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

NJ Clarifies Investors in Structured Settlement Payment Rights Have NO PROTECTION in the Event of Insolvency

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Transfers or assignments of other people's structured settlement payment rights, have been deceptfully marketed to investors as secondary market annuities by certain members of the structured settlement secondary market and

If you buy someone else's structured settlement payments in NJ, you're not buying an insurance product. You get nothing if the insurer fails.

market, in addition to certain settlement planners and structured settlement brokers who incorporated them in settlement plans and (as the evidence showed last year), some have even used them in purported qualified assignment documents with a related factoring company. 

Then came the 2017 Revisions to the Life & Health Guaranty Associations Model Act(#520), which is has been approved by the majority, but not all US states, which expressly excludes structured settlement annuity benefits where a payee or beneficiary has transferred rights in a structured settlement factoring transaction regardless of whether the transaction occurred before or after the adoption of the 2017 Revisions became effective.

See  Bad News for Structured Settlement Investors as NAIC Encourages Adoption of Model Act #520 - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

Why States Now Exclude SMA Investors From Annuity and Insurance Insolvency Schemes? - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com)

New Jersey Joined the Party in August 2022.

Progress report on the clarity for investors in structured settlement payment rights and it isn't good news. I reported that it was coming and it is now effective in New Jersey.

New Jersey P.L. 2022, CHAPTER 98, effective August 12, 2022,  AN ACT concerning the “New Jersey Life and Health Insurance Guaranty Association Act” and amending P.L.1991, c.208 has SERIOUS implications for NJ investors in structured settlement payment rights. 

c. Except as otherwise provided in subsection d. of this section, P.L.1991, c.208 (C.17B:32A1 et seq.) shall not provide coverage

(11) structured settlement annuity benefits to which a payee (or beneficiary) has transferred rights in a structured settlement factoring transaction as defined pursuant to section 5891 of the federal Internal Revenue Code, 26 U.S.C. s.5891(c)(3)(A), regardless of whether the transaction occurred before or after that section became effective.

The in excess of two decade long strategic failure of state legislatures to (1) implement licensing standards and (2) to regulate the secondary market sales practices through licensing standards and regulatory enforcement of a reasonably forseeable problem

 

 

 

NJ Association Of Justice "Partners" With Structured Settlement Factoring Company

by Structured Settlement Watchdog

Lynne M Kizis, President of the New Jersey Association for Justice has written an endorsement of Canadian structured settlement factoring company Strategic Capital in which the amount of the $3,000.00 financial contribution to NJAJ plays a prominent role. A Business Partner of the New Jersey Association which pays $3,000.00 annually is considered a Copper Partner and each and every member of NJAJ is made aware of business partners' financial contributions.

Strategic Capital is one of the many companies in the structured settlement secondary market whose value proposition is to pay pennies on the dollar in

Bad Optics |  What Does Taking $3,000 from a factoring company say about NJAJ's strategic vison?

exchange for the hard earned future periodic payments that New Jersey trial lawyers have fought for their clients to receive. The Lynn Kizis letter is a disgrace and embarrassment, in my opinion, and appears to demonstrate that the New Jersey Association for Justice is more concerned about getting a few thousand dollars in the door from a company in an unregulated industry that has no licensing standard or meaningful regulation of sales practices that have proven harmful to consumers all across the country.  

Is Taking Financial Inducements For Endorsements Of Structured Settlement Factoring Companies Consistent With NJAJ Mission?

Should members of NJAJ be aware of national news stories that have appeared in the Washington Post about annuitants and investors in structured settlement payments rights who have been screwed?  

NJAJ says in its advertising that it is dedicated to preserving justice for all and protecting people’s rights by working to strengthen the laws for safer products and workplaces, a cleaner environment and quality health care.  A Pennsylvania retired couple invested just under $153,000 of retirement money with a New Jersey company in a factored structured settlement payment stream and lost it all because of a fraud in the origination of the deal for which the New Jersey company was brokering. Yes lost it all. The New Jersey company inaccurately marketed the investment as an annuity and it was clear that transactional risk was never discussed in the marketing hype.  [ see Deposed Parties in Wall v Altium Group LLC Misrepresented the Nature of What Retirees Were Buying Multiple Times]

Then there was a case in March 2019 where the Superior Court in Morris County overturned a transfer where a 20 year old NJ resident was solicited by a Philadelphia factoring company and induced to sign papers to transfer payments for someone who was the midst of what was described as a "full blown psychotic episode" and was hospitalized.

Bad Optics for Trial Lawyer Associations

The Consumer Attorneys of California recently issued a similar endorsement letter which will be covered in a separate post.

 

 

 

 

 

 

 

 

Guaranteed Income More Important Than Return to Baby Boomers 55-65

by John Darer® CLU ChFC CeFT MSSC RSP CLTC

 

Stable Income Rules!

"Transition boomers," or people between the ages of 55 and 65, said they would protect their retirement savings with a guaranteed return rather than watching their assets lose value in the market. A 2013 Transition Boomers and Retirement Income survey from Allianz Life Insurance Company of North America found these results "despite the (stock) market’s strength.

Specifically, 87% of Transition Boomers surveyed reported being more attracted to a financial product with 4% return that is guaranteed not to lose value over one with 8% return but with the possibility of losing value due to market downturns. This feeling was higher among: women (91% versus 82% of men), those with under $50,000 in annual household income (92% versus 83% of those with more than $50,000 in annual household income), and those without children at home (87% versus 79% with children at home).

There is a strong parallel between the issues facing those surveyed for the Allianz study and those who are due to receive settlements from the settlement of a lawsuit arising from losses suffered due an auto accident, medical malpractice, an aircraft or helicopter crash, construction accident, gas explosion, maritime disaster.  For the latter, structured settlements may be part of a great solution for these people.

Safety, Security and Guarantees

Structured settlements benefit people settlements by providing a fully customizable package of guaranteed streams of income that can address many types of financial need with safety, security and guarantees

Guaranteed income solutions are an important aisle in our "store".  4structures.com® LLC sells On Time Every Time®

4structures.com® LLC provides a variety of On Time Every Time® income guarantee products and stable income solutions for transition boomers and people and companies involved in lawsuits, settlements and their attorneys, as part of its menu of financial and settlement planning services. For more information about income guarantee solutions such as a single premium immediate annuity, deferred income annuity, structured settlement annuity and specific terms and options, please call me at (888)325-8640, or (203)-325-8640, if within CT)

The Allianz Life 2013 Transition Boomers and Retirement Income survey was conducted by Ipsos U.S. eNation online from March 15-25, 2013 with 1,425 panel respondents age 55-65, and was commissioned by Allianz Life Insurance Company of North America. Please click here for the April 10, 2013 Allianz Life press release announcing the survey results.

On Time Every Time® is a registered trademark of 4structures.com® LLC

 

 

 

 

 

NJ Claims Qualifed Settlement Fund Assets "ARE Available to Beneficiaries"

by John Darer CLU ChFC CSSC RSP

The State of New Jersey has taken the position that money in a qualified settlement fund  is an available source of income and resources for New Jersey Medicaid beneficiaries. This seems to throw a a monkey wrench into the single claimant qualified settlement fund argument [Source:  settlement tax expert Higgins Settlement law blog (November 2, 2011)]

In the words of the State’s attorney: “It is irrelevant that he did not receive distributions and was unable to direct distributions to himself.” The State relies on 42 U.S.C. section 1496p(d)(3)(B) discussing irrevocable trusts.  According to Higgins Settlement Law, the beneficiary’s counsel intends to file a federal lawsuit to clarify the issue so stay tuned.

In the meantime if the State of New Jersey's position reaches the State's apparent intended legal conclusion.  it creates an interesting question. If the funds in a Qualified Settlement Fund are determined to be "an available source of income and resources" for New Jersey Medicaid beneficiaries, what about the rest of the money in the QSF, such as the money in the QSF that would be used for structured settlements and structured attorney fees? Could it be determined that it is "an available source of income and resources" for one and not the other?

Rev Proc.93-34 permits qualified assignments out of a qualified settlement fund. If  New Jersey's position sticks isn't that going to create a conflict?

Times have changed. With few structured annuity issuers accepting qualified assignments from single claimant qualified settlement funds,  neither plaintiffs nor plaintiff attorneys benefit  from the claim of  "full market access" that was previously touted by some settlement planners as a reason to do a QSF.

When it comes to your attorney fees and your client's financial future,  why ride "the bull" when there's a chance  you will end up in "shit"?

 

 

 

Parties Agreed to Cash...Cannot THEN Change Terms To Structured Settlement Without "Meeting of Minds"

by John Darer® CLU ChFC MSSC RSP CLTC

In the matter of Nicholas Impink, a minor by his parent and natural guardian, Shannon Baldi, and Shannon Baldi, individually v David Reynes, Neil B. Reynes and Maria A. Reynes Docket No. A-3448-06Y5 (935 A. 2d 808; 2007 2007 N.J. Lexis 351), the Plaintiff successfully used a Minor’s Compromise hearing to create a structured settlement in a case where Franklin Mutual Insurance Company had agreed only to pay its policy limits in “cash” in the amount of $300,000.00.  Franklin Mutual had only been willing to offer a structured settlement if the plaintiff agreed to accept its as part of a lower priced offer of $250,000.00.

However, on November 29, 2007 the Superior Court of New Jersey, Appellate Division reversed the decision of the lower court, stating:

“It is clear from the record that the terms of the agreement called for the payment to be made in a lump sum, not in a structure.  The motion judge impermissibly ordered a change, therefore, to the terms agreed upon.”

The Court concluded that the only role for the Judge hearing the Minor’s Compromise is to determine whether the cash settlement was fair to the minor.  If not, then the Judge should disapprove the settlement and schedule the case for trial.

For the Appelate decision Download Impinkcase.pdf

Comments

1. The decision makes it clear that there must be a "meeting of the minds", but what is also interesting are the following observations.
2. Holy crap! The 16.66% discounted offer to structure ($50,000 as a percentage of $300,000) to cover the Franklin Mutual "risk" is WORSE than the effective discount factor charged by many factoring companies like Peachtree Settlement Funding. How the heck do you think that makes Franklin Mutual look? Wonder what annuity issuer was being used or if this was an arbitrary number? What did Franklin Mutual get for playing hard ball? Added legal expenses, really bad PR and they probably overpaid the case.
3. If the adjuster was trying to save off the policy limit they might have done better to think about  a number that works in today's environment. For example, why did they not at least give a shot to an offer of $285,000 in a structure, which would have meant a 5% discount factor?
4. If the case were able to have been resolved by way of a qualified settlement fund it is possible the plaintiffs might have been able to achieve their structured settlement objectives. A structured settlement broker or settlement planner would have needed to be on board in advance of settlement discussions to discuss the costs involved of that route.
5. Under the eventual circumstances the plaintiffs still had other alternative periodic payment options using the full $300,000.00, without regard or concern to Franklin Mutual.