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February 20, 2006

Big Dissipation Risk with Lottery Winners, Settlement Recipients, Sellers of Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

I'll admit that I bought 2 lottery tickets for the $365MM Powerball, unfortunately not from a certain lucky store in Lincoln Nebraska. While the media's saliva is dripping like a hungry mutt watching mama cook dinner, while it awaits the coming out of the mysterious winner, I thought some of the following information might be worth digesting.

70% of those who become "suddenly wealthy" squander it within a few short years

70% of those who become "suddenly wealthy" squander it within a few short years, according to the National Endowment for Financial Education.  Moreover, about 1/3 of lottery winners eventually declare bankruptcy according to the Certified Financial Planners Board of Standards. What is absolutely astounding is the sheer amounts needlessly lost forever. And it didn't have to be!

Lottery winners, people who inherit large sums of money and plaintiffs in law suit settlements, or structured settlement payment recipients thinking of transferring structured settlement payment rights, pay careful attention to these statistics lest you end up one of them.

Proper planning and proper advice from qualified advisors can save you from making a fatal mistake with your money.

Learn from the mistakes of others. One former lottery winner quoted on AOL News today stated " I won the American Dream but I lost it. It was a very hard fall, It's called Rock bottom". She won millions and now lives in a trailer (not by choice)by gambling and inability to say "no" to the hand out requests of friends and family.

Structured settlements and trusts with spendthrift provisions (sometimes referred to as "Settlement Preservation Trusts" or Recovery Management Trusts) individually or in combination can be helpful to protect  plaintiffs in personal injury law suits. Even plaintiffs in labor and other types of disputes can benefit from a non-qualified structured settlement,  called  a non-qualified assignment.

Alot of lottery winners opt for cash in lieu of an annuity. Some winners may want to rethink that (this new winner...can't he/she live on the $6.5MM-1st installment- for a while?) or at least consider creating some vehicles for spendthrift protection if they do take all cash.

If you, someone you represent as an attorney,  or a loved one, is thinking of selling structured settlement payment rights or has been approached by a structured settlement factoring company wanting to buy your structured settlement payment rights for a deep discount.

Think carefully and take heed of these statistics. If you guess wrong, it's a decision that you can't go back on.

Posted at 10:54 PM in Attorney Responsibility to Clients in Settlement Planning Process, Dissipation Risk, Dissipation Stories, Financial Planning, Non Qualified Assignments, Non Qualified Structured Settlements, Recovery Management Trust, Settlement Preservation Trust, Structured Settlements |

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Comments

Lori

I received a letter from Michael C. Betzig, Structured Settlement Investments, LP. It starts out by indicating I had won the lottery. Well, if I did win the lottery, I wish they'd let me know!! How do they come up with this kind of information?

Posted by: Lori | February 29, 2008 at 01:13 PM

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Guide to Structured Settlements 2023

  • What is a Structured Settlement? What You Need to Know
    Structured settlements and what you need to know about them including a helpful introductory video featuring 2023 A.M. Best Client Recommended Structured Settlement Expert and Registered Settlement Planner John Darer® of 4structures.com® LLC
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    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in on the spectrum of settlement planning solutions.
  • Rated Ages and Structured Settlement Cost
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  • Treasury Funded Structured Settlements
    Treasury Funded Structured Settlements are a settlement option for the most conservative using the OTHER permissible qualified funding asset under IRC 130(d), United States Treasury Bonds in addition to, or instead of, structured settlement annuities. Treasury Funded Structured Settlements can also be used to fund installment sales, also known as structured sales and other non qualified structured settlements.
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    Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
  • Structured Settlement Payments | Types of Structured Settlements
    Ways You Can Structure Your Settlement Payments. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
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    Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as the an index linked structured settlement where payments are adjusted based on upside changes in the S&P 500 with no downside and a cap of 5%. Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team.
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  • Structured Settlement Quote Lock-Ins | What You Need To Know
    What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
  • What Are Structured Settlement Annuities?
    Structured settlement annuities are annuities that can provide one or more customized annuity payment streams in a single contract. Read about structured settlement annuities here.
  • History of Structured Settlements
    Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
  • What Are Market Based Structured Settlements?
    Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that: 1. Can afford to take some market risk 2. Have discretionary settlement dollars. Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
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    iStructure is an innovative game changing fixed index structured settlement annuity for plaintiffs or attorneys. with an intermediate to long term horizon

Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
    Qualified Settlement Funds | What You Need to Know
  • Firmwide Qualified Settlement Funds Debunked
    Firmwide qualified settlement funds have been heavily promoted to trial lawyers, but have been debunked in a detailed analysis in a July 2022 legal opinion a tax partner at the law firm of Faegre Drinker Biddle & Reath, LLP. Trial lawyers and firms who have established Firmwide QSFs or coinsidering establishing a Firmwide QSF should read the analysis as part of their evaluation.

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