Structured Settlement Transfers | NJ Judge Masterclass On How to Evaluate "Best Interest"

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

Judge Nelson Johnson is THE MAN when it comes to NJ structured settlement transfers.  How refreshing to see a judge who takes his responsibility seriously and doesn't rubber stamp structured settlement transfers. 

Judge Nelson Johnson's decision in the matter of In re Keena, No. L-1004-15, 2015 BL 315298 (N.J. Super. Ct. Law Div. June 18, 2015) [2015 BL 315298, a structured settlement transfer that was approved, is a masterclass in how judges should be evaluating "best interest" in structured settlement transfers.

In his decision Judge Johnson discloses that the following questions are routinely posed by his court, to payees on the sale of structured settlement payments:

1. Date of birth?
2. How far did you go in school?
3. Where and with whom do you live?
4. Is anyone dependent upon you?
5. Do you have any other source of income beyond annuity payments?
6. Tell me about the lawsuit that resulted in the payments you hope to sell.
7. Discuss/detail the injuries sustained giving rise to the claim.
8. Do you expect you will require future medical treatment for these injuries?
9. Did you understand the terms of the structured settlement when you agreed to it?
10. What has changed  making the payment  schedule not satisfactory?
11. Who was the lawyer who handled that claim? Have you conferred with him/
    her regarding this proposed sale?
12. Have you sought advice from anyone (professional or trusted friend) as to whether this a good
    move for you? Who?
13. Tell me about the payments from prior sale(s) of any structured settlement payable to you: how
    were those funds used?
14. If this transfer is approved, please detail how the funds will be used?
15. Explain how the sum to be paid to you will benefit you to such a degree that it is better to
    receive that reduced sum now, rather than receiving the full amount on the date you originally
    agreed
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What a Contrast!

Contrast the care taken by Judge Nelson C. Johnson with the "WTF method* " apparently used by the Portsmouth Virginia Circuit Court Judges in approving 11 structured settlement transfers for Terrence Taylor in 2 years.  As I have shown from information posted by that Court, the Portsmouth docket has been crammed with as many structured settlement transfer hearings into an hour as it can. Clearly the questions that the exemplar Judge Nelson C. Johnson poses,  would take longer than the 1-2 minutes per case that were allocated to Judge Dean Sword Jr. on one of the docket days I highlighted in a prior post.

* there's just no way to sugar coat it

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KEY TAKEAWAYS

The key takeaways from Judge Nelson C. Johnson's decision are these:

• The court must never lose sight of the fact that at the time the structured settlement was entered into the purpose was to create a degree of financial security for the injured person

• Ordinarily, at the time a structured settlement payment schedule is established by a plaintiff, or a          plaintiff's parents and legal counsel, the purpose is to provide a degree of financial security, assuring      that funds will be available at various benchmarks in a person's life. In short, it is a good faith effort to  save people from themselves, by insulating injured persons from the temptation to possibly squander      their settlements, leaving them unable to provide for themselves or their dependents. This purpose,    and the right of any competent adult to choose how best to handle his or her own finances, creates  a tension that can only be resolved by engaging in, what is of necessity, a case by-case assessment    of that person's situation and how the proposed transaction will benefit them long term.
• As learned first-hand by trial judges across the nation, and as revealed by the above sampling of case law, the responsibility of the court is a heavy one.

• The court's obligation is much more than merely inquiring into whether the payee is competent and has voluntarily entered into the agreement with knowledge of its consequences.

• It is not enough for the court to merely learn that the payee understands the consequences and the significant sacrifice being made through the sale.

• The court must make "express findings" that the proposed sale is in the payee's "best interest" by somehow improving his or her life (or addressing an urgent need), making the loss of future income and the receipt of a lesser sum now akin to an investment in the future which will enhance his or her life in a meaningful way.

• This is the primary means by which to "optimize" the lesser sum, namely, using it to augment the payee's life's circumstances in a manner that waiting for the money could never do.