Deferral & Settlement Planning · §453 · §104 · Childs

Big windfall.
Bigger tax bill.
Unless.

You can’t be taxed on money you haven’t received yet. That one IRS-blessed idea is the spine of three different structures — depending on whether you’re selling something, settling something, or finally collecting a contingency fee. We place all three, and we’ll tell you straight when your deal doesn’t actually fit one.

CA-licensed insurance producer · NPN 20602398
Hans Goldstein — California Structured Installment Sale specialist
Who runs Goldstein & Co.

It started with a cabin. And a $300K problem.

A woman who’d attended one of my classes at the Retirement Literacy Foundation — a 501(c)(3) nonprofit where I teach on Social Security, taxes, and Medicare IRMAA spikes — called about a cabin sale. ~$300K gain, six-figure tax bill on the other side — plus the IRMAA Medicare spike and Social Security taxation hit she’d realized in class were coming too. She mentioned a deferred-tax strategy. Sounded too good to be true, so I dug.

Within hours I’d found something sounder buried in the structured-settlement literature: a 100-year-old, IRS-blessed structure called §453. Same idea as what she’d mentioned — except the obligor was an A-rated insurance carrier with $100B+ in reserves instead of a marketing pitch deck. Two thoughts hit me almost simultaneously: “If she’s sweating $300K, what about the people sitting on $3 million sales? And — wait — I already have the insurance license.”

The math was so absurdly good for the larger cases I rebuilt my practice around it. Hans Goldstein — California-licensed insurance & annuity producer (NPN 20602398, CA Lic 4445478), now focused entirely on California §453 / Structured Installment Sale placement.

Read the full story →
What we actually do

Three structures. One idea.

You can’t be taxed on money you haven’t received yet. That principle — the same one structured settlements have used since 1982 — is the spine of all three.

For sellers

Structured Installment Sale · §453

For sellers of businesses, rental real estate, and other appreciated assets. The buyer’s future payment obligation gets assigned to an A-rated carrier; you recognize the gain pro-rata as payments arrive, not at close.

Designs: 5–40 year payouts, COLA optional, no charitable gift required, heirs stay whole.

How an SIS works →
For plaintiffs

Structured Settlement · §104(a)(2)

For plaintiffs with a personal-injury or wrongful-death recovery. Periodic payments are received tax-free under §104, guaranteed by the carrier for life or for a set term.

Standard since: Periodic Payment Settlement Act of 1982. Forty-plus years of case law.

When §104 fits →
For attorneys

Structured Attorney Fees · Childs

For contingency-fee lawyers, class-action firms, and mass-tort counsel. Spread your fee into a multi-year annuity stream instead of taking the whole hit in one ordinary-income year.

Validated by: Childs v. Commissioner, 103 T.C. 634 (1994), aff’d 89 F.3d 856 (11th Cir. 1996). Never overturned.

The Childs framework →
Honest answer

DSTs, monetized installment sales, opportunity-zone funds, and 1031s have a place too — they each have a specific failure mode (pooling and trustee risk for DSTs, IRS challenge risk for monetized installments, like-kind constraints for 1031s). We’ll walk you through which structure fits your situation and refer you out if it isn’t one we place. No commission-hunting.

Self-route

Tell us which one you are.

Appreciated-asset seller, attorney with a contingent fee, or plaintiff with a physical-injury settlement — we’ll route you to the math that matches your situation.

Different code section, different mechanics, different number.

Appreciated-asset seller → Attorney (contingent fee) → Plaintiff (injury settlement) →
The big idea, in one image

Eat the cash pie slower.

Funny thing happens — you get more.

Because Uncle Sam could take less when it’s structured right.

Same physics works for sellers, plaintiffs, and contingency-fee attorneys.

Why this even works — the part nobody explains

Every lump-sum discount in commerce is really a credit-risk premium in disguise.

Bulk pricing exists because the buyer commits capital up front. Annual-rent prepay gets a month off because the landlord is assured of the year. “2% off if paid by the 10th” is the supplier discounting against the risk of late or no payment. Every “lump sum = discount” in commerce is fundamentally a payment for trust — the payer eats a small loss to remove counterparty risk.

The SIS removes the credit-risk problem at its source. The obligor on your payment stream isn’t a buyer who might default — it’s an A-rated U.S. life-insurance carrier with $100B+ in assets, regulated reserves, and a 100-plus-year operating history. The credit-risk premium that drives every commercial lump-sum discount goes essentially to zero. You capture the bracket-spreading benefit without paying the credit-risk cost that normally makes installment receipts feel inferior.

Don't take my word for it

Read what mainstream CPAs, attorneys, and A-rated carriers publish about IRC §453.

Every claim on this site traces back to a public source — the IRS code, a peer-reviewed CPA journal, a carrier's own white paper, an attorney's published analysis. Sample below; full citations on the “What the Pros Say” page.

The CPA Journal

“When the right set of circumstances presents itself, there may be no simpler way to defer, reduce, or completely eliminate long-term capital gains taxes than a structured installment sale.”

Dan Finn, CPCU, MSSC, RICP · The CPA Journal, Dec 2021
Read on cpajournal.com →
MetLife · Carrier white paper

“Insurance companies providing such payments are highly regulated and have strict reserve requirements designed to prevent insolvency.

Matin Momen, Maureen Darrow, Bejan Shirvani
MetLife in-house legal & SIS team
Download the white paper (PDF) →
Kitces.com

“Under IRC §453, capital gains on the sale of assets … are deferred until the years when the payments are actually received.

Ben Henry-Moreland · Sr. Financial Planning Nerd
Kitces.com, May 2024
Read on kitces.com →
See all sources & download the carrier white paper →

What could you keep with SIS?

Two numbers. Apples-to-apples. Both sides earn 4%/yr, 20-year horizon, MFJ filing — conservative on purpose.

You could keep approximately
$—
more after 20 years
Tax-bracket compression alone (no yield assumed):~$—
+ 4% yield compounded both sides:~$—
Accounts for your $200,000/yr existing income.Your tax brackets are stacked on top of this — higher existing income = more SIS upside. Adjust the income field to see how it moves.
See the full breakdown →
Illustrative ballpark.Input treated as your capital gain (sale price minus cost basis). Assumes MFJ, 20-yr horizon, 4% yield on both sides (cash net reinvested at 4% taxed-as-earned; SIS at 4% carrier credit, each year’s after-tax payment also reinvested at 4%). Conservative on purpose. Real returns vary, carrier rates change, tax law changes. Not tax or investment advice — consult your CPA. Adjust assumptions →
Be Honest — There Is a Catch

So what’s the catch?

One word: irrevocability. Once the train leaves the station, it’s going to the next station. No matter what.

The honest catch

An SIS is irrevocable. Once it’s funded at closing, you can’t unwind it.

The carrier-funded annuity payments are non-commutable and non-assignable by you, the payee. That’s a structural requirement of §453 treatment — if the payments were freely convertible to cash, the IRS would treat the whole sale as a Year 1 cash transaction and the deferral wouldn’t work. So you can’t sell the income stream. You can’t pull a lump sum if something comes up. You can’t change the schedule once the carrier issues the annuity.

It’s a one-way door. That’s the cost of the bracket compression.

One important nuance: the SIS contract itself is irrevocable, but the beneficiary designation on the annuity is revocable. You can change who receives the remaining payments at your death (spouse, kids, trust, charity) at any time during the term — same way you’d update beneficiaries on a 401(k) or IRA. The schedule and dollar amount are locked; the recipient at your death is not.
But fear not

…because it’s a Swiss train. It’ll show up on time. And it’ll pay out.

The obligor on your payment stream isn’t the buyer who just walked away from escrow. It’s an A-rated U.S. life-insurance carrier with hundreds of billions in general-account assets, a 100-plus-year operating history, and a regulated reserve framework that’s never failed to pay structured-settlement annuity holders in the modern era. The payment shows up every month, exactly on schedule, exactly the dollar amount printed on the contract.

Backstopped further by CLHIGA, the California Life & Health Insurance Guarantee Association — 80% of present value up to $250K per insured if a carrier ever did fail. Annuity guarantees are subject to the claims-paying ability of the issuing carrier.

The other catch — the one that kills deals

“Wait, isn’t this one of those J.G. Wentworth ‘it’s my money and I need it now’ things?”

No — and this is the single most common reason a deal dies. Someone in the seller’s life — a cousin, a brother-in-law, a friend at the gym — runs a 30-second Google search on “structured settlement,” lands on a secondary-market ad or a lottery-winnings horror story, and concludes the seller is being scammed. Deal dead.

Here’s the actual distinction — it’s about direction, not whether you’re a “receiver.” Both parties technically receive structured payments. The difference is which direction the deal runs:

  • The J.G. Wentworth side — cashing out of a structure. Someone already has a structured-settlement annuity (usually a personal-injury or lottery payout). They want a lump sum today, so they sell their future payments to a factoring company at a steep discount — they take 50¢ or 60¢ on the dollar to escape the schedule. That’s the loss-of-value transaction the commercials joke about.
  • The SIS side — entering a structure at face value. You’re going the other way. Your sale proceeds buy a brand-new annuity directly from an A++ carrier, at face value, with the full tax-deferral benefit of §453. No discount, no factoring company, no secondary market — same structure Fortune 500 self-insurance trusts and the federal court system use to fund their own obligations. The payments are contractually guaranteed by a top-rated insurance carrier and backstopped by the California Life & Health Insurance Guarantee Association up to applicable limits.

One is the discount-store exit. The other is the wholesale entry. Same word on Google. Opposite direction of money.

Different product. Different direction. Different math. Same two words on Google — which is why this misunderstanding is rare-as-a-unicorn in practice but kills a real number of deals when it surfaces. Trust takes time. That’s fair enough. Run the calculator, read the carrier’s white paper, talk to your CPA. The structure has been in the tax code for 100 years.

The other obvious question

“If I'm willing to take payments anyway — why not just take them from the buyer?”

Who do you trust more — a Fortune 500 life-insurance carrier (household-name, A-rated, $100B+ in regulated reserves) writing your checks for the next 25 years, or the buyer's ability to keep paying you over the entire term?

That’s the problem the SIS solves.

A useful analogy

Think about the last house you sold.The buyer got a mortgage. The BANK wired you the full purchase price at closing — not the buyer. You walked away with the check. You never followed up monthly to make sure the buyer was still paying their mortgage on time. You didn’t worry about whether they’d lose their job in year 12 and default. That entire 30-year credit-risk problem was the bank’s, not yours.

The SIS does the same job for the seller side. The carrier's assignment company takes the buyer's lump-sum at closing — the same way a mortgage bank takes the borrower's loan funds — and then makes the long-term payments to you. The institutional middleman absorbs the credit risk. You trust the SIS carrier for the same reason you trust the mortgage bank: they’re too big, too regulated, and too well-capitalized not to deliver. The direction of money flow is reversed; the trust architecture is identical.

Yes, you can take payments directly from the buyer — it's called seller financing or a traditional installment sale, and the §453 tax benefit works the same way. But you've now made yourself the bank for 10–25 years, and the risk profile flips entirely.

Buyer credit risk. Buyer life events (divorce, death, bankruptcy). Buyer wanting to prepay (which collapses your §453 deferral). Buyer wanting to renegotiate when rates change. Buyer moving across state lines making enforcement hard. Foreclosure costs if they default. Selling the note triggers a §453B disposition. Buyers usually want a 5–15% price discount to take terms. You become the loan-servicer doing the admin work. No professional infrastructure behind a private note.

The SIS was specifically engineered to give you the §453 tax benefit while replacing your buyer with an A-rated U.S. life carrier as the obligor — eliminating almost every failure mode of the traditional approach.

Read the 10 reasons in detail →

The brilliance — never all-or-nothing

99% of the time, we carve out cash at closing for your liquidity.

The irrevocability concern is real, and the answer is built into the structure: you take a cash carve-out at closing for the dollars you need liquid — emergency fund, replacement-home down payment, college tuition, debt payoff, the next 18 months of living expenses, whatever. That cash is yours, in your account, fully liquid, Day 1 of closing.

Only the remainder structures through the SIS into the carrier-funded annuity for the bracket-compressed lifetime payment stream. Typical split: 20–40% cash, 60–80% structured. Sometimes 50/50. Sometimes 15/85. There’s no fixed rule — the math works at any split, and we right-size the carve-out to whatever level of liquidity actually fits your life.

Minimum structured amount: $500,000. The carrier-funded structured-annuity infrastructure has a floor — below ~$500K of structured premium, the carrier paperwork and broker overhead aren’t economic for the carrier or for you. Above $500K of structured premium, the SIS pencils. Carve-out is whatever you want above that — on a $2M sale at the $500K minimum, that’s up to $1.5M cash at closing.
Two-pool logic:
  • Pool A — the cash carve-out: liquid, in your control, deployed however you need (debt payoff, replacement property, MYGA, market, business).
  • Pool B — the SIS: the irrevocable but bracket-compressed structured stream from an A-rated carrier. This is your guaranteed floor for 5–40 years.

The catch is real. The answer is the carve-out. Almost nobody puts 100% of the sale into the structure — that’s not how this should be done.

How the deal actually works

Five players. Two extra pieces of paper. Same escrow timeline as any normal California sale.

1

You sign with the SIS condition

The buyer signs the standard Purchase Agreement plus a one-page SIS rider. Same loan, same contingencies, same 30-45 day timeline. No different from any cash sale — except for that one page.

2

Wire splits at closing

Buyer wires the full sale price to escrow on closing day. Escrow records the deed and splits the wire per the rider: cash carve-out → you, remainder → the assignment company — a wholly-owned subsidiary of the same Fortune 500 life carrier writing your annuity, not a sketchy third party. Buyer walks away with zero ongoing obligation.

3

A-rated carrier pays you for life

The assignment company immediately uses the remainder to purchase an annuity from an A-rated insurance carrier. The carrier becomes the obligor and pays you monthly/annually for 5-40 years — pro-rata gain recognition each year keeps you in low brackets.

Full mechanics — players, wire flow, paperwork →
Critical distinction — read this

SIS is NOT a traditional seller-financed installment sale.

When most people hear “installment sale,” they think of the old-school version where the buyer pays the seller directly over time — like seller-financed real estate. That arrangement carries massive buyer-default risk for the seller and is NOT what the SIS does.

QuestionTraditional installment saleStructured Installment Sale (SIS)
Who owes the seller the payments?The BUYERAn A-rated INSURANCE CARRIER (via the carrier's own assignment-company subsidiary)
When does the buyer pay?Monthly to seller for 10-30 yearsFull cash at closing (just like any normal sale)
Does the buyer know about the structure?Yes — they ARE the obligor; their signature on the note IS the payment promiseYes — buyer signs a one-page SIS rider acknowledging the structure exists. The rider disclaims any ongoing payment responsibility — the structured payments are the carrier’s obligation, not theirs.
If buyer defaults?Seller stops getting paid — buyer-default riskN/A — buyer already paid in full. Carrier owes the seller, not the buyer.
Backing the payment stream?Buyer’s creditworthiness onlyA-rated insurance carrier’s general account + CLHIGA state guaranty (80%/$250K cap)
Tax treatment§453 installment method§453 installment method (same code, same blessing in Rev. Proc. 2005-26)

Bottom line: the SIS keeps the §453 spread-tax benefit of the old installment sale but eliminates the buyer-default risk. The buyer wires the full sale price to escrow on closing day — same as any cash sale. Escrow splits the wire per the SIS rider: any cash carve-out goes to you, the rest goes to the assignment company which immediately purchases an annuity from an A-rated carrier. The carrier becomes the obligor.

For contingency-fee counsel

If you’re the lawyer, not the seller.

A big verdict is supposed to feel like a win. The 1099 in January usually decides whether it does.

A contingency-fee attorney who hits a big verdict takes the entire fee as ordinary income in the year of settlement — same year, top bracket, gone. That’s the default.

In 1994 the Tax Court — and in 1996 the Eleventh Circuit — said it doesn’t have to be. In Childs v. Commissioner, 103 T.C. 634 (aff’d 89 F.3d 856), the court held that a properly designed pre-settlement structure — the defendant’s obligation assigned to a third-party carrier, fee paid out as a multi-year annuity — does not trigger constructive receipt and is not §83 “property.” Translation: you choose the schedule, the carrier guarantees the payments, and the IRS doesn’t tax you on what you haven’t been paid yet.

Thirty years on, Childs has never been overturned. The IRS has rumbled in chief counsel advice (CCA 201151018) but hasn’t won a courtroom challenge. Major firms structure fees every quarter on the strength of it.

Who it fits
  • Plaintiff-side firms with a contingency-fee award > $250K
  • Class-action and mass-tort lead/liaison counsel
  • ERISA fee awards and §1988 statutory fees
  • Solo and boutique litigators expecting a tail of big years
What we do
  • Design the deferral schedule with you before settlement papers are signed
  • Coordinate assignment language with defense counsel and the carrier
  • Place the annuity with an A-rated carrier (Independent Life, Pacific Life, MetLife ABG, depending on case profile)
  • Sit with your CPA on the reporting side — the 1099 mechanics are straightforward once you’ve done one
Read the full Childs framework →
Or call 213-414-2808 if you’re sitting on a settlement next month.
Common objections — answered

The other questions every sharp seller asks.

Each of these comes up by call #2. Short, honest answers below.

"What about inflation? I'm locking in 4.5–5% for 25 years."

Real concern. Three answers: (1) the SIS schedule can be quoted with an annual COLA step-up (typically 3%/yr) — trades some upfront payout rate for inflation protection; (2) the cash carve-out at closing is yours to deploy into any inflation-hedge asset class you want; (3) the SIS removes sequence-of-returns risk and credit risk on the structured portion, which is its own form of protection. The honest trade: SIS protects against market and credit risk; pair it with carve-out plus a COLA rider for inflation.

"How do you get paid? Where's your conflict of interest?"

The carrier pays the placing structured-settlement broker a commission of roughly 3–4% of structured premium, baked into the carrier's pricing. You pay nothing out of pocket. The rate-to-you is the same regardless of which licensed broker places the case — the carrier publishes one set of rates. Same standard the structured-settlement industry has used since 1982.

"What if the carrier fails in year 18?"

SIS annuities are backed by the carrier's general account, regulated reserves, and state insurance-department oversight. If a carrier ever did fail, your state's life-insurance guaranty association steps in — in California, that's CLHIGA, covering 80% of present value up to $250K per insured per carrier. Insolvencies in the structured-settlement carrier space are historically rare. Large placements ($1M+) are commonly split across two carriers to double the CLHIGA coverage.

"What if I move out of California after closing?"

Depends on what you sold. The federal §453 treatment is unchanged — recognized gain spreads over your payment years no matter where you live. But the state-source question is where most online advice gets it wrong:

  • CA real estate? CA taxes the remaining gain forever — even if you've moved. The property's location locks the source.
  • Closely-held C-corp or S-corp stock sold directly by you (the individual)? Intangible → sourced to your state of residence when each payment is received. Move to TX / NV / FL / WY / TN / SD / AK before payments arrive and the CA piece drops off remaining gain.
  • Asset sale of a CA business through an S-corp or LLC? Goodwill gets apportioned back to CA at the entity level (2009 Metropoulos Family Trust v. FTB, Cal. Ct. App. 2022) even if you've moved. This is the trap.
  • Partnership / LLC interest sale? Mostly residence-sourced for the non-hot intangible portion — but §751 "hot assets" apportion to CA (FTB Legal Ruling 2022-02), and any CA real property inside the entity stays CA-source.
  • Out-of-state real estate, sold by a CA resident who moves first? No CA claim at all if you're a nonresident when payments are received.

Translation: SIS + a move to a no-tax state works beautifully for the right asset, structured the right way. It does not automatically erase CA tax on every SIS. See the full breakdown — case law, citations, asset-by-asset map: Moving out of CA — which assets actually escape CA tax through SIS.

"What if the buyer changes their mind about the addendum at closing?"

The SIS addendum is signed as part of the Purchase & Sale Agreement weeks before closing — not at the closing table. If the buyer tries to back out of it the day of close, you walk — same as any other contract condition not being met. In practice this is exceptionally rare; the addendum is one page imposing zero ongoing obligation on the buyer, so there's nothing for them to object to.

"What happens to the payments if I die?"

Remaining scheduled payments pass to your designated beneficiary (spouse, kids, trust, charity) at the same dollar amount, on the same dates, until the term ends. Nothing reverts to the carrier. The beneficiary inherits as Income in Respect of a Decedent (IRD) under §691, with the §691(c) deduction available for any estate tax paid on the remaining payments' present value. Beneficiary designation is revocable any time during your lifetime.

"What does an IRS audit on an SIS actually look like?"

The carrier issues an annual 1099 with each payment broken into recognized gain (LTCG), imputed interest (ordinary), and basis return (tax-free). Your CPA reports those numbers on Form 6252. The carrier maintains the gross-profit-ratio calculation; you keep the original closing documents. In an audit, the IRS receives the same 1099 the carrier sent you — there's no parallel reporting universe. SIS is one of the cleanest installment-method audit profiles because everything ties to a carrier-supplied tax form.

"Will my CPA know what this is?"

Probably not by name — mainstream CPAs see SIS rarely (the best-kept-secret problem). But the underlying mechanics are basic §453 installment-method tax which every CPA learned in school. Send them the CPA Journal article and the MetLife white paper; both walk through the structure with citations. The standard CPA response after 30 minutes of reading is "ah, this is a fixed-term §453 installment sale funded by a structured-settlement annuity — that's fine."

See your sale, not someone else’s example.

The calculator runs your specific California sale through real 2026 federal + CA tax brackets — including §121 exclusion, §1250 recapture, NIIT, IRMAA, and the Mental Health Services Tax.

Run the calculator → 213-414-2808