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Is Your Client a Non-U.S. Citizen? Read This Before Settling

Is Your Client a Non-U.S. Citizen? Read This Before Settling
Sage Settlement Consulting

If you are working with a U.S.-based defendant and your client is a non-U.S. citizen, complications will likely arise during settlement. Fortunately, several financial options are available to resolve your client’s case and provide long-term financial security.

Common Settlement Issues

Some plaintiff attorneys have faced defendants who are unwilling or unable to make structured settlement payments to non-U.S. citizens. Reasons vary but generally are related to the claimant’s lack of a Social Security Number or domestic bank account. By arming yourself with the information below, you’ll be able to work with the defendant towards a positive resolution. Don’t forget—make sure the settlement agreement includes language allowing your client to structure.

Structured Settlement Solutions for Non-U.S. Citizens

Structured settlements provide injured claimants with income tax-free periodic payments. Rather than dealing with the inherent risks of accepting a cash lump sum settlement, a structured settlement offers a guaranteed1, predictable source of long-term income.

Options for non-U.S. citizens include:

  • Payments Directly from Life Companies: Several structured settlement-issuing life companies will write payments for non-U.S. citizens (including lifetime payments in some cases) but require annual proof of living. Some life companies will mail checks directly to non-U.S. citizens in their country of residence, while others can direct deposit settlement payments.
  • Legacy Enhancement Trust’s Foreign Disbursement Program: This option offers a program in which the claimant signs an individual disbursement account agreement. The life company deposits the structured settlement funds on an unrestricted, reloadable debit card according to the claimant’s disbursement schedule. The debit card can be used at ATMs and internationally, and account information can be managed on Legacy Enhancement Trust’s web portal.
  • Structures’ Foreign Wire Program: Structures’ program utilizes a Foreign Wire Trust Master Account to facilitate non-U.S. citizens' payments. The life company directs the claimant’s structured settlement payments into the Foreign Wire Master Trust Account. The funds are then wired to the claimant’s bank account in the claimant’s country of residence.
  • Dash Paycard: Sage offers the Dash Paycard, a prepaid debit card accepted worldwide. The life company deposits structured settlement payments directly onto the card based on the claimant’s payment schedule. Funds are FDIC-insured and the claimant can manage their account via web, mobile, and text alerts.

Tax Implications

In preparation for your client’s settlement, it may be necessary to complete and submit an IRS Form W-7 to establish a U.S. Individual Taxpayer Identification Number (ITIN). The ITIN does not entitle the applicant to social security benefits, nor does it change an individual’s immigration status; it is only used for federal tax purposes.

Another consideration is the tax laws in the claimant’s country of residence. Some countries have specific guidelines allowing tax exemptions for structured settlements only if they are funded in a market admitted in that country. However, even a taxable structured settlement provides long-term financial security. Your settlement consultant can review all options with your client to find the best solution.

Take Advantage of Your Tax Deferral Options

Before you settle the case, be sure to also include language in the settlement agreement allowing you to structure your contingency fees. By doing so, you can defer taxes until the years in which payments are received while providing yourself (or your law firm) with a steady source of income.

We Have Structured Settlement Options to Fit Any Case- Contact Us Today

Our experienced settlement consultants will help your team efficiently resolve even the most complicated cases. We offer a range of settlement options that can be customized to suit your client’s individual needs and circumstances. Contact us today to learn more.

1Guarantees are subject to the claims-paying abilities of the issuing insurance company.

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