by Structured Settlement Watchdog®
Seneca One Finance falsely implies that you can retire broke if you are receiving structured settlement payments (with its putative solution being selling your structured settlement to them for a discounted lump sum)
Seneca One must be pilloried for soliciting American consumers with a what appear to be old British coins. I see pennies, half pennies and even some tuppence! Typical of the often lack of attention to detail deployed by social media experts for settlement purchasers.
Seneca One's marketing ploy is not substantiated by AMERICAN government and industry experts.
With respect to pension plans, the Government Accounting Office (GAO) found that the amount of the lump sum payment may be less than what it would cost in the retail market to replace the plan's benefit. This is because the mortality and interest rates used by retail market insurers are different from the rates used by sponsors, particularly when calculating lump sums for younger participants and women. Similar logic applies to selling your structured settlement payments for a lump sum.
“Participants who assume management of their lump sum payment gain control of their assets but also face potential investment challenges,” the study found. In addition, the GAO said, “some participants may not continue to save their lump sum payment for retirement but instead may spend some or all of it.”
(“[I]n many cases because it assumes that injured parties will wisely manage large sums of money so as to provide for their lifetime needs. In fact, many of these successful litigants, particularly minors, have dissipated their awards in a few years and are then without means of support.”); Miscellaneous Tax Legislation: Hearings Before the Subcomm. on Select Revenue Measures of the H. Comm. on Ways & Means, 97th Cong. 7, 82, 84 (1982) (statement of Patrick J. Hindert, President Benefit
Designs, Inc., a consulting firm for personal injury case parties) [Source: Justifying the Tax Subsidy: The Use of Lump Sum Settlement Monies by Jeremy Babener NYU Journal of Law and Business Vol. 6, 2009]
If lump sum dissipation were not a concern why would Kingston New York Medical Malpractice attorney John Fisher be so concerned to post this on his website:
"By having your client sign the Grillo Waiver before they accept a lump sum settlement, you are protecting yourself from a potential legal malpractice lawsuit down the road".
- "I am aware that the law enables all principal and interest earned in a structured settlement annuity to be excluded from my gross income adn that this opportunity is only available to persons like me who are recovering tort damages on account of a physical injury or physical sickness that I or an immediate family member have suffered."
- "I understand that, if I do not participate in a structured settlement, all earnings on any investment I may choose could be fully taxed at my highest income tax bracket."
- "My attorney has warned me of the pitfalls of not selecting a portion of my recovery to be included in a structured settlement annuity and has informed me that due to unexpected events or circumstances, many plaintiffs who do not participate in a structured settlement annuity either lose their money award due to investment risks and/or deplete their funds and lose financial security."
- "I understand this is my only opportunity to take advantage of a structured settlement annuity and that my settlement decision cannot be changed or reversed on a future date in that it is irrevocable. I have been given every opportunity to ask questions and all my questions have been answered."
Many plaintiff settlement planners have also advised and continue to advise plaintiff lawyers to get their clients to sign a so-called Grillo Waiver to insulate the plaintiff lawyer from future liability, if a client does not opt for a structured settlement. Grillo waivers, named after Grillo v Pettiette, a 1990s Texas case in which a Guardian Ad Litem and Plaintiff lawyer paid millions to settle a case in which a structured settlement was not taken, generally include the following points:
- The decision not to structure is irrevocable.
- Earnings from a qualifying SSA are received tax free.
- Future payments scheduled to be received from a SSA are protected from creditors.
- A rated age may be available with the use of the SSA, increasing the benefit to the client.
- A SSA places contractual and statutory restrictions on access to the funds making them more difficult to dissipate.
- There may be estate tax implications of receiving this settlement in cash.
- A SSA could provide lifetime income guaranteed by a highly rated insurance company.
- Taking the settlement in cash could affect eligibility for government entitlements.
"Alternatively, and as many of my clients have opted to employ, I have recommended the use of a “Client Acknowledgement Letter,” often referred to as a “Grillo Waiver.” The Client Acknowledgement Letter is generally used by my clients in situations where, despite advice and recommendations to the contrary, the claimant has insisted on taking an all-cash lump sum settlement. The Letter requires the client’s signature and his/her initials at various points indicating that he/she understands certain ramifications of that decision, especially as it relates to the risk of premature dissipation of needed settlement funds and the possibility of jeopardizing certain critical governmental benefits, including and especially medical care provided by Medicaid and Medicare [ Tacker Le Carpentier, Esq. post on Lawyers Mutual website April 23, 2013]
"In order to further insulate yourself from liability, we recommend that, in the event you client refuses a structured settlement annuity (SSA), you should request that they sign a Grillo waiver. This Grillo waiver serves as formal acknowledgement that the claimant has been made aware of the opportunity to purchase a SSA. It also requires that they understand the following:
- The decision not to structure is irrevocable..." [Source: plaintiff settlement planners Amicus Settlement Planners, LLC website August 15, 2015]