Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

How Not To Kill Your Client's Structured Settlement By Fumbling At The Goal Line

by John Darer CLU ChFC CSSC

Epitaph for a would-be structured settlement:

Documentation that says in pertinent part " For the consideration of Five Hundred Thousand ($500,000.00) the receipt and sufficiency of which is hereby acknowledged, plaintiff hereby releases, remises...

" Plaintiff has been advised by counsel...

Followed by client's signature

Action Followed by fax to defense counsel.

CONSTRUCTIVE RECEIPT...Two big words.  Add one fatal tax principle.  Possible E&O Claim.

Practice Tip: If your client is going to structure then the consideration must include the periodic payments as consideration, not the cost of the payments.

Structured Settlement Quotes More Best Practices

I see that on Speaking of Settlements, my friend Mark Wahlstrom has  brought out the street sweeper this morning on the subject of structured settlement quoting practices. It's a good venting of issues that appear from time to time. It's also nice to see that there are others in the industry who are intent on "cleaning up the neighborhood" of some of its "racoons".

Why would any structured settlement or settlement planning professional not adequately disclose the cost of a structured settlement and the name of the insurer in the illustration in this day and age . What has it been...a quarter of a century since the two Private Letter Rulings which stated that disclosure of cost is not constructive receipt? Some states like NY, MN, FL and MA even require extensive disclosures!

On the issue of rate of return calculations the structured settlement or settlement planning professional must recognize the differential in mortality tables used between different life insurers and the resultant effect on the presentation of any Internal Rate of Return proposal. A 1980 will show a shorter life expectancy than the 2001 tables. Using a longer assumed life expectancy result in a higher internal rate of return. One annuity issuer currently illustrates a to age 90 lifexpectancy for females while another only goes to ages 85 or 86. Those 4 extra years are speculative. It's a peculiarity that you may not notice if not looking carefully. It's a peculiarity that may show a higher IRR from company A that uses a to age 90 female life expectancy assumption versus one that uses a to age 85.

A useful detailed explanation of this can be found at Structured Settlement IRR..Fact or Fiction? in 4structures.com, LLC's  Structured Settlement FAQ

Another critical element and an essential best practice is to use an assumed purchase date to recognize that event sensitive payment dates are affected by funding delays. For example if annuity rates stay the same and funding is delayed two months it will cost more to fund the payments due on "Jenny's birthdays" or

Among other best practices for structured settlement quotes: 

1. Set an expiry date on the quotes
2. Be extra careful when using daily rates.
3. Clearly state that "this is an illustration and not a contract" if that is the case.
4. Confirm selected benefits in writing.
5. Disclose the cost. There is no need to apologize for what things cost.

What Can Happen When Things Go Wrong

• Crutchfield v Ringler Associates, Civil Action No.01-2720 (E.D. La 2002)

More on Structured Settlement Quotes

Structured Settlement Quotes July 10,2008  in Structured Settlements 4Real

Settlement Planners Beware! Your Inaction May Result in Liability Exposure

by John Darer CLU ChFC CSSC

Settlement planners should not accept paid referrals from financial planners without defining the scope of the engagement, or they risk professional liability exposure. The increasing convergence of disciplines is fraught with both obvious and unrealized potential liability traps.

Consider this scenario:

1. After you consistently hold yourself out as a settlement planner or structured settlement planner in advertising or on your website,  you get a call from a financial planner  who it is evident is not a specialist in settlement planning or litigation recovery management. He claims to have total control over the proceedings for plaintiff Sally Jones.
2. You are asked to run some structured settlement quotes for an annuity with life and 30 years certain, perhaps a question or two about Medicare Secondary Payer or other topic.
3. You fail to ask critical questions that would be a standard part of the settlement planning process but you do agree to split your commissions 50/50 with the financial planner. 
4. In all your self promotion, you fail to define the scope of your engagement with the planner, the plaintiff attorney or the plaintiffs.
5. You subsequently acquire knowledge through observation or otherwise that  leads you to believe, in your professional knowledge and experience, that what your referral source (or the attorney) is recommending may not be in the best interest of the plaintiff. You elect to say nothing out of fear of losing the commission or fee that you will be earning by placing the structured settlement or other financial product.
6. Don't you have a duty to inform?
7. Some time after the case is resolved things don't turn out as planned. The plaintiff hires an attorney with a national reputation for prosecuting people who mislead seniors and disabled persons. You blame it on the financial planner. He blames it on you.
8. Think your case will hold up in court?

How about another version of this scenario where you observe and do speak up, but the financial planner, or attorney, ignores your recommendations? How have you documented your suggestion and the fact that it has been rejected?

Settlement planners with pride in their profession and a "love of their own hide" should not call themselves settlement planners unless they are planning to follow through.

"Attorneys on both sides of negotiations, while they may be expert in prosecuting or defending claims on behalf of their respective clients, are increasingly aware that they cannot, in many instances, also competently represent their clients in the intricacies of settlement planning. Some attorneys who have successfully negotiated large settlement amounts have been successfully sued by their own clients for failure to provide competent representation in planning other aspects of the settlement." Society of Settlement Planners Press Release March 31, 2008

Handling and Transmission of Original Settlement Documents-The Best Way

1. Why wait for for the slow route when you can have DOCUMENTS NOW?
2. Why chance that sensitive and confidential original settlement documents could be "lost in the mail" when you can track them RIGHT NOW online?
3. As a settlement professional and businessperson, are you interested in increasing your client's satisfaction with the structured settlement issue process?

   

4. As a settlement professional and businessperson, are you interested in the increasing overall satisfaction of ALL parties with the structured settlement issue process?

Incredibly I have encountered competitors who make thousands of dollars in commissions, yet still opt for 40c-$1.00 regular mail over a $5-$6 or even $10 FEDEX charge.

This "penny pinching" can turn out to be costly in more ways than one.

Consider the following as a general business practice :

1. FEDEX all sensitive documents, even if there is no time sensitivity.
2. Be sure that each outbound document going via FEDEX clearly displays the FEDEX Airbill number. When the airbill is created we often use FEDEX ship features to include electronic notifications to interested parties involved in the case in addition to a message which describes the content.
3. Include a return FEDEX prepaid envelope as needed.

You can save money on matters with no time sensitivity by using FEDEX Express Saver. I've found that many times FEDEX delivers the next day anyway, particularly to major cities. UPS, DHL and the USPS have comparable overnight services which include online tracking.

American Express Business Platinum holders get rebates/discounts for FEDEX services charged to the card.

THINK ABOUT IT!