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Treasury Funded Structured Settlements

Treasury Funded Structured Settlements

What is a Treasury Strip?

STRIP stands for Separate Trading of Registered Interest and Principle of Securities. Treasury STRIPS are fixed-income securities which are investments that provide a return in the form of a fixed periodic payment. They result in an eventual return of principal payment when the STRIPS reach maturity. Various types of government securities can be used to fund structured settlements; however, Treasury STRIPS are the most popular security used because they are the most flexible. Treasury STRIPS are backed by the full faith of the United States government and were first introduced in 1985. There is minimal risk when it comes to Treasury STRIPS; even though bond prices fluctuate over time, when held to maturity, a U. S. Treasury security has never resulted in a loss of principal payment to the investor. U.S. Treasury securities, as sovereign debt obligations of the United States of America, are perceived by the international and domestic investor as one of the safest bond investments in the world.

How are Treasury Strips used to fund Structured Settlements?

A Qualified Funding Asset is defined under Section 130(d) of the Internal Revenue Code as an annuity contract or any obligation to the United States. The availability of Treasury STRIPS through the U.S. Government Securities marketplace allows the structured settlement provider to match government obligations to custom periodic payments schedules. This is known as a Treasury Funded Structured Settlement™ (TFSS). While lifetime payments are not available, long term payouts are common as STRIPS can pay out up to a 30-year maturity date. Since U.S. Treasury obligations are backed by the full faith of the United States they are a conservative choice when funding a structured settlement. This option could be ideal for claimants that are seeking the highest level of assurances for their future structured settlement payments. To fund the structured settlement, multiple STRIPS are purchased upfront with laddered maturity dates to match the payment schedule. The TFSS program makes these periodic payments in the same manner as an annuity-funded structured settlement.

Contact a Structures representative today to learn more about the TFSS program.


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