by John Darer CLU ChFC CSSC RSP CLTC
I'm dissappointed that one of my industry colleagues at EPS Settlements Group tweeted glibly "Maybe they should've chosen a structured settlement" on October 17, 2013, in response to a October 10, 2013 story in the Poughkeepsie Journal about a now 36-year old man, who suffered mild traumatic brain injury in an accident when he was 11 years old who moved out on his own at age 23, started drinking, abusing his medication and at age 23 wrecked his car while DUI. The man's letter to the Annie's mailbox at the Poughkeepsie Journal states that the 36 year old is in his 4th "brain injury rehab'. At some point in the journey the man's parents became his legal guardians and he alleges his parents have gone through the money and claiming the son gave them the money they were entrusted with as a gift. The 36 year old seeks advice from the newspaper columnist about what he should do.
Annie's mailbox advises the man to speak with a lawyer, surmises that his parents undoubtedly requested guardianship in order to protect him at a time when he was going through some difficulties. And it’s also possible they expended a great deal of money on your care and rehab and felt that taking the settlement money was somehow justified. The judge who issued the guardianship can be asked to remove it. But they state correctly that get the money back from your parents, he might have to sue them.
The tweet from EPS is too glib, in my opinion, failing to contemplate the relevant facts and failing to seize an opportunity to demonstrate a more contemporary settlement planning approach to the visitors to the Twittersphere. Here are some of my thoughts and observations:
- First of all, an injured 11 year old cannot bring a lawsuit in New York and must have an adult commence any
litigation on his/her behalf. Generally one or more of the infant's parents and natural guardians brings the suit on the infant's behalf. [note that wrongful death cases have slightly different procedures]
- Article 81 promotes the public welfare " by establishing a guardianship system which is appropriate to satisfy either personal or property management needs of an incapacitated person in a manner tailored to the individual needs of that person, which takes in account the personal wishes, preferences and desires of the person, and which affords the person the greatest amount of independence and self-determination and participation in all the decisions affecting such person's life. - See more at: http://codes.lp.findlaw.com/nycode/MHY/E/81/81.01#sthash.z7sq3a7F.dpuf
- We have no idea from the man's query to the Poughkeepsie Journal of the amount of his proceeds from the settlement and how it was held until he was 18. We do know from his admission that he lived at home until he was 23, 'when the real trouble began'.
- From the limited information provided one can deduce, that the only way a structured settlement could have been created for the man would have been as part of the consideration of the settlement of his case in the late 1980s or early 1990s. It is less likely that he would have been able to receive a structured settlement for the later accident when he was DWI and caused the accident.
- A structured settlement would have certainly made sense in 1988, when one can deduce the accident occurred and some point in the following years when the lawsuit was adjudicated. Interest rates were roaring at the time. Perhaps there was a structured settlement that ended and was not designed to continue for life.
- Structured Settlement Protection Acts are intended to provide a layer of protection for annuitants, by requiring that a court approve any structured settlement transfer as being in the best interest of the annuitant/seller and applicable dependents. New York courts are notoriously stringent in this regard.
- One settlement planning issue worth raising is the use of professional or institutional trustees in lieu of the parents. Article 81 provides for guardianship or the person or property. It does not have to be both. Settlement Planning Trusts or Settlement Preservation Trusts are useful planning tools and may be used even for more modest amount of settlement proceeds. The questions are
- Are the parents qualified to be a fiduciary?
- Do the parents understand the responsibilities of being a fiduciary, including the recourse for not discharging their responsibility?
- Are the parents insured for the services they are providing as fiduciary?
- Do the parents want to have the burden of being a fiduciary?
- Is there a desire to see out the financial plan should either or both parents die or become incapacitated?