I felt compelled to read Tacker
LeCarpentier's February 16, 2009 article in North Carolina Lawyers
Weekly after the NSSTA posted a link and "belated kudos" on its website referring to the article as "perceptive". After reading it I was left with considerable doubt as to whether the person responsible for that adjective actually took the time to read the article.
What could have been a great
article from LeCarpentier has left me disappointed. While LeCarpentier
does a reasonable job of stating the benefits of structured settlements
he engages in too much puffery, fails to do his homework and, given the
opportunity, suggests no alternative to the limitations in structured
settlements while bashing The Halpern Group , a direct competitor of his, which has simply
established a solid presence in LeCarpentier's territory and with the
North Carolina Association for Justice.
As a Registered Settlement
Planner I am tired of people who call themselves settlement planners
(but who are not registered settlement planners) who "talk the talk"
but "walk the wobble" with an apparent ulterior motive to simply peddle
structured annuities as a panacea.
LeCarpentier, a North Carolina licensed attorney, Summit Structured Settlements affiliate and Director of Annuities for a subsidiary of Lawyer's Mutual Liability Insurance Company of North Carolina says: "Sound,
diversified settlement planning simply involves the appropriate
allocation of settlement assets among a variety of risk categories in
order to (1) first and foremost, provide income guarantees, security,
liquidity and flexibility; (2) avoid the risk of dissipation of
settlement assets; (3) avoid the volatility and uncertainty of the
equity and bond markets (especially in today's uncertain and unsettled
financial circumstances); (4) secure ongoing funding for past, present
and future special needs, or life-care planning; (5) ensure maximum tax
advantages; and (6) obtain a favorable return on principal with minimal
Points that LeCarpentier agrees with Halpern:
Virtually all plaintiffs will squander their financial recovery within a few years
Many, but not all, claimants are
unprepared to manage their settlements, thus putting their settlements
funds and their financial futures at serious risk.
Claimants, including their
attorneys and other financial advisors, should understand all of the
products and services available to them.
LeCarpentier admits that "all of
these products (including structured annuities) have pros and cons, and
therefore an effective and professional settlement planner should be
weighing the individual needs of the claimant, evaluating the pros and
cons of each of these products and recommending to the claimant and/or
the claimant's family the appropriate mix of products and services
that best secure and protect the claimant's settlement proceeds so as
to provide long-term security and income for the claimant, prevent
dissipation of assets and obtain the most advantageous tax position and
return for the claimant.
He continues with "those hardships might include
medical emergencies, job loss and other personal or family emergencies.
That is why I am a strong advocate for diversification and
guarantees, security and protection, not merely liquidity, flexibility
and safety, as my competitor recently stated as his company's goals
(see R. Halpern, Protecting plaintiffs from the squandered settlement,
North Carolina Lawyers Weekly, Dec. 1, 2008, p. 13)".
"An effective settlement planner can create a plan that allocates the claimant's settlement funds among several products that
allow for security through income guarantees, flexibility, liquidity
and tax advantages, while avoiding the possibility that a claimant
might outlive his or her settlement funds".
LeCarpentier says: "You simply cannot outlive a life-contingent annuity". Comment: TRUE, in such case the annuitant, if the measuring life, will receive an income he or she cannot outlive.
Tacker LeCarpentier goes on to say "diversification also avoids the claimant becoming a target of many of the unsavory companies making up the factoring industry ("cash now pushers").
Many of these factoring companies employ massive advertising, sales
calls to vulnerable annuitants and other predatory sales tactics to buy
annuities of all types at heavily discounted prices.
Comment: Is Le Carpentier saying that diversification of annuity products avoids the annuitant becoming a target (of factoring companies)? Here's what I think...
In fact a number of settlement
planners, including NSSTA and SSP member Patrick Hindert, consider and
have published and marketed misguided opinions that factoring is an
improvement to the structured settlement product. Moreover, a notable
number of settlement planners assist annuitants in factoring their
structured settlements and take compensation from such work, some not
so openly. A factoring broker who stated that 100% of its clientele
was made up of industry members, stated in writing that 90% of them are on the take. More significant is that an independent year long grass roots structured settlement transparency initiative to
obtain affidavits from industry members about their factoring business
practice was publicly rejected by the National Structured Settlement
Trade Association and 95% of industry members, the
majority of whom to this day have no disclosure on factoring in
published materials. The purpose of the initiative was to show the
trial bar that such practices were in the minority and to educate the
bar on questions they should be including as part of their due
diligence on settlement consultants and other financial advisers.
If that's not bad enough the
factoring companies are believed to employ "court sniffers" to obtain
court papers identifying annuitants and then contact them to hock them to sell their structured settlements.
That the NSSTA would endorse LeCarpentier's article having prior knowledge of this business practice is astounding.
Le Carpentier then asks: So, why
would claimants risk putting all of their settlement funds in a
recovery-management program unless its administrator can state under
oath that his program will provide the tax-free, guaranteed payment
streams of a life-contingent structured-settlement annuity?
This is where LeCarpentier appears
the hypocrite because LeCarpentier wants Halpern to make a statement
under oath when he would not do the same when it came to the
structured settlement transparency initiative?
Has The Halpern Group made a claim
that the recovery management trust or any of its products "will provide
the tax-free, guaranteed payment streams of a life-contingent
structured-settlement annuity"? If I'm missing something will
LeCarpentier please show me where.
Does Tacker LeCarpentier suggest that all or most tort victims
require a life contingent structured settlement annuity? Inasmuch as
the term "life contingent annuity" also applies to life contingent lump
sums, why is Tacker Le Carpentier using it to describe a life annuity?.
Even if we're just talking annuities why limit the plaintiff's choice
to 12.5% of the possibilities for structured settlement payments?
While LeCarpentier says that "
although certain income streams to a claimant out of a trust can be
made on a tax-exempt basis, nearly all trusts must pay taxes within the
trust on investment gains (using Internal Revenue Service Form 1041)",
he neglects to recognize that the tax exemption is not always an issue
such as when there are out of pocket medical expenses for which a tax deduction can be taken. After all as LeCarpentier himself has stated one
of the tenets of "sound diversified settlement planning" is to ensure
maximum tax advantages. The value assigned to liquidity and the
putative debit to a trust product for not having the tax advantage of a
structure is offset by the tax deductions. Moreover an active manager
can construct a tax efficient portfolio to address both liquidity and
tax advantage. Not to rub salt in LeCarpentier's wounds but the passage
of the Disability Savings Act would render his tax argument moot up to
the limits of the Disability Savings Account.
The contradiction of his own advocacy continues as LeCarpentier addresses the costs of creating and managing a trust which he claims are not so with (Section) 130 qualified structured settlements. He says "so, would you and your client rather have 100 percent of the claimant's settlement proceeds invested in an annuity now or 91.5-96 percent of those funds invested now? WAIT A MINUTE!!! Didn't LeCarpentier just espouse diversification?
LeCarpentier states "trusts
do not, and cannot, guarantee the performance of the "assets under
management". IRS 130 qualified structured settlements can and do". IRC
130 qualified structured settlements DO NOT guarantee "assets under management". Per Wikipedia, Assets Under Management
(AUM) is a term used by financial services companies in the mutual fund
and money management, investment management, wealth management, and
private banking businesses to gauge how much money they are managing. A structured settlement involves a contractual guarantee of future payments in an amounts and at times set forth in the contract
or settlement agreement and, if assigned, in the qualified assignment
agreement. The use of the term "Assets Under Management" by a
settlement planner in the aforementioned context is a grossly misleading misrepresentation of the facts, in my opinion. Total LeCrap!
LeCarpentier lobs up what seems at
first blush to be an impressive number of cases against an adversary.
At least one of them is a dud however, In re Estate of Yolette Mede,
677 N.Y.S.2d 707, 177 Misc.2d 974 (1998), which is among those cited as
something that North Carolina courts may find as disturbing as "several
different trial courts in New York State". Seemingly lost on the Le
Carpentier is that the Mede decision was the bane of New York City
area structured settlement professionals' existence for a period of
time. As someone with practical experience in the effect of the Mede
decision, I can tell you that in the immediate aftermath of the Mede
decision the Surrogate in Kings County New York was even rejecting "(IRC Section) 130 qualified" structured settlements
that went beyond the age of 18 of a minor. I further understand that
Mede decision would probably not have even happened had the former
Halpern Group employee shown the Surrogate the paperwork for a minor's
trust instead of the adult trust upon which the decision was rendered.
This author personally spoke with Surrogate's office a number of times
and informed other structured settlement colleagues and attorneys so
that a solution could be made.
LeCarpentier admits that there
will soon once again be inflation risks, yet appears to promote a short
term strategy addressing deflationary pressures in the economy.
Attacking United States Treasury Bond Trusts he opines that that buying
Treasuries at their current prices would seem illogical and not
particularly advantageous for most claimants, particularly those with
special needs. Le Carpentier again exposes the inconsistency in his
game plan. First he touts the longevity insurance of an annuity and
then takes the short term view on inflation. If longevity insurance is
a concern then the time horizon is extended and inflation is
therefore a corrolary concern. It would appear that LeCarpentier is not
familiar with the fact that such United States Treasury Bond Trusts are
funded with Treasury Inflation Protection Securities (TIPS) Treasury Inflation Protected Securities, or “TIPS”, are government securities designed by the U.S. Treasury to help protect investors from inflation.
The above chart from the U.S.
Bureau of Labor Statistics shows a 105 year history of inflation. The
level of spending as a percentage of GDP is in the range it was in
World War II. Check out the change in the inflation rate in the decade
after. Will history repeat itself?
Running up the score in an epilogue to this critique of
Mr. LeCarpentier's NC Lawyers weekly article, I selected this
contribution to structured settlement financial literacy from his "revised FAQ" on structured settlements in which LeCarpentier poses the question Can a Client Buy a Structured settlement Annuity AFTER Settlements? To which he answers..."Yes,
with qualifications. The benefit is that a structured settlement
annuity will have better rates than an ordinary annuity and your client
can still benefit from a 'rated age.' On the other hand, the income portion of the annuity payment will be taxable,
and tax laws require that the annuity must begin within a year and have
substantially equal payments (so no long deferrals and lump sums).
However, if your client has settled a personal injury case without a
structured settlement and needs the security of guaranteed income, a structured settlement after the fact will often be the best alternative". This is also total LeCrap by any definition of structured settlement! Since when does a client buy a structured settlement unless someone like J.G. Wentworth is your client? In that case they would be buying the structured settlement payment rights.
National Financial Literacy Month Begins April 1, 2009 Start walking the walk. Quit walking the wobble!
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