by John Darer CLU ChFC CSSC RSP CLTC
Jason Squatriglia, a 20 year old entrepreneur from Long Island New York, made over $200,000 as a teen selling rare coins on EBay. But somehow he was seduced by the materialistic 'appeal' of Michael Lohan, the father of troubled actress Lindsey Lohan, to invest $50,000 and Squatriglia claims he now has "squat".
Today's New York Post page 4 headline reads "Lindsay's dad took me for 50G: kid investor" . In my 25 years as a settlement planner, I've seen young adults make a bad decision, and both heard and read of others. .That's their right say cash now pushers. But few don't regret it later, so I am going to use the story to address a common question that must be addressed by parents of infant and minor injury victims.
Should my child receive all their settlement proceeds at age 18, or the age of majority if later, or should they set up a structured settlement?
I'm also going to use the story to help address a pivotal moment in the life of certain young adults who hit the age of majority, find out they have a structured settlement and are lured by the cash now pushers hitting them up for a "quick fix" tied into a supposedly better investment alternative, or plied with steak dinners and bribes to encourage them to violate the law by facilitating the creation of illusory domicile in Florida or Virginia. I hope that those who contemplate such decisions will read this blog post and the Squatriglia story and really think about what they are doing. in advance of making a major financial decision. It's natural for young adults to make impulsive decisions and to be impressed by materialistic displays.
Before we get to that, let's loopback to the alleged Lohan swindle story....
According to the New York Post, the naive Squatriglia "says that Michael Lohan swindled him out of $50,000 promising to invest his dough in a cleaning product and a celebrity reality show". Lohan seduced him by letting him drive his Maserati and try on his Rolex watch and getting him an invitation to a party at David Hasselhoff's house". It was no surprise that things turned sour when Squatriglia asked Lohan for some return on his investment.
According to The Post, Squatriglia said that Lohan peppered him with daily texts for more money, following the initial investment on October 22, 2012, which Squatriglia did, over the warrnings of his parents, at or about age 18, if my math is correct.
Lohan claims the reality show never got off the ground because he could not secure enough sponsors, according to The Post..
The impulsive decision to invest 25% of his kitty from the successful coin business in a speculative investment like a reality show (of which there seem to be a dime a dozen) and fall for Michael Lohan's "gold plated carrots", highlights a moment of financial inmaturity by Squatriglia, in my opinion. 'Bud Fox' in the 1987 movie Wall Street, fell for the materialistic trappings on show by Gordon Gecko. Whether or not Lohan swindled ' "jack Squat" remains to be seen. There has been no arrest and no announcement of a lawsuit which the 'Lindsay Lohan milking tabloids' would surely have been all over, based on observations of past performance. Perhaps it was just a dumb investment to commit 25% of one's profits on a successful investment to, or just dumb period. On a positive note at least he didn't lose all of his money.
Even if parents are good investors, that doesn't mean their kids will be, or even that their kids will listen to them when they are at or after the age of majority. How often do they listen to you now? 'Squat' didn't heed his parents' warnings.
- Observe and learn from the financial mistakes of others.
- Protect your children by educating them about money and/or engaging with someone who can help you educate them. Don't set your children up to fail.
- As settlement advisors we can play the role of educator for our children or your clients.
There are a number of financial tools for minors who receive settlements for damages on the account of their own physical injury or physical sickness, or due to the wrongful death of a parent. A structured settlement is one such tool, one that is customizable to specfic needs and allows one to plan ahead. A certain amount of regimentation, afforded by a structured settlement may be helpful in dealing with financial immaturity. I have personally dealt with a 9-11 victim's son who blew through the cash portion of his award, an amount meant for college, on day trading. Fortunately for him the cash was only 10% of his award, he structured the rest. In his case he made a very mature decision for an 18 year old. Had he not done so he would not have had the opportunity to learn from a youthful mistake and might have jeopardized his compensation for the unfathomable loss he suffered on 9-11. Fortunately he has a mother who loves and cares about him and an attorney who cared enough to have him spend some time with a settlement planner, at age 18.
A structured settlement is not all or nothing. Use it for the baseline it is intended for.