Oil and Gas lease bonus payments, how to structure them for tax savings

In this weeks edition of Speaking of Settlements we look at one of the more innovative programs in the non-qualified market and that is the structuring of oil and gas lease bonus payments through the use of a structured settlement annuity device.

As many people in the structured settlement profession know, Allstate Financial has been a consistent innovator in the area of structured taxable damage awards, as well as structuring the sales of appreciated real estate through their structured sales program. They continue their progressive ways with the announced ability to now structure oil and gas lease bonus payments, allowing people who are leasing their land for oil and gas drilling to defer bonus payments into future years tax returns.

Oil and Gas lease bonus payments, how to structure them for tax savings

The reason this is so important and valuable is that the bonus payment is on top of the annual or quarterly lease payments and is typically a one time bonus up front. By being able to move those dollars into future years, you are able to spread the tax hit over time, earn interest on the funds while deferring, guarantee payments on a fixed schedule and ideally receive them when you are in a lower tax bracket or have other off setting deductions. Of course, on top of the tax benefits, many people just find the idea of being able to secure future payments with the bonus funds to simply be prudent financial planning and want to take advantage of that option now.

To learn more about the Allstate Financial Oil and Gas leasing bonus program, you can go to my firms website at www.wahlstromandassociates.com.

Structured sales and farm property, the boom in farm land revives a great planning tool for farmers

In this weeks edition of Speaking of Settlements, I look at the renewed interest by my farmers in using structured sales to spread out the tax hit and guarantee cash flow on the sale of their farm land. I also look at the recent surge of farmers who are leasing land to oil companies due to the discovery of shale under their property and the ability to collect oil and gas leasing bonus payments that can be structured as well.

The use of the structured sale has been on the back burner for several years now, largely as a result of the collapse of the real estate market and financing options for both buyers and sellers. It was a product originally conceived and used successfully for several years when people who own highly appreciated, low cost basis real estate, want to cash out and sell, but don’t want to write huge tax checks to the state and federal government on the capital gain. While we can all agree it makes a lot more sense to use 100% of your net sale proceeds and spread the money out over years, many people are still wondering what a structured sale is, and why it makes sense for those selling farm property.

In almost every case that has been referred to my office over the last year in which farm land is being sold or is under consideration for sale, it is a family owned farm that has almost no cost basis and close to 100% of the sale is going to be subject to capital gains tax. While the tax is a big issue, what is a larger problem is that with the sale of the farm, most farmers or their families are also losing their source of annual income, something they need to sustain through the investment income on the sale proceeds.

The structured sale allows them to design guaranteed payments, on a schedule that makes sense for their situation, paid monthly, annually and for years if not decades into the future. Combined with spreading out the tax hit, putting 100% of the net proceeds to work and creating a guaranteed cash flow and payment stream that provides income to the family, you can see why this is becoming increasingly popular during these uncertain market conditions.

If you want to learn more about structured sales and it’s use when selling farm property, contact my office through our web site at www.wahlstromandassociates.com and we will be happy to assist you.

S&P down grades five major life insurance companies to AA+ from AAA status

In what we can assume will be the first of several down grades for major life insurance companies in the structured settlement markets, S&P quickly down graded five premier life insurance companies yesterday from AAA to AA+.  The companies who were impacted by this are:

New York Life was dropped to a AA+

Northwestern Mutual Life Insurance was dropped to a AA+

USAA was dropped to a AA+.

Knights of Columbus was dropped to a AA+.

Teachers Insurance and Annuity. TIAA, was dropped to a AA+.

So what exactly does this mean and what are the implications for the life insurance industry and structured settlements in general? I address some of the concerns in this weeks video broadcast of Speaking of Settlements but in short the impact should be minimal other than to the pride of the companies listed above.

It is a sickening process in that each of those five firms went to great lengths over the last three years to do the things needed to retain a coveted AAA rating and in some cases make it a key element of their marketing campaigns, only to suffer this immediate down grade as a result of the fact that they hold a large portion of US government obligations precisely because they are so conservative and careful.

As I have been saying for years, our industry uses these ratings at our peril as the rating firms really could care less about the impact of their down grades on companies marketing and reputations and the idea of using S&P as a rating agency for life markets has been a bad idea for decades. I have always preferred AM Best as the best source of information on insurance company standards and solvency and they are not as reactive as the other firms.

Enjoy today’s video on the S&P down grade and it’s impact on the insurance and structured settlement profession, but it would be wise to stop using rating agency rankings as some sort of validation of safety and instead do your own research on markets and firm to match the right company to the right risk.

Allstate rolls out a structured sales product on oil & Gas Lease bonus payments

In yet another innovative move by Allstate Financial and their structured settlement division, it was announced this week that Allstate would be rolling out yet another “non-qualified” annuity funding vehicle that would allow for the structuring of oil and gas lease bonus payments.

While seemingly obscure to those who do not have land upon which they lease oil or gas rights to drilling or production companies, this market has substantial potential given the wide number of privately held or closely held businesses, as well as individuals, who might be interested in spreading the bonus payments they get in some years over a several year period. The fact is in an era of rising oil and gas prices, these lease bonus payments can be substantial and many owners of the leases would prefer to spread those big bonus years where oil and gas prices spike, over several years if possible, or even defer it far into the future when the oil or gas lease might be played out or sold. This is going to be a really solid planning tool in this niche market.

This particular product has one key feature in that there is a revenue ruling, RR 68-606, which specifically addresses the tax treatment of this technique, something that has inhibited the use of structured sales and income deferral strategies in the areas such as celebrity endorsements and divorce settlements.

Learn more about this announcement by viewing this weeks edition of Speaking of Settlements, where Mark Wahlstrom discusses some of the basic issues and for whom this product or strategy might be suitable. 

Mark Wahlstrom on Allstate Oil and Gas lease Bonus, structured settlement program

You can learn more about how the new Allstate Structured Settlement product for Oil and Gas Lease Bonus payments works by contacting Mark Wahlstrom at Wahlstrom & Associates in Scottsdale, AZ

Stan Harlan, Iowa structured settlement broker, on Speaking of Settlements

In this introductory video, Stan Harlan of Summit Settlements joins Scott Drake on Speaking of Settlements to discuss his 30 year career in structured settlements, settlement planning and running one of the nations leading agencys for structured settlements.

Based out of Des Moines, Iowa, Summit Settlements is Iowa's top resource for structured settlements, settlement planning and annuity products and services for trial lawyers, claims professionals, self insureds and others who wish to use structured settlements to resolve difficult personal injury claims.

Stan Harlan's back ground and expertise in investments, annuities and settlement planning is available for anyone based in Iowa, with the cutting edge experience to handle all types of settlement planning issues.

Be sure to watch this initial video and learn how you can get your questions about structured settlements answered by the leading expert in the state of Iowa, Stan Harlan.

Marvin Smith, structured settlement broker and expert for Utah, featured on speaking of settlements

From the very inception of the structured settlement profession in the late 1970's, one of the leaders in designing, negotiating and implementing structured settlements in the Rocky Mountain and Utah region has be Marvin "Marv" Smith. A member of both major professional settlement organizations, NSSTA and SSP, an almost 20 year relationship with Summit Settlements and an advocate for personal injury victims and trial lawyers through out the Rocky Mountain and Utah region, few professionals have the years of experience and knowledge that Marv Smith provides.  The Structured Settlement Expert Directory is pleased to have Marvin Smith as our listed expert for the State of Utah.Marvin Smith, Utah Structured Settlement Expert

One of the unique aspects of Marv's practice and service to those looking for structured settlements in the state of Utah is his willingness to meet in person with trial lawyers, injury victims or the families of those hurt or killed in an accident to review in detail their options regarding their personal injury settlement. Few areas of finance require a companion knowledge of the insurance claims process, something that Marv provides given his decades of work in and around the claim community.

Marv Smith is available for consultation on all aspects of structured settlements, structured legal fee, multi-claimant cases and taxable damage settlements, which may also be structured if designed by a professional with expertise in that area. You may find his information and contact profile here on The Structured Settlement Expert Directory.

Please watch and enjoy this video of Utah's leading structured settlement expert, Marvin Smith, who has for years worked with lawyers, insurance companies, self insureds and plaintiffs in every kind of case. If you are searching for information on what a structured settlement is, or simply looking to speak with a local expert or broker in the Utah area, Marv Smith can assist you.