by John Darer® CLU ChFC MSSC RSP CLTC
The use of a qualified settlement fund has many merits as a settlement tool for the right case. But this author is concerned that the dissemination of propaganda about the so-called "QSF" by certain settlement planners as if it were "The Ginsu" or "the Magic Bullet" to achieve better structured settlements rates is irresponsible and may very well be proven in some cases to be self serving.
A New York lawyer shared with us that he was recently told by a colleague to use qualified settlement funds in order to:
- Get to use your own structured settlement broker
- Get better rates
Not withstanding if New York Senate bill S8027A passes, both of these points are possible today (and have been for many years) WITHOUT having to subject the plaintiff to the expense of a qualified settlement fund.
There are certain costs associated with a qualified settlement fund that cannot be borne by the plaintiff/claimant structure settlement consultant or settlement planner who may be recommending it. This opinion letter was obtained by this author from the New York State Insurance Department Office of General Counsel on September 24 2007, after a New York structured settlement broker attempted to "distinguish itself" in a legal journal by advertising "cost free qualified settlement funds".
As to rates
- Some liability insurers restrict the annuity issuers it will agree to fund a structured settlement. Most of the time this can be worked around by simply doing a full market shop and then getting the approved markets to match. Isn't there extra work involved and can it be a pain in the butt? Yes, but that's what your broker or planner gets paid "the big bucks" for. If they are not willing to do this for you then please contact me. I'd be happy to perform this service and write the case.
- If there is a rate gap that cannot be filled then before you go down the QSF route you should consider the aforementioned costs. It may be that the cost of the QSF wipes out or materially reduces any rate differential.
- Annuity rates are not the only criteria in structured settlement planning.
As to your own structured settlement broker or consultant
- There is no restriction on plaintiffs having their own structured settlement consultant. The only issue is who pays for the services- (1) the plaintiff out of his/her pocket or (2) via commissions paid by the annuity issuer(s) or Treasury bond structured settlement trust provider.
- The structured settlement community is generally civil and there should be no problem splitting fees. There are few circumstances where there is a defense restriction on their brokers splitting compensation.
- Part of S8072A deals with the compensation of the claimant's structured settlement consultant and if it passes, there will be little need for the wholesale use of a qualified settlement fund simply for the reason to have your own structured settlement broker, planner or consultant.
In conclusion, one should recognize the utility of a qualified settlement fund as a settlement planning tool when appropriate, but not use it on a wholesale basis when being solicited to for the reasons outline above.
Lawyers should contact a credentialed settlement planner or settlement consultant early enough during the course of a case to discuss potential financial planning issues for their clients as these may later have a bearing on settlement discussions.
More information on Qualified Settlement Fund as a Settlement Resolution Tool for Plaintiffs