Who must own the funding asset?
The defendant or the defendant’s insurer must own the annuity or bonds in accordance with IRC Section 104(a)(2) and Revenue Ruling 79-220 unless a “Qualified Assignment” is made. The purpose served by this ownership is to protect the plaintiff from the claim that he/she has constructive ownership of the assets, which produce the settlement payments. A finding of constructive ownership in the plaintiff would likely cause a portion of the settlement payments to be taxable to the plaintiff.
