What is secured creditor status in a structure?
It is an option offered by most assignment companies to give the plaintiff a security interest in the annuity contract, no longer being a general creditor of the assignee. In the event the assignee defaults on its payments, the plaintiff can perfect ownership in the annuity contract. However, if ownership is taken, all future growth of the annuity is a taxable event. It is a better option if the annuity issuer will guarantee the obligations of the assignee (shell company). In this way, the annuity company subsidizes the assignee to cure the insolvency. Ownership of the annuity is retained by the assignee, and the plaintiff continues to receive tax-free growth. Sometimes both options are offered, usually at no extra cost to the releasee.
