Lawyers Mutual Insurance Company's subsidiary Lawyers Structured Settlements, a Cary, North Carolina associate of Structured Financial Associates gets Wall of Shame "credit" this week for posting structured settlement guidelines that are replete with errors. Hence we will dub them "structured settlement mis-guidelines".
- First of all, a guideline is "a rule or set of rules giving guidance on how to behave in a situation" (see Websters Revised Abridged Dictionary). Lawyers Structured Settlements Mis-Guidelines are a mixture of guidelines and marketing statements.
- On the subject of Incompetents and Minors Settlements Lawyers Structured Settlements says there are broad planning options (for structured settlements-they say these are "structured settlement guidelines") including college funds , future lump sums and lifetime income-which they say are a "superior alternative to the Clerk of the Court Structured Settlements routinely approved by judges for minors".
Comment: Anyone known the clerk of the court to possess an insurance license? Is it possible folks that what is being referred to is the Registry of the Court?
- On the subject of Medicare Set Asides, Lawyers Structured Settlements states "Effective July 1, 2009, new Federal regulations require that Medicare's rights of subrogation be fully protected.
Comments: Funny, I and I suspect many others understand that the Medicare Secondary Payer Act, effective since 1980 establishes this.
Furthermore, if as I suspect, the "new Federal regulations" they are referring to is "The Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007, THAT act added new mandatory reporting requirements (originally to be effective July 1, 2009) for group health plans and for other arrangements that are impacted by the Medicare Secondary Payer rules (i.e., liability insurance, no-fault insurance, and workers' compensation). The purpose of the new reporting requirements is to enable CMS – the agency responsible for the oversight of Medicare – to monitor the proper payment of benefits where Medicare is a secondary payer. Of course "the chains have been moved" concerning the effective date several times.
- On the subject of Commutation at Death Rider. Lawyers Structured Settlements says: "commutes all remaining "certain" benefits to a lump sum at death. Useful in large cases (with estate tax implications) provides a final disposition for surviving family members"
Comments: While an annuitant can elect to have 100% of unpaid remaining certain payments and guaranteed lump sums be paid at death, one can elect a lower percentage with such riders.
Although estate liquidity on a New York medical malpractice case was the impetus to the 1995 Allstate IRS Private Letter Ruling that provided the tax foundation and more widespread issue of such riders, commutation riders are also applicable (and widely used) on cases where a structured settlement is sued in conjunction with a special needs trust. The commuted proceeds can be used to pay of the lien at death with surplus residuals paid to heirs.
An annuitant can provide "a final disposition (of structured settlement payments) to surviving family members" regardless of whether or not there is a commutation rider, by simply naming a beneficiary.
- On daily rate quotes, Lawyers Structured Settlements states that a minimum range of $250,000-$500,000 is needed to get a daily rate quote
- In its Frequently Asked Questions piece, Lawyers Structured Settlements says "when you consider it (structured settelment payment) is tax free, the return is often equal to the long-term after tax return of the stock market, without the risk and the volatility".
Comment: This is absolute "bollocks bolognaise". How can a company run by lawyers make such a broad and unsupported statement, citing a market, without defining what "the stock market" is. For example, are they comparing it to the S&P 500, the Dow Jones Industrial Average, the FTSE 100, the Russell 2000, the Hang Seng, or what? Once the index is defined; over what time period? Where's the authority? I didn't use the word "often", THEY did!
- Furthermore, in its Frequently Asked Questions piece, Lawyers Structured Settlements says that a lawyer's client CAN buy a structured settlement annuity after settlement. They go on to state that "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".
Lawyers Structured Settlements has muddled the terminology by describing a non qualified annuity as a structured settlement.
That being said Lawyers Structured Settlements is clearly not familiar with defined benefit annuities or longevity insurance that ARE available in the annuity market.
The only structured settlement that can be purchased after the fact is the rights to someone else's structured settlement payments in the secondary market. It's obvious that is not what Lawyers Structured Settlements had in mind in its FAQ.
Plaintiffs can benefit from a structured settlement "after the settlement" with the defendant in those cases where the underlying settlement is resolved via a qualified settlement fund per IRC 468B. Even in such cases "the client" DOES NOT buy the structured settlement annuity. A QSF is not appropriate for every case.
- A number of structured settlement brokers like to emphasize that they are attorneys. I think it's a given, based on this analysis, that simply having a law degree does not automatically make you the most knowledgeable structured settlement broker or settlement planner in the state of North Carolina or anywhere else in the United States. There's much more that goes into it.
- In this author's opinion those in the structured settlement industry owe it to their clients, the industry and themselves to maintain a high level of financial literacy and be able to articulate it.
- In the opinion of this author, companies like Lawyers Mutual have a responsibility to the industry and the public to assure that its employees are disseminating accurate information. This is the second time this author has addressed the work of Lawyers Mutual's Director of Annuity and Structured Products. See Walking The Walk on "Sound Diversified Settlement Planning"? March 28, 2009.
- In this opinion of this author, Structured Financial Associates and its parent, Integrated Financial Settlements (IFS) have a responsibility to the industry and consumers to assure that their employees, associates, or affiliates are disseminating accurate information. This author has already highlighted in another post how another North Carolina associate of an IFS affiliated entity has been advertising the North Carolina Insurance Guaranty Fund, possibly in contravention with North Carolina Law.