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

The Personal Injury Victim's Dilemma | Managing Expectations of Others

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Personal injury victims may face the post settlement dilemma of "It's Your Settlement and Everyone Wants Your Money Now". Working with a settlement expert who is also a Certified Financial Transitionist can be helpful to help you manage expectations of family, friends and others and to help sort through, organize, prioritize and help make it easier to process your options. Settlement planning expert and Certified Financial Transitionist John Darer covers the issues in this introductory video.

What is a Certified Financial Transitionist (CeFT)?

CeFT holders are experienced financial professionals who understand how life transitions change financial situations.  It is a level up designation in that CeFT designees must also have earned and maintain at least one other highly respected professional designation such as the CFP, CIMA, ChFC, CDFA, CPWA, CPA/PFS, or CFA. 

CeFTs have the comprehensive knowledge and skills necessary to guide clients through a variety of transitions. When they meet with clients, CeFT holders show empathy and know how to listen carefully to their unique needs and emotions so they can make appropriate recommendations.

During their 12-month training program through the Financial Transitionist Institute,a division of the Sudden Money Institute, CeFTs become well-versed in the four stages of transition and use them and different tools to guide their clients through a successful transition during the uncertain and often chaotic times they’re facing.

With their support, you’ll be able to make smart financial decisions that lead to a happy future and help you avoid money problems down the road. Unlike a traditional financial advisor, a CeFT will understand the emotional side of your situation and keep it top of mind when they make recommendations and guide you through your transition. 

They can prevent you from making emotional, rather than logical financial choices that take a toll on your finances. Whether you’re anticipating a life transition or found yourself facing one unexpectedly, a CeFT can be a valuable resource and thinking partner. 

Sources:  Sudden Money Institute,  Wealthtender.com

Video copyright:  4structures.com LLC

 

Consumer Financial Protection Bureau Warns on Aggressive Structured Settlement "Cash Now" Deals

by John Darer CLU ChFC MSSC RSP CLTC

One of the constructive solutions that I proposed in my 2015 white paper on the structured settlement secondary and tertiary markets was there needed to be a "seller's guide" that made sellers more informed.  [ see The Structured Settlement Secondary Market Fills a Need But Reckless Lack of Oversight of the Secondary and Tertiary Market Creates Problems in Need of Constructive Solutions]

The Consumer Financial Protection Bureau Has Now Issued a Warning to Consumers About Selling Their Structured Settlements in response to "What should I know before giving up my monthly disability, personal injury or structured settlement payments in exchange for a one-time lump sum payment?"

The CFPB Warning for People Receiving Structured Settlements

"You could receive much less cash than your settlement is worth. Dealing with companies that offer lump sum payments for your disability, personal injury or structured settlement payments can be very risky. Some companies target people with disabilities who have structured settlements. If you receive a flyer or solicitation promising fast cash or a lump sum payment for your monthly payments, be aware! Consider all options, including talking to people you trust with your finances, or your own lawyer or financial counselor, before trading your future payments for instant cash".

The CFPB Offers Reasons Why not to Take a Lump Sum?

1. It can be a bad deal for you because you may be getting a lot less money than you would get over time.
2. By giving up your structured settlement, you are signing over the right to these guaranteed payments and money that you may need for your monthly expenses for the one-time benefit of receiving a lump sum.
3. Potential risks to taking a lump sum include: spending your lump sum payment quickly and not having money for living expenses later; losing it in an investment; or someone trying to take or borrow the money from you.
4. Monthly payments don’t have those risks. Monthly payments may give you the needed stability to manage your finances, to pay your rent or mortgage, and to pay your bills. Take a hard look at your ability to manage money before you accept one of these deals.
5. Make sure you have a plan in place for how you will pay your monthly expenses without the benefit of monthly payments from your structured settlement.

The Consumer Financial Protection Bureau suggests that you

Get answers before you consider giving up your structured settlement payments:

• Do you have other options? If you are having trouble paying your bills and see a lump sum payment as an opportunity to get out of debt, first contact your creditors to see if you can work something out. If you have hospital bills, check and see if your hospital has a “charity care” program or a way of providing free or reduced prices.

CFPB Tip

Get a second opinion or an independent evaluation from a trusted source, your own attorney, or a financial adviser. Be cautious of recommendations from the company trying to get your structured settlement.

Structured Settlement Seller's Guides Need to Be Delivered On First Approach

The CFPB guide provides good information, but it only appears online. That is not enough to further the objective of keeping consumer informated.

This is a simple fix to state structured settlement protection acts that should have bipartisan support. It should not be difficult to create a seller's guide. There is a three day cooling off period ostensibly to give the seller time to think about what they are doing (presuming they understand what they are doing). Perhaps Maryland, New York, Connecticut, Florida, Virginia and others can take a leadership role in this.

In addition to what is in the CFPB posting, there needs to be a warning about being induced to participate in forum shopping, in particular what it is and the potential consequences to a seller of lying about state of domicile and a seller of structured settlement payments accepting inducements to lie. Investors in structured settlement payment rights must rely on the validity of a court order and the validity of the representations made to obtain such order for the security their investment.

John Darer's Structured Settlement Watchdog® commentary exposes bad business conduct in the structured settlement secondary market, provides relevant information that may be helpful to attorneys, plaintiffs, defendants, claims adjusters, judges, investigative reporters in local and national news media, sellers and buyers of structured settlement payment rights, law makers, law enforcement, attorneys general, the Consumer Financial Protection Bureau (CFPB), the FTC, consumer and disability advocate groups and interested others. The content is informative, irreverent and effective.  For more information about John's pro bono Structured Settlement Watchdog work, please visit the Structured Settlement Watchdog® website

The Consumer Financial Protection Bureau is a United States government agency established in 2011, that was built to protect consumers. Its free resources help you have the information you need to make informed financial decisions.

Give All The Settlement Money to Child At 18? This One Joined ISIS and "Was Handing 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.

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.

Lending Your Settlement Money | Being Generous v Being a Sucker

by John Darer® CLU ChFC MSSC RSP CLTC

"When life changes money changes and when money changes life changes" says Susan Bradley of the Sudden Money® Institute.  One aspect of settlement money  "life changes" is the people who come out of the woodwork seeking loans.  Special care must taken with decisions with settlement money, particularly if you are physically or mentally unable to work because your settlement money has to last.

A very poignant article  Buddy Can You Spare Five Grand?, has been published in the August/September issue of AARP magazine.  Yeah Yeah... I've been receiving it since I turned 40.  The article, by Laura Daily,  discusses  several real-life scenarios to inspire readers to create their own ground rules for giving or lending.

The six money lending scenarios covered by the article are:

• The Accident Victim
• The Emotional Blackmailer
• The Friend Who Wants More
• The Heartsick Relative
• The Hard to Believe Storyteller
• The Prodigal Nephew

"Buddy Can you Spare Five Grand?" is an important read for those receiving settlement money and those who sell a structured settlement for a lump sum of cash.  Think it through.

 

 

More Misleading Advice from Genex Capital, On Inherited Structured Settlement

by John Darer® CLU ChFC MSSC RSP CLTC

Awful advice from Genex Capital website about inherited structured settlements. Genex Capital, disseminates horribly misleading information on the Structured Settlement-Quotes (SSQ) website about structured settlement factoring as part of its webpage " 13 Reasons To Sell Your Structured Settlement"

"In some instances annuities are inherited--a person who has inherited such a structured settlement may choose to sell and have their inheritance in its entirety, up front"

If you inherit a structured settlement what you are inheriting is a series of  periodic payments payable now or in the future that are income tax free, if the periodic payments represent damages that qualified for a tax exclusion under IRC 104(a)(2).

If you sell your right to receive such payments you sell those payments at a discount to the present value of the future payments, not the future value.  Ipso facto, bucko, you CANNOT have your inheritance in its entirety, up front or otherwise.

Isn't it your entire inheritance that you want?

 

More accurate information about inherited structured settlement.

Does Your Structured Settlement Need "After Care"?

by John Darer CLU ChFC MSSC RSP CLTC

One of the benefits of a structured settlement is that it does not need "after care". With the exception of an occasional address , beneficiary or bank change,  or to explain to your child that they have a structured settlement once they reach the age of majority,  there is nothing that you need to do with your structured settlement once you set it up.  Structured settlements provide safety, security and guarantees to people who want a stable income with minimal maintenance.  It's like a "job you can't be fired from". Even if you're naughty you still receive your structured settlement payments.

This has not stopped structured settlement cash now pushers and secondary market consultants from attempting to create an illusory need for "after care" services for structured settlements, that really isn't necessary. 

If you need financial advice, seek financial advice only from those who are registered to do business in your state, who possess relevant professional credentials and regulatory oversight.

 

 

 

 

Let 'Em EAT Cake! | Investing in "Food Scraps" and More Money Silliness

by John Darer CLU ChFC CSSC RSP CLTC

A 33 year old slice of Princess Diana's wedding cake has sold for $1,375 at auction at the Olympia International Fine Art and Antiques Fair in London.  In 2012 a 31 year old slice of toast from Charles and Diana's 1981 wedding breakfast sold for almost $400.

As was reported in 2007, a single french fry and a half drunk bottle of Coke containing David Beckham's saliva were up for bid on a New Zealand auction site. Bidding got up to $159!

It's the case of "don't do this at home" folks.

After another uninspiring performance, Manchester United could have used a swab of DNA from an in-prime Becks today.

Settlements, Mediations, Managing Financial Transitions | Transition Stress

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

Plaintiffs are often asked to make life impacting financial decisions during a period of heightened stress. Transition stress can impair the decision making process, perhaps even leading to a frozen state, or a combative state, where making a decision seems impossible.

Where does that leave you if you are the plaintiff, the defense or plaintiff lawyer or a mediator, are in the middle of a mediation on a personal injury or wrongful death case, or having settled the personal injury or wrongful death case and trying to wrap things up?  In some cases it may even lead to conflict between plaintiffs and their personal injury lawyers, despite the job the lawyers have done in obtaining a favorable recovery, not to mention the impact on accounts receivable from the resulting delay.

Understanding and managing transition stress should be an important consideration when a case is heading towards a possible settlement, even before settlement discussions begin at mediation or elsewhere.

John Darer's  article Clients Need Help Planning Life Transitions was published in the June 9, 2014 issue of the Connecticut Law Tribune. Download Reprint_John Darer 060914 CT Law Tribune.

Sudden Money advisors have a process and protocols for helping clients navigate their best path. For more information please call me at 888-325-8640.

 

Are There Enough Structured Settlements to Justify The Volume of Cash Now Ads?

by Structured Settlement Watchdog®

Is the amount of cash now for structured settlements advertising on overload?  The above question was asked of me by an Ivy League graduate recently. Maybe he's onto something.

Structured settlement secondary market afflictions on overload:

1. Saturation TV advertising by JG Wentworth/Peachtree and others. You already have enough awareness.  Parents are posting videos of their children being more obnoxious than the zaftig Vikings while "setting a fine example" of the "subtle difference" between  instant gratification and delayed gratification. I spoke to a teenager whose impression of the structured settlement secondary market is one of sleazes. That's your budding target market! How about moving past awareness and moving onto what's your value proposition?
2. A plethora of poorly researched and often illiterate content generation in the name of "search engine optimization". Do we really need to have ANOTHER search engine "optimized" answer to "what is a structured settlement?" written in the syntax of a non-native English speaker, or someone with  grade school writing skills?
3. Press release "diarrhea" on meaningless topics that nobody cares about, sometimes even  written in the name of people  that don't exist. 
4.  "Hashtag whores", promiscuous in their association of the term #structuredsettlement with unrelated topics on Twitter, Facebook and other social media.

 

Hashtag Whores , Again, Jimmy?  I'm Afraid You Have a Bad Case of Tee Hee

 

Image:Dreamstime.com

Structured Settlements and Financial Aid for College/University

by John Darer CLU ChFC CSSC RSP CLTC

Can a child’s insurance settlement have an effect on how much financial aid they receive for college?

There is no question that it does and therefore it is important for parents, to understand how settlement proceeds from their child's settlement might affect different types of financial aid.

The first stop for financial aid is the FAFSA form. FAFSA is for the federal financial aid program as opposed to financial aid from the academic institution itself. Some institutions require the CSS profile to be completed for institution based aid. These forms are separate and distinct.

Dealing with FAFSA, eligibility for federal financial aid is based on the financial status of a student and his/her parent(s).  The status determines so-called  "expected family contributions" or EFCs. The FAFSA financial aid form seeks information about Income, Cash and Investments. Income is verified by the parent's and student's tax returns, Cash is verified by bank statements and Investments are verified by performance reports.

The United States Department of Education  FAFSA Help Desk is a useful resource with regard to Federal Financial Aid programs.  Be mindful of institutional based financial aid, where the university or college provides financing to students.  More than 300 schools may also use the separate CSS Profile to evaluate the  eligibility for financial aid.  There are some important nuances between FAFSA and the CSS Profile that are important for parents, attorneys and settlement planners to know.

Generally speaking, the Income and Cash sections are weighted more heavily than the Investment section by the Department of Education since Income and Cash are considered immediately available to the applicant and therefore, immediately available to be used for college expenses. With the FAFSA, an investment is considered an asset that is not immediately available for use by the applicant and therefore NOT immediately available to use for school expenses. When qualifying for financial aid, the more money that is immediately available to the applicant, the higher the Expected Family Contribution (i.e.  the less financial aid they are entitled to receive). 

With the CSS Profile income producing investments must be shown at their fair market value. An example that I saw which might have similar cash flow to structured settlements,  was a rental property in the child's name with a stream of rental income.

If we start with a given that it is more desirable to go to college than not, what are some of the things to look out during the settlement planning process,particularly when dealing with teenage plaintiffs that have college on the horizon?

A. One of my esteemed structured settlement industry colleagues states " As with cash proceeds from a personal injury claim, structured settlement proceeds are income tax-free. As such, there is no tax reporting from the annuity company to your child or the IRS. Because of this, payments from a structured settlement are not considered income. Therefore, when completing the financial aid application, neither a cash settlement nor a structured settlement should be reported as income since they are not treated as income by the IRS."  This gets an incomplete, in my opinion.  Here's why:

Many structured settlements are set up with 4 lump sum payments timed to the college years or college semesters.  Sometimes lump sums are tied to the birthdays.  Be aware that once the payments are made in lump sums on his/her birthday at age 18, 19, 20 and 21 and that birthday is early in the year, prior to the FAFSA form completion, the amount of that payment is available to be counted. One way or another the payments will be available for the EFC calculation at some point.  The qualification process for financial aid is an ongoing process. 

Bear in mind that a greater percentage of the assets of the student are expected to be used for the EFCs than assets of the parents. This is where the structured settlement secondary market gets it all wrong.  Cash now pushers try to get young adults to sell their structured settlements at a discount "to help pay for college". The end result is that the student simultaenously gives up the factoring discount and then screws herself/himself on the financial aid front when 20% (FAFSA/Federal formula) 25% Institutional Method) or 5% (Consensus Method) of the structured settlement transfer proceeds go towards the EFC!

B.    If, and only if the student is applying to a CSS Profile school and has an existing structured settlement, consider seeking a number of bids from settlement purchasers for the cash flow.  Some cash now pushers market themselves as providers of liquidity for illiquid cash flows, therefore it would be a good measure of fair market value.  THIS DOES NOT MEAN YOU SHOULD SELL YOUR STRUCTURED SETTLEMENT (see paragraph above!) In my opinion, for credibility, only seek bids from companies that have a real office address in the United States, not a UPS box.  Make sure the bids are in writing and on the letterhead of the company. The structured settlement secondary market could liase with the primary structured settlement market in a constructive way here. The way I understand it from what I've read is that it is the fair market value, not the present value, that applies. 

C.  For non CSS Profile schools  and smaller settlements, consider having smaller payments during the college years with a balloon payment after  the anticipated graduation date to pay of the debt. Maximize aid and then pay it off while establishing good credit.

D. Some settlement planners are recomnending non qualified annuities, such as fixed indexed annuities as a structured settlement supplement or alternative in some cases.  It is critical to note that non qualified annuities DO get counted on the CSS profile, but not on the FAFSA.

E. Given that some settlement planners and financial advisors might recommend the use of structured settlement payments rights as an investment, possibly owned by an LLC.  Setting aside the highly misleading marketing labels (that include the word "annuity" to portray the rights) used by merchants of the derivative instrument,  it is possible that these investments will be treated in a similar way to rental income and need to be included on the CSS profile.