed me.