Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

House Ways And Means Commitee Requests Lump Sum Dissipation Study

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Smucker "Pumps Up the Jam" on Premature Lump Sum Dissipation Study with Murphy

The American Association of Settlement Consultants (AASC) announced November 10, 2022, that members of the House Ways and Means Committee, led by Lloyd Smucker of Pennsylvania and Gregory F. Murphy of North Carolina have formally r equested a government-funded study assessing the long-term economic and lifestyle impact of premature lump-sum settlement dissipation.

Perhaps the dictionary is trying to tell us something!

The task will be assigned to Honorable Gene Dodaro, the Comptroller General of the United States and head of the Government Accountability Office (GAO), who will assess the feasibility of conducting the study and respond accordingly.

In their request, the Congressmen strongly stated the need for authoritative data on the troubling incidence of premature dissipation associated with lump-sum cash settlements, “For low-income Americans and or disabled individuals, settlement income is depended upon to cover essential costs such as mortgage payments, accident-related medical expenses, and other basic living expenses." 

"We are deeply concerned by historical data showing legal settlements made in the form of lump sum payments to injured parties and their families quickly dissipate, leaving victims without income when they need it most.” they said, according to the AASC release,

What is the Incidence and Impact of Premature Distribution on Injured Parties?

In addition to analyzing the incidence and impact of premature dissipation on injured parties, the request also asks that the study assess the long-term impact on mortgage foreclosures, medical debt, and other personal debt. With the availability of data that paints a complete picture of premature dissipation’s negative impact, injured parties will be able to make a more educated decision and fully assess the risk associated with cash versus annuitization of payments.

Give All The Settlement Money to Child At 18? Teen Joined ISIS, Handed Out Money lIke Candy

by John Darer® CLU ChFC MSSC RSP CLTC

A new reason to question the wisdom of handing an 18 year old a large lump sum of cash at a time when they may be easily influenced, often inexperienced and financially immature.

Mohamed Roble was due to receive a lump sum payment (from a structured settlement) of $65,431.22 on his 18th birthday - roughly a month and a half before federal prosecutors say he

I-35W Bridge Collapse Minnesota in 2007

left the U.S. for Istanbul, Turkey en route to Syria, according to an AP Report.  The structured settlement, approved in 2009 was created as part of a $53,500 settlement from the state of Minnesota and  was compensation for damages for personal physical injuries Roble sustained as an 11 year old school boy in a bus in the I-35W Minnesota bridge collapse in 2007.

Testimony in a Federal court trial of three men accused of conspiring to travel to Syria to join Isis, has suggested that at least some of the men in the group knew Roble had money and asked him to fund their own trips. One man believed Roble had gone to Syria with thousands of dollars and used it to pay for weddings for fighters and cars.

The bridge collapse was not mentioned during the trial. The Associated Press made the connection using state court records to trace the bridge collapse victim to a Minneapolis high school, then matched the victim's yearbook picture to a photo the government has provided of the young man believed to be in Syria. A handful of people who knew the family also confirmed the match.

According to evidence presented in federal court last week, Roble flew to Istanbul in October 2014 as part of an itinerary that included a trip to China. He was due to return to the U.S. in June 2015, but never did, FBI Joint Terrorism Task Force Officer Joel Pajak testified.

"We received information that Mr. Roble ended up in Syria with his uncle, Abdi Nur," Pajak testified.

Victim Broke Cardinal Rule | Don't Blab About Your Settlement

Little has been revealed about Roble, but testimony suggests at least some of the men knew he had money. One witness, FBI informant Abdirahman Bashir, testified that in the fall of 2014 some group members asked Roble if he could finance their own trips.

"We all knew that he had money, and we were asking him if he could give us some money for travel and he said yes," Bashir testified. Under questioning from Assistant U.S. Attorney Andrew Winter, Bashir added that Roble "had a lot of money from an accident before, and got a settlement."

"Some kind of insurance settlement?" Winter asked.

"Yes," Bashir said.

It isn't clear whether Roble actually funded trips for potential travelers, and evidence so far suggests he did not. Bashir's testimony showed the men struggled to find ways to finance their own travel.

But in one secretly recorded conversation played for jurors, defendant Guled Omar told Bashir that Roble took thousands of dollars to Syria and was passing out money like "candy." In that conversation, Omar said Roble used the money in Syria to finance weddings and cars for fighters.

One of the obvious questions is how all these influencers knew Roble had a settlement.  One of the biggest mistakes a settlement recipient can make is to blab about their settlement. What a pity!

The Financial Maturity of Young Adults and Settlement Money

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.

Read about Structured Settlements

Structured Settlements | What Is a Structured Settlement? (4structures.com)

Read About Structured Settlements for Minors and Young Adults

Structured Settlements for Minors | Here's What You Need to Know (4structures.com)

 

 

 

 

 

Another Boom to Bust Athlete Story That Could Have Been Prevented : Allen Iverson

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Allen Iverson knows how to play basketball. He also knew how to spend and spend he did. Iverson was among the biggest superstars in the NBA, an 11 time NBA All-Star (2000–2010) earning more than $154 million during a professional career that began back in 1996 (not including endorsement money and other business deals). According to a February 14, 2012 article, he was having trouble paying his bills.

How did Iverson lose so much?

Loyal to his friends from a youth spent in Virginia, Iverson traveled with one of the biggest posses in professional sports Read the rest of the story in Allen Iverson Has No Answer For Financial Woes The Post Game February 14, 2012

Let's talk about a" three point play" for basketball players like Allen Iverson.

By structuring endorsement fees, professional athletes and other celebrities can help mitigate the over spending problem and provide a stable foundation of income backed by a Fortune 100 insurance Company. This can help you stroke that ball for the long haul.

If you receive fees from product or service endorsements, or represent someone who does, have you considered structuring the income? If that endorsement fee otherwise represents taxable income that you're not going to spend this year, consider a non qualified structured settlement. This should be of interest to movie and television celebrities, athletes, executives and CFOs at companies who hire celebrities to endorse their products, producers and contest sponsors, agents and CPAs

I'm Here to Help 888-325-8640

9-11 Victim's Child Who Didn't Take Structured Settlement Is Bilked By Godmother

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Together with my friends at the law firms of Kreindler & Kreindler and Duane Morris in New York City, along with several industry colleagues and other law firms, we saw to it that many 9-11 survivors were educated about structured settlements.  Significant legislative efforts on the Federal and State level  enabled structured settlements from the 9-11 Victim's Compensation Fund to even be possible.

Many of those9-11 survivors that I was honored to work with, elected to receive benefits from structured settlements and are glad they did.  They continue to receive their structured settlement payments. Yet whomever was tasked with protecting the interest of Shanhellen Jimenez in 2003 or 2004, when such decisions had to be made, chose to forgo a structured settlement and the end result is that the daughter of 9/11 victim Elena Ledesma was alleged to have been bilked out of hundreds of thousands of dollars by her godmother.

The New York Post carries the sad story that is a stark reality for some injury victims or survivors who receive "sudden money" and succumb to hangers on, people the victims think they can trust, even family members. Had Shanhellen been receiving a structured settlement, the only way that she would have been able to send money to what turned out to be failed business venture in the Dominican Republic, was if a judge approved a transfer of structured settlement payment rights was in Shanellen's best interest.

Coincidentally while reading the article, I received a call today from a 9-11 survivor who at age 18 and facing the typical temptations of an 18-year-old, in 2003, made the very mature decision to take a substantial portion of his recovery from the 9-11 Victim's Compensation Fund in the form of a structured settlement. We still keep in touch. Time and time again that mature decision has proved to be the right one. 

I leave those of you who have lost a parent or loved one under tragic circumstances, who is facing an important financial decision about a legal recovery or inheritance, with something important to think about.

I want you to think about why you are getting this money. You can take steps to avoid "doubling down" on your loss.

Read Structured Settlements and Settlement Planning for Your Minor Children

Settlement Dissipation Risk: Meet The New "Money Brain" Theory

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Fascinating article in Newsweek about spending addiction that may shed some light on why some people blow through cash settlements, inheritances and lottery winnings in record time. Scientists have discovered measurable differences between the brains of people who save and those who spend with abandon, particularly in the areas of the brain that predict consequences, process the sense of reward, spur motivation and control memory. 

Research has shown that having a good short-term (or “working”) memory is associated with being able to project yourself into the future and plan for it, which is a prerequisite of saving. The article Stop You Can't Afford It: The New Science Behind Your Spending Addiction, by Sharon Begley and Jean Chatzky Newsweek. 11/7/2011, Vol. 158 Issue 19/20, p50-54, discusses past and ongoing scientific efforts to develop ways to "zap" the brain and give it a "reboot". 

 Rest assured that "Dr. Evil" is not behind the new research

While attorney Jeremy Babener's "assiduous research" as an NYU law student, could not locate a study that backed up the often parroted "90% blown in 5 years" settlement industry statistic (one factoring company operating in the space has also failed to produce a shred of support to its published statement "when cash is received, one study found that 95% of claimants have exhausted their settlement), perhaps another explanation is at hand. What I'm saying is that the basis for the "spend/save behavior" of tort victims may be far more fundamental.

Essentially, we cannot deny that dissipation happens, we have ideas about why, there are some new ideas based on scientific research and there may be a way to change behavior patterns by following the ongoing scientific research and gaining a better understanding of the psychographics on an industry level.

Psychographics is the study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research.

 

 

 

 

 

 

 

 

 

From A $55 Million NFL Contract to Broke and Living With Mom and Dad

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Chris McAllister went from the Pro-Bowl to the "Cereal Bowl", at Mom and Dad's house.

A first round draft pick out of University of Arizona in 1999, McAllister was a 3-time Pro Bowler (career stats) who signed a 7-year $55 million dollar contract in 2004, about 5 years prior to his last NFL game in 2009.

It is estimated that up to 80% of NFL players squander their fortunes in the years immediately following their retirement.  Source; Yahoo Sports January 31, 2011

Between 1999 and 2002, the NFL Player's Asspciation estimates that 78 players lost a total of $42 million in acts of fraud perpetrated by financial advisers.

The primary reasons for financial failure are little different from lottery winners or those who receive money from the settlement of a lawsuit.

1. Made bad investment choices
2. Spent frivolously
3. Fell victim to predatory advisors
4. Assigned their less-than-qualified friends or family to handle their affairs.

4structures.com, LLC offers immediate and deferred guaranteed income solutions for athletes and other celebrities which can help prevent the squandering of assets that they would otherwise receive from product endorsements.

A structured settlement should be considered as part of the settlement planning process because of the guaranteed income that it provides, free of stock market volatility.

For more information about structured celebrity endorsement fees or structured settlements please contact John Darer at 888-325-8640.

 

 

 

A "Kluge" Mistake: Wealth of $1.6MM A Week Divorcee Literally Withers on The Vine

Patricia Kluge was famously awarded the largest divorce settlement in history (a reported $1.6 million a week) but she seems to have figured out a way to spend it – and then some, according to an article in Luxist published January 21, 2011. 

The ultimate dissipation story, 12 years after being described as being flush with cash, sees Kluge allegedly in default of nearly $23 million on her gilded mansion in Virginia, part of her divorce swag, "one of the most important residences created in the United States since the Golden Age",  once listed with a $100 million price tag in October 2009. On Feb. 16, 2011 the 23,538-square-foot home will be auctioned on the courthouse steps. 

Her antiques and jewelry have already been auctioned through Sotheby's. Her winery was foreclosed on and its inventory also sold off at auction. Several lots in the Vineyard Estates subdivision she devised for her property were also auctioned.

The root cause is an overly ambitious plan to make it in the wine business meets bad economy. According to a competitor cited in Luxist, " [Kluge Estates] was trying to make a fast dime when they should have made a slow nickel."

The story is one that shows wealth is not an immunization against major mistakes that can cause dissipation or erosion of assets and lifestyle, whether it's due to bad business decisions, putting all their eggs in one basket (Madoff victims who staked substantial portions of their life savings) or other factors.

http://www.luxist.com/2011/01/21/what-happened-to-patricia-kluges-fortune/?icid=main%7Chtmlws-sb-n%7Cdl3%7Csec1_lnk3%7C197212

Former World Champion Boxer Faces Financial TKO

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Last Sunday's New York Post carried the rags-to riches-to rags story of 5-time world champion Iran Barkley, who defeated Thomas "The Hitman" Hearns twice in his pomp (1988 and 1992) and is a member of an elite group of fighters to have won world titles in three separate weight classes. Barkley was active through 1998 and purportedly had $5 million in earnings.

NOW

The New York Post describes Iran Barkley as "penniless but upbeat". Last week "he slept on the No. 6 subway train as it rattled between Pelham Bay Park and the City Hall station", after his niece changed the locks on the apartment they shared because he was unable to contribute to the household.

The New York Post says that during the 1980s and '90s, Barkley "frittered away millions. He bought a Lexus 300 and the latest-model Infiniti. But it wasn't all about himself. He gave to family and friends and threw block parties with pony rides for kids in the South Bronx".

The Post makes it sound like the Lexus 300 is an over-the-top sports car. Geez Louise! It's an entry level sports sedan. It doesn't sound as though he blew it all at once because Barkley states that he did not receive it all at once unlike big pay days earned by his big-name competition at the time like Roberto Duran and Thomas "The Hitman " Hearns.

Critical of The Post's coverage one reader states something more poignant. "All too sad and all too common. Some don't stay in school long enough to understand how to handle money, which a few schools now teach. So the churches and civic groups must take over, educating people at a young age as to excessive spending, interest rates, worthless relatives, hangers-on and so forth".

As the years go by I recall having read many stories like this and some worse. If you are a young athlete it is as critical to establish good financial habits as it is good work, sleep and eating habits. Establish a relationship with a good financial advisor early in your career and listen to him or her.

Read more of the New York Post story "Ex Champ Is Down For the Count" here: http://www.nypost.com/p/news/local/bronx/ex_champ_is_down_for_the_count_OAFD54Pffz6lbxUKTXNavM#ixzz15wLzbdIr

Through guaranteed income streams, structured celebrity endorsement fees and bonuses can afford an athlete long term financial security. For more information, please contact John Darer® CLU ChFC CSSC RSP CLTC at 888-325-8640

Prevent Lottery Winners From Ending Up Losers: Give Them More Options

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Do limited options for lottery winners increase the likelihood of dissipation? The choice is simply cash or annuity and many just take the cash. Some end up with nothing even though they started their post winning life with more than many are able to save in a lifetime.

The latest story about a lottery winner to end up a financial loser is Norfolk, England's Michael Carroll. Carroll , who managed to squander approximately $14 million he won February 11, 2002, at age 19, over the course of 8 years (after being down to about $900,000 in 6 years).

• Lost £1million on the dogs and horses (gambling)
• Spent £1million on the Rangers his favorite soccer team
• £400,000 fleet of luxury cars (which he sold in 2009 and spent the proceeds)
• Boasted about sleeping with four a day - a total of 2,000 at a cost of £100,000 over eight years - in order to sate his sexual appetite.
• Reportedly lost an estimated £80,000 on a property deal in Dubai after the market fell.
• In 2004, Carroll was jailed for five months after failing to comply with a drug treatment order, imposed as part of a sentence for cocaine possession

A May 30, 2010 story in Britain's Daily Mail quotes Carroll as reflecting "'The party has ended and it's back to reality. I haven't got two pennies to rub together and that's the way I like it. I find it easier to live off £42 dole than a million. He said others had benefited from the win more than he had. 'I'm just glad it's over. There were also vultures everywhere after my cash. I started to see what people were really like,' he explained.

Is it fair to the taxpayers that someone who won a sizeable sum is allowed to go on welfare and possibly qualify for Medicaid as a reward for a reckless financial downfall  in such a short period of time after their windfall?

On the one hand one could say people should have the right to screw themselves up. They make bad business decisions every day that cost them their savings. They borrow too much. They make bad investment decisions. Some get scammed by  the likes of a Bernie Madoff, Scott Rothstein, Marc Dreier or lower level alleged Ponzi hoods like "Dirty Barry" and Nicholas Cosmo Some get fleeced or taken advantage of by friends or family, or salesmen with a hot tip (never answer an investment survey!).

Today's lottery winners generally have only two choices;  a) take a lump sum or  b) take an annuity. Why don't they have more choices so they can make better decisions?

Why not give a lottery winner the ability to have a portion in an annuity? Give the individual the ability to have a stable secure income while still being able to grow into their new found wealth.  Perhaps a choice of all cash, all annuity, 1/4 annuity, 1/3 annuity and 1/2 annuity.  There should be enough options so that a person can make a reasonable choice.  Perhaps there should be some sort of guidebook to help people make an informed decision.

Using US rates for illustrative purposes, a 1/4 annuity would have meant $10.5 million in cash about $3.5 million into the annuity at say 5.41% tax deferred, the 30 year bond rate of February 11, 2002.

So our "hero" would have close to $7 million in net cash and an annuity that pays him $189,350 a year for 30 years. After assumed 35% taxes, the annuity would be about $123,077. He could blow all the cash and still have a meaningful income. Have a look at his mug in the link below. Think he'd be smiling more with more than the equivalent of $75 or so dollars a week on the dole?

Moreover, the secondary market assures that liquidity is still available.

Some might say why be paternalistic? Who gives a rat's ass if some SOB blows all his/her money?  I say why the hell not? Having now had the benefit of hindsight, if a guy like Michael Carroll finds it easier to live off 42 pounds a week compared to having a million in the kitty, perhaps somewhere in the middle would be right.

Read the Daily Mail story about Mr. Carroll.

Some of the problems experienced by Mr. Carroll could well be experienced by a personal injury victim, who through his or her own personal injury or the death of another comes into a large sum of money. Read our section on Structured Settlements for Minors and Settlement Planning For Children and Young Adults,