What is a non-qualified assignment?
A non-qualified assignment (NQA) is an assignment of an obligation to pay money in the future (a structured plan) in cases that do not involve bodily injury. An NQA allows both claimants and their attorneys to spread income tax obligation over future years.
With a non-qualified assignment, a plaintiff can reap the benefits of financial planning by spreading their settlement over a long period of time instead of receiving it in one lump sum (which would be taxable). Not only does it offer the opportunity to receive payments designed to spread the tax burden, but by controlling the timing of the receipt of income, taxpayers can plan each and every year around the receipt of the additional income.
Types of cases to which an NQA may be applicable include (but are not limited to):
- Employment litigation, including wrongful termination, sexual harassment, discrimination, mental anguish, etc.
- Construction defects
- Whistleblower claims
- Contract disputes
- Punitive damages
- Environmental claims
- Directors and officers (D&O) claims
- Errors and omissions (E&O) claims
- Patents/intellectual property cases
- Attorney fees from with these cases
Why are some cases “non-qualified”?
Personal injury settlement payments are considered “qualified” because they are not subject to income tax. Qualified typically means that the process of setting up the structure qualifies under IRC section 130 and 104, and it is either a personal injury case or a workers compensation case. In short, tax exemption on earnings from a settlement requires some kind of bodily injury as defined by the IRS.
Why would someone want to set up an NQA?
The types of cases listed on the previous page result in a taxable settlement. A lump sum settlement guarantees the highest amount of tax and the least deductions in a single tax year. We experienced firsthand hundreds of business owners who recovered in the BP litigation and were happy to see their claim resolve but cringed when they netted out their award after attorney fees and taxes. Many of these types of recoveries only see 25% or so actually go to the plaintiff after fees and taxes.
Milestone Consulting is one of the only companies today to offer an independent, non-qualified solution. We offer non-qualified options for plaintiffs and attorneys to evaluate the amount of the settlement or fee they choose to take in the year of settlement. Deferring portions of the settlement through non-qualified assignments can reduce the overall tax bite, and gives litigants and their attorneys investment options (pre-tax).
How does Milestone Consulting do this? The Milestone team handles all of the setting up and managing of the non-qualified assignment. We do this through use of our additional entities, listed below.
Specialty Asset Holdings LLC (SAH)
SAH serves as the sole owner of any assets, investments and/or funds that may be invested to meet the periodic payment obligations. Based in Buffalo, New York, Specialty Asset Holdings serves as the exclusive agent for GPPAC and markets GPPAC products and services to plaintiff attorneys and business owners in the United States.
Global Periodic Payment Assignment Company (GPPAC)
GPPAC is an International Business Corporation and independent non-qualified assignment company domiciled in Barbados to serve the purpose of accepting periodic payment obligations.
We welcome you to contact Milestone for assistance or to learn more.