Dorothy Secol, CLA
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Structured Settlements – A relatively new concept of “settlement planning,” which can help determine whether or not a structured settlement is actually indicated or even suitable for a personal injury claimant. Structured Settlements are not for everyone, in fact, in most cases at least 10% of candidates are not suitable nor do they need a structured settlement.

The most common and best uses of structured settlement annuities are:

1. To provide for a fixed income need or goal – money that is needed to meet monthly budget expenses.

2. To replace lost pension benefits for someone who is hurt and must leave the workforce before they are fully vested or have not had the time within which to accumulate a pension. This is a way to provide for their retirement income on a guaranteed, tax-exempt basis.

3. As a guaranteed and tax-exempt education fund for children. The structured settlement annuity is probably the best solution for a minor’s settlement because the Courts tend to look favorably upon structured settlements in these cases. Once a structured settlement is set up, no further annual reporting to the court is required. There is also no risk of the annuity falling in value and creating a loss before a minor reach their majority.

Settlement planning is usually done immediately after an agreement is reached for payment money in settlement of a claim. Claimants would meet with a professional after settlement to talk about their needs and what they want the settlement to accomplish for them financially – and perhaps even psychologically. Options would be discussed, pros and cons of the options so that the claimant can make an educated decision as to how they want their plan funded to meet their needs.

Once a decision is made, a written settlement plan, memorialized the goals, needs, concerns and considerations of the injury victim and listing the settlement professional’s recommendations and/or the decisions of the claimant in terms of what they have decided to do to meet their needs.

A qualified structured settlement must have 1) an “offer-and-acceptance” at settlement or mediation; 2) a court order laying the foundation and authority to settle, allocate and distribute with a settlement agreement clearly creating obligation of the defendant; and 3) a qualified assignment agreement transferring the obligation to a third-party assignment company.

Based on litigation, it is clear that the plaintiff’s attorneys have an overriding duty to retain an expert to represent and protect the client when it comes to financial aspects of the case. Most attorneys lack specific training and experience for the financial advice necessary, nor the professional liability insurance coverage that would protect them in case the advice they offered turned out badly. As the attorney, your duty is to retain an expert to represent and protect the client, objectively discuss all financial options, not just a structured settlement.

Other options may include Certificates of Deposit, US Treasury Securities, Municipal Bonds, Stock, Mutual Funds, etc. Many personal injury victim clients have little or no experience with these investments and need a quick and simple explanation of how they work. The pros and cons of the options need to include whether they can lose money as well as earn money, whether the investments are guaranteed, and what the tax exposure is of funds going in and out of the investments.

You must ensure that the expert is competent and experienced. An expert who is member of the Society of Settlement Planners (SSP) has taken an oath of loyalty to work with plaintiffs as a majority of their practice.

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