Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Amortizing TIPS Would Compete With Structured Annuities

by John Darer CLU ChFC CSSC RSP 

A senior investment strategist at BNY Mellon Asset Management  proposing the creation of a new investment vehicle to address what he perceives to be the shortcomings of life annuities. His letter to Secretary of Treasury, Tim Geithner,  " A Good TIp For Better TIPS" was published in Barrons on November 27, 2010.

The idea? 30-year Amortizing Treasury Inflation-Protected Securities, or "A-TIPS".

1. Similar to existing TIPS in that they are issued by the Treasury
2. Provide an inflation-adjusted rate of return. But rather than just paying interest until maturity, the A-TIPS would make regular payments of both income and a portion of the principal, adjusted for inflation. On a 30-year A-TIP, Ralph Goldsticker suggests that payments might be twice the size of those of a regular TIP.
3. The A-TIPS, if structured properly, like annuities, would let retirees know exactly how much they will have each year, in inflation-adjusted terms, over the 30-year life of the security.
4. After 30 years, the investment wouldn't provide more income because its value would be fully exhausted. Goldsticker suggests that retirees (and by implication accident victims) could purchase longevity insurance, a deferred payout annuity that starts paying in at the end of the bond term, to mitigate the risk of outliving  savings.
5. Unlike annuities, payments would be guaranteed by the government
6. True inflation adjustments, unlike the "UNCOLA" currently offered by many insurers
7. Secondary market spread would be less severe than annuities and the market would be highly liquid.

TIPS are already being used in recovery managenent solutions for plaintiffs. It's not hard to see how the proposed new vehicle could have application and, in my opinion could be a game changer for the primary and secondary structured annuity market.

I strongly suggest that all stakeholders in the structured settlement industry read the Barron's article and gain an understanding of the implications.

 

Connecticut Health Insurers Seeking Immediate Increases in Premiums of 20% Plus

by John Darer® CLU ChFC CSSC RSP

Connecticut Heath Insurers have thrown gas on the fire by seeking immediate 20% increases in rates, according to a September 15, 2010 report in the Hartford Courant. Rising medical costs and federal health report laws were cited reasons.

Whether the State of Connecticut Insurance Department approves the increases in full, or in part. the increases could play a part in the value of  personal injury cases where there is liability and includes a significant medical component. 

There are a variety of ways to deal with future medicals in personal injury cases. Regardless of the approach used it is critical to address the issue to mitigate erosion of settlement proceeds.

When considering the funding of a medical policy as part of the settlement solution,  calculating the cost of such solution one must recognize the cost of medical insurance increases. Based on what we know now, a 3% fixed increase would not be adequate. 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.

The Connecticut story follows my recent post concerning historical premium increase in New York City for the past decade.

Medical Insurance Inflation: Factoring Into a Settlement Solution  August 29, 2010

 

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.

Where Are You Going To Put Your Settlement Money Now?

by John Darer CLU ChFC MSSC RSP

Still feel comfortable putting your settlement money in the stock market?

Today's headlines from CNBC

• Dow Down 4% after brutal sell off
• Dow Jones Industrial Average has dropped 6.7% from its 52 weeks closing high on January 19, 2010
• S&P 500 has dropped 7.6% from its 52 week closing high on January 19, 2010
• Nasdaq biggest one day drop since October 1, 2009
• Silver Futures down 5%, lowest since June 2009
• Gold Biggest Drop since December 2008
• Oil Futures Down 5%

A few memorable lines from Tim Rice and Andrew Lloyd Webber's dying protagonist Evita, frame the obvious question:

"Where do we go from here?
This isn't where we intended to be
We had it all, you believed in me
I believed in you

Certainties disappear
What do we do for our dream to survive?
How do we keep all our passions alive,
As we used to do?"

HOW WOULD YOU FEEL ABOUT THIS?

Using the S&P 500 as an example, on $1,000,000, a 7.6% loss meant a loss  of $76,000 in 3 weeks!  

Using the Dow as an example , on $1,000,000,a  4% loss meant  a loss just today of $40,000?

Are you mentally prepared for that?

Were you mentally prepared for that?

STRUCTURED SETTLEMENTS PROVIDE A GUARANTEED OUTCOME FOR YOUR INCOME

I disagree with "Evita Peron" on one point, in the case of structured settlements, certainty generally doesn't disappear.

Think about this:

1. You can have your structured settlements funded with a specially customized annuity (or annuities) from an insurance company with over $300 billion in assets like New York Life Insurance Company which has been providing financial security for 165 years and has weathered numerous national and global financial crises. More recently New York Life insurance Company weathered the financial storm of 2008 with no drop in its highest ratings from AM Best, Moodys, Standard & Poors or, Fitch.
2. Alternatively, or in conjunction with the above in #1, you can have your structured settlements funded with United States Treasury obligations, currently rated AAA. If you have concerns about inflation such United States Treasury Funded Structured Settlements can be funded with Treasury Inflation Protection Securities (TIPS). 
3. And, if you want there are other large regulated insurance companies, with similarly long histories to help protect your income and longevity risk. You can also diversify across a number of companies and between annuities and TIPS.
4. No structured annuity issuers have been taken over by a state insurance regulator during this financial crisis.
5. Compare this to banks. While banks have FDIC protection on deposits (subject to certain limits), think about how many banks have failed in the last 3 years.

WHY GAMBLE IF YOU DON'T HAVE TO?

**opening stanzas from "You Must Love Me", Evita, Andrew Lloyd Webber and TIm Rice

Getting "PSSI" in the Name of Financial Literacy and Attention to Detail

by John Darer CLU ChFC CSSC RSP

The new website of  John Bat's Plaintiff Settlement Solutions Incorporated  ("PSSI", pronounced "Pissy") is NOT one of "life's moments that takes our breath away". As Will Smith might have paraphrased back in the day,  time to start "gettin' pissy with it"

PSSI:  An annuity is an investment vehicle in which the plaintiff allows all or part of the award or settlement to be placed with an insurance company

Reality: An annuity is a contract between the annuity owner and an insurance company. In return for premium payment or consideration, the insurance company agrees to provide a regular stream of income and/or a lump sum payout, or a combination, at some future time. With respect to structured settlements an annuity is one of two permissible types of "qualified funding assets", as defined in IRC 130(d).

PSSI: In return, the insurance company guarantees inflation adjusted periodic payments for life or period certain.

Reality: There is currently no annuity structured settlement that provides guaranteed inflation adjusted periodic payments for life or period certain. The best one can do with an annuity funded structured settlement at this time is a fixed COLA. United States Treasury Bond structured settlements however, funded with Treasury Inflation Protected Securities (TIPS) not issued by insurance companies DO guarantee inflation adjusted periodic payments for period certain. There are also other ways to address inflation risk.

PSSI: Due to the difficulty of self-managing a cash settlement, 92% of all claimants exhaust their funds completely within the first five years.

Reality: NYU Law professor Lily Batchelder's star pupil, Jeremy Babener, ought stand up and give "Batty Boy" the business! I've written about this before, how can Bat get a now proven flawed statistic wrong?

PSSI: Internal Revenue Service Code Sections 104a2 and 130 provide for periodic payments (i.e., a structured settlement), in personal physical injury and workers' compensation cases,to be income tax free to the plaintiff. This means the amount of the award or settlement is tax free, but more importantly, so are all future periodic payments and lump sums.

Reality: The periodic payments represent payment for damages.

• IRC104(a)(2) NOT 104a2 provides an exclusion to the taxpayer for damages that are for physical injury or physical sickness.  PSSI incorrectly ties workers compensation cases to the inaccurate 104a2.
• IRC 104(a)(1) provides a  similar tax exclusion to IRC 104(a)(2) for workers compensation cases.
• IRC 130 is a tax exclusion that only comes into play if there is a qualified assignment. IRC 130 provides a tax exclusion to the qualified assignment company, NOT the plaintiff, which typically owns the annuity and receives the income generated by the annuity, prior to making payment to the plaintiff/payment recipient. Such exclusion is desirable because non natural entities do not otherwise enjoy the same tax benefits from annuities as individuals. To wit, IRC 130(a) expressly states
  

  "(a) In general
  
   Any amount received for agreeing to a qualified assignment shall not 
  be included in gross income to the extent that such amount does not 
  exceed the aggregate cost of any qualified funding assets".

PSSI: When given an option, most clients prefer to have all their needs for financial services met by one financial professional who understands their situation, as well as their goals and aspirations. In order to meet this client need Plaintiff Settlement Solutions delivers trust services through Registered Representatives and Registered Investment Adviser Representatives.

Comment: To meet the need that most clients prefer to have all their needs met by one financial professional they deliver trust services through Registered Representatives and Investment Adviser Representatives?  Does Bat, who this author understands is a member of the Society of Settlement Planners , have 468B on the brain? If that was the case the operative phrase is "One OR more" not "One equals More".  At the very least there's a better way to articulate this!

Other moguls encountered on this "piste":

PSSI: Structured settlements exclusively for Plaintiff's

Comment: Plaintiff's what? Or is that a typo?

PSSI: Sometimes, at moments that are inopportune for us--for example, when we need the income-- stocks may stumble. 

Comment:

Stumble       Tumble

Which do you suppose represents the worse predicament for stock investments, the cautious bumbler or the snowball downhill?

PSSI:   PSSI is seeking marketing representatives (i.e. "Persons with prior marketing experience at CLE conferences and conducting educational lunch's at law firms."  AND  "What the key consideration for the injured claimant should be is how do I make enough money with my settlement funds to keep pace or exceed the ravages of inflation's with the least of amount of risk?"

Comments: 

• Must have been a huge sale on apostrophes in Denver that day
• "Ravages" means to bring heavy destruction on or devastate or to pillage , sack. Does PSSI actually want to EXCEED or add to the ravages? Or do they simply want to keep pace or exceed the RATE of inflation?

And finally a biggie, NO DISCLOSURE OF BROKER DEALER. So I looked up John S. Bat's name on the FINRA Broker Check and the name of the investment firm therein (Multi-Financial Securities Corporation) at the time of this posting, appears nowhere on the PSSI website despite it stating that it (PSSI) "offers a broad range of investment options" such as variable annuities, fund of funds, stocks and corporate bonds etc. See requirements of FINRA Rule 2210

It is the ongoing opinion of this author that those who dispense financial advice should maintain the highest level of financial literacy. Such financial literacy should be demonstrated by an ability to properly articulate the essential knowledge of one's business to members of the public.

Top Five Concerns of Affluent Households

by John Darer CLU ChFC CSSC RSP

A Spectrem Group poll in July 2009 revealed the top five concerns for mass affluent households in 2009: 

1. A prolonged economic downturn (82%);
2. Maintaining their current financial position (74%);
3. Having enough money set aside for retirement (71%);
4. Inflation (68%) ;
5. The financial situation of children or grandchildren (68%).

The study commissioned by the financial consulting firm revealed that 50% are still concerned about their own jobs or their spouse’s job. Most respondents experienced a 30% to 40% drop in their net worth, with a concomitant reduction in risk tolerance. The focus is now on protecting principal and saving.

Cited in Money Management Executive, Spectrem President George Walper, Jr said:

"The shift to a more conservative investing approach could be in place for another five to 10 years,

He also was cited as saying the study revealed “even the younger investors, those between 35 and 50-years-old are more conservative than ever before"

The Spectrem report is based on the online polling of 1,498 households. Mass affluent is defined as those with $100,000 to $1 million in net worth, not including primary residence. This sector accounts for approximately 30 million households in America. The data have a margin of error of plus or minus 2.5%.

Settlement consultants have to add another layer of psychological or emotional impact to their client's profile to better understand their clients and what is expected of them. Insurance settlements will place many settlement recipients in the so-called  "mass affluent" category.

"Heady Junk Bond Returns Attract Funds" Deja Vu All Over Again?

The New York Post reports that junk bond bets have soared to their best comeback since the 1980s Year over year returns for May were purportedly 25.4%, citing at Bank of America Merrill Lynch report. The Post alleges that analysts say "risks of distressed debt may not be as scary as expected because some of the investments will be packaged into assets that are guaranteed by the government's Term Asset-Backed Securities Lending Facility (TALF)"

Apparently CALPERS, the California Pension funds is considering putting about $5B or 3% of its portfolio into distressed assets.

John King an analyst with CreditSights soberly states that this is the first big rally we've seen since the tech crash (9 years ago)

Tort victims may encounter financial planners or financial advisers who suggest putting part of their recovery into these types of funds. Be careful.

Inflation...It's Coming Says Philly FRB President

Bloomberg reports that Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5 percent in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation.

“The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear (sic) to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”

Walking The Walk on "Sound Diversified Settlement Planning"?

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 risk

Points that LeCarpentier agrees with Halpern:

1. Virtually all plaintiffs will squander their financial recovery within a few years

2. Many, but not all, claimants are unprepared to manage their settlements, thus putting their settlements funds and their financial futures at serious risk.

3. 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?

Comments

1. 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?

2. 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.

3. 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?

4. 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.

5. 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!

 

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!