Revenue Ruling 79-220

IRS tax rule that conferred tax-free status for money received over time on account of physical injury or death

Reversionary Trust

A trust that includes a provision for the return of remaining trust assets at the conclusion of its term, usually upon the death of the trust’s beneficiary.

Section 104(a)(1)

Internal Revenue Service Code section excluding from income taxes payments received as a lump sum or periodic payments, for injuries or death arising out of a workers’ compensation claim.

Section 104(a)(2)

Internal Revenue Service Code section excluding from income taxes payments received as a lump sum or periodic payments, for injuries or death arising out of a liability claim.

Section 130

Internal Revenue Service Code section allowing qualified assignments, the transfer of obligations to make future income tax-free payments for damages on account of physical injury or sickness.

Settlement Agreement

Legal document executed by all parties of a lawsuit or claim stating case facts and terms by which plaintiff releases the defendant. Payments made by defendant, purchase of annuity and consent language for the assignment may appear within the document as well.

Single Premium Deferred Annuity

Annuity purchased for a single premium with a payout at a later date

Structured Settlement

A settlement of a claim or lawsuit with future periodic payments, usually funded with an annuity.

Workers’ Compensation Claim

A claim against an employer for an injury of death that occurred on the job.

Assignee

A person or entity to whom legal liability is transferred for an obligation.