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Questions for Qualified Settlement Fund Experts

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Sometimes it's not what is said about qualified settlement funds, but what is omitted that is significant.

Let's take a closer look...

No need to fly "missing information formation" when it comes to QSFs

Is this accurate?

"Qualified settlement funds are established with three requirements:

1. The fund must be established pursuant to a court order and is subject to continuing jurisdiction of the court (26 CFR § 1.468B(c)),
2. It must be established to resolve one or more contested claims arising out of a tort, breach of contract, or violation of law, and
3. The fund must be a trust under applicable state law".

Source: Website of a heavy promoter of qualified settlement funds

Answer:  Here is what 26 CFR § 1.468B(c) actually says (highlight shows what was omitted):

(c) Requirements. A fund, account, or trust satisfies the requirements of this paragraph (c) if -

(1) It is established pursuant to an order of, or is approved by, the United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law) of any of the foregoing and is subject to the continuing jurisdiction of that governmental authority;

(2) It is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability -

(i) Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (hereinafter referred to as CERCLA), as amended, 42 U.S.C. 9601 et seq.; or

(ii) Arising out of a tort, breach of contract, or violation of law; or

(iii) Designated by the Commissioner in a revenue ruling or revenue procedure; and

(3) The fund, account, or trust is a trust under applicable state law, or its assets are otherwise segregated from other assets of the transferor (and related persons).

Source: Legal Information Institute Cornell University

The next question is WHY would one or more of the highlighted sections be selectively omitted in the context of what is being promoted to trial lawyers?  

 

Settlement Planning | Wirehouse Refers Clients to Chat Room for Unsuitable Unsupervised "Advice" Says Accuser

by John Darer CLU ChFC MSSC RSP CLTC

TD Ameritrade steered a disabled couple looking for a managed account to chat rooms where they lost about half a million dollars, according to the clients’ FINRA arbitration filing and a report in Financial Planning magazine. Kevin and Natalie Flynn accused TD Ameritrade of violating FINRA’s “know your customer” rules, as well as unsuitable investments and a failure to supervise — two of the most frequent client claims.   Neither of the Flynns has been able to work for years, and Kevin Flynn visited a Manchester, New Hampshire, branch of TD Ameritrade in June 2010 looking to invest their disability settlements, according to their statement of claim. Kevin Flynn struggled daily attempting to copy the trades executed by the leaders of the chat rooms, he says.

“We were looking for somebody to manage it, and the rep told us about these chat rooms where you just do what they do,” says Kevin Flynn, 60. “It was very fast, the way that they traded.”

In my opinion referring  a settlement recipient to a chat room is not financial planning or settlement planning.  It comes under the category of "Financial WTF". It is clearly a cookie cutter approach to gather assets using a digital cookie cutter, no more appropriate than executing a six pack of beer stock recommendation from Uncle Vinnie at Shmuck family picnic.

The Flynns could have used a settlement planner so that they could have made a better, more informed decision.  Read more about Settlement planning

 

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 is a Certified Financial Transitionist What is A Certified Financial Transitionist? (CeFT) (4structures.com)

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.

Read about Settlement Planning What is Settlement Planning? Settlement Advisors and Financial Transitionists NY|NYC|CT|NJ (4structures.com)

Last updated May 18, 2024 

 

Medical Insurance Inflation: Factoring Into a Settlement Solution

by John Darer CLU ChFC MSSC RSP CLTC

The AVERAGE year over year rate of increase in health insurance premiums for New York City residents across 8 leading insurers was 11.23% based on data assembled by the New York Public Interest Research Group (NYPIRG) and published in the August 29, 2010 Daily News. According to the report "Self-Insured Feeling Pinch" there has been MORE THAN A DECADE of double digit increases.

The increasing federal deficits may make it increasingly difficult to shift tortfeasor responsibility to government based initiatives like Medicaid and Medicar.

Buying medical insurance is a solution. In some states like New York and New Jersey there is guaranteed issue community rated medical insurance. These have been around for close to 20 years, originally as a private insurance solution to the Clinton era threat of Universal Health Care. As an alternative to the restrictions found in government funded benefits private health plans in such states may offer more flexibility in physician selection

Some states offer catastrophic health insurance pools. Then of course we now have "Obamacare"

When calculating the cost of such solution one must be cognizant of the cost of medical insurance increases. Moreover, be aware that these are just increases in premiums and do not reflect the deductibles, co-pays and co-insurance that may apply. Those must be factored in as well. An additional wrinkle is that most structured annuity issuers will cap contractually based increases to 5% or 6%.  One must account for the gap and determine how it is to be funded.