foregoing discussion touched briefly upon the two qualified means
by which structured payments may be made so as to provide the
plaintiff with tax-free payments and allow the defendant to assign
its liability. The
most common method is through the purchase of an annuity or
annuities which in turn are designed to meet the payment needs of
the plaintiff or plaintiff’s family.
The other qualified method allows for the establishment of
an account or trust funded with United States Treasury Bonds.
IBAR Settlement Company first developed and refined to
provide the plaintiff with optimum security.
As a result of ongoing development this funding vehicle
evolved from a trust format to that of a custodial account which
we refer to as a Custodial Bond Account or CBA.
CBA is funded through the purchase of United States Treasury
Bills, Notes, or Bonds. The interest generated by the bonds is
paid semi-annually with the corpus paid upon maturity. The interest payments are paid by the Untied States Treasury
into the CBA held by a legally qualified custodial entity. In the case of CBA’s established through IBAR, either City
Nation Bank or Merrill Lynch acts as the custodian.
All payments to the plaintiff are made directly by the
the CBA has many attractive features, its most important attribute
is that it affords the plaintiff a SECURED CREDITORS INTEREST
in the assets held in the CBA.
It is this feature which provides the plaintiff with the
greatest safety allowed under Internal Revenue Services Code
Section 130. The
settlement documents developed by IBAR perfect the plaintiff’s
secured interest in the bonds thus protecting those assets from
any and all claims of the assignee’s (i.e., IBAR) creditors
should the assignee fail. A
BOND PLEDGE AGREEMENT is entered into by the plaintiff, the
assignee (i.e., IBAR) and the custodian (i.e., either City
National Bank or Merrill Lynch).
The Bond Pledge Agreement which becomes part of the
complete settlement documentation, identifies the specific United
States Treasury Bonds by their CUSIP number.
To perfect the plaintiff’s secured interest in the bonds,
a U.C.C. Form 1 is filed by IBAR with the appropriate regulatory
offices in both California and New York.
This filing must be renewed every five years.
The additional documents needed to establish the CBA are
the SETTLEMENT AGREEMENT; CUSTODIAL AGREEMENT; ASSIGNMENT
AND ASSUMPTION (this is combined with the Bond Pledge
Agreement as one document) and the ACKNOWLEDGEMENT OF LIEN.
All of these documents are prepared by IBAR.
document lists the terms of the settlement and provides for the
release for the defendant through an assignment of its liability.
This document is signed by the plaintiff and the defendant.
The terms of the periodic payments are included in the
Agreement: This document sets forth the terms under which the custodian
operates the CBA.
and Assumption and Bond Pledge Agreement:
This document provides for the transfer from the defendant
to the assignee (IBAR). As
was discussed earlier, this document also identifies the specific
bonds and sets them aside from any and all claims of the
assignee’s creditors. To
perfect this document as U.C.C. Form 1 is filed in California and
of Lien: This
document is executed by the custodian and recognizes the secured
creditors interest held by the plaintiff.