Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary, Now in 15th Year!

Geithner Says "The Returns We'll Get From Banks AND AIG Will Be More Than Enough To Cover Losses on Autos"

by John Darer CLU ChFC MSSC RSP

Yahoo Finance reports  that the price to the tax payers of the bailouts and financial rescue of 2008 and 2009 continues to fall sharply. Incredibly the final net cost of the Troubled Asserts Relief Program (TARP) is estimated to be $50 Billion, according to the report.

There has been alot of misinformation out there and to the extent it has affected structured settlement sales it needs to be corrected. If you are in the structured settlement industry , or an attorney, or a plaintiff in a personal injury case reading this a post I suggest you read this article and watch the video.

While AIG is characterized as a huge wild card , having received more than $180 billion in support from Treasury and the Federal Reserve, including $69 billion in TARP funds, the company has a plan to extricate itself from Treasury and The Federal Reserve. As published last week in the media, the plan involves converting preferred shares owned by Treasury into common stock, which would then be sold piece by piece over several years, but less than the 5 to 8 years estimated in 2009. To underscore that Treasury is optimistic the plan will succeed, Treasury secretary Timothy Geitrner said ""The returns we'll get from our investments in banks and AIG will be more than enough to cover the money we'll lose in autos"

New York Personal Injury Verdicts "Defense Doesn't Just Write Out a Check". And Don't Forget 50A and 50B!

by John Darer® CLU ChFC MSSC RSP CLTC

What happens after they have won a medical malpractice (or other liability) verdict in courts in the State of New York?

Gerry Oginski, a New York City area medical malpractice attorney, has released a useful video podcast on the above subject As Oginski points out, when a verdict is rendered by a jury, the defendant (or his/her/its insurer) doesn't simply write out a check. Oginski takes the viewer through the post trial motion and appellate process.

Although not mentioned directly on Oginski's video, it is important to point out that medical malpractice or liability awards in the State of New York are subject to the statutory requirements for a structured judgment. The structured judgment requirements provide that future damages in excess of a statutory threshold be paid periodically (i.e. over time). If you are fortunate enough to have a sufficiently large sustained verdict, ultimately the defendant (or its insurer) will be required to purchase (and guarantee) an annuity to fund the "excess" future portion of the damages in the judgment that is paid to you. The form of annuity for payment of the "excess" future damages other than lost earnings, is in the form of a temporary life annuity. A temporary life annuity pays over a fixed period of time or your lifetime, whichever is sooner.

In addition to the post trial issues raised by Oginski, a complex series of calculations must be performed in order to finalize a judgment in New York. The statutory requirements, which have been in effect since the mid 1980s are set forth in Article 50A  (CPLR 5031-5039) for medical, dental and podiatric malpractice cases and Article 50B (CPLR 5041-5049) for other liability cases. The two articles were substantially similar until 2003 when Article 50A was amended. The calculations and proposed judgment are presented to a judge in a post trial hearing outside of the ears of the jury that rendered the verdict.

The manner in which such calculations are performed can also be a matter of dispute and may create additional appellate issues than those raised in the video. Generally experts in structured judgment calculations under New York CPLR Articles 50A and 50B are retained by the counsel for both sides. Providers of such services include certain economists, structured settlement consultants and settlement planners, although there are only a few structured settlement consultants (including this author)  who have the experience working on such cases to have comprehensive knowledge on the subject. It is not simply the matter of calculating the cost of an annuity.

A significant issue for a plaintiff with large recovery is that a structured judgment does not offer the same customization as a structured settlement, and comes with the risk that the non guaranteed portion of the recovery could evaporate in the event the plaintiff dies prior to the end of the defined life contingent period. Careful attention must be paid to assessment of this risk, particularly where there is a spouse, children and/or other dependents. If the plaintiff is insurable the risk can be mitigated through the purchase of a life insurance policy. If the plaintiff is uninsurable based on medical history then the possibility of a settlement in lieu of judgment should be vetted carefully.

A structured judgment also exposes the plaintiff to the credit risk of the defendant, or its insurer. 

If you have questions concerning New York Article 50A or 50B, the associated risks discussed here, or other settlement planning and lawsuit recovery issues please contact John Darer at 888-325-8640 or 646-849-1588.

John Hancock Structured Settlements Offers Qualified Assignment Release and Pledge Option

by John Darer CLU ChFC CSSC RSP

Structured settlements funded with an annuity issued by John Hancock Life Insurance Company (USA) and John Hancock Life Insurance Company of New York will now offer a security interest consistent with, and within the meaning of Section 130 of the Internal Revenue Code  ("IRC").

IRC 130(c)(2)  states "the determination for purposes of this chapter of when the recipient is treated as having received any payment with respect to which there has been a qualified assignment shall be made without regard to any provision of such assignment which grants the recipient rights as a creditor greater than those of a general creditor".(emphasis added)

Benefit of secured creditor

Not only is the right to some form of property of benefit to assuring repayment to the secured creditor, but it often guarantees some other rights. One of the major rights that many lenders get is the right to property first, before unsecured creditors get to make any claim.

The terms of the security interest is set forth in a settlement document called the Qualified Assignment Release and Pledge. In essence the annuity contract is delivered to the payee as a form of collateral. In such cases you will see a stamp placed on the front of the annuity contract. The John Hancock language appears below but it is substantially similar to the pledge offered by many other qualified assignment companies offering structured settlements.

"NOTICE: This contract has been delivered to the possession of Claimant for the sole purpose of perfecting a security interest of such person in this contract. Claimant is not the Owner of, and has no ownership rights in, this contract and shall have no right or power to (i) accelerate, defer, increase or decrease any payments due hereunder; (ii) anticipate, sell or absolutely assign, or encumber by any means, regardless of form, any right to receive payments from Assignee, both directly and through its security interest in this contract; or (iii) pledge, collaterally assign, grant any security interest in, or otherwise use any right to receive such payments or security interest in this contract as any form of collateral. Any attempt to transfer this security interest will be void. For more information, please contact the annuity issuer. The Claimant’s exercise of the security interest in this Contract may have tax consequences; consult a tax advisor.

NOTES

• It should be noted that IRC 130 is a tax code section referring to a tax exclusion that applies to qualified assignment companies. Commonly part of the structured settlement process today, a qualified assignment enables the defendant or its insurer to remove a long term payment obligation from its books and get a tax deduction, while at the same time helping the plaintiff because they do not have be exposed to any long term credit risk of the defendant or its insurer.
•  A qualified assignment company is generally a special purpose company that exists to facilitate structured settlement transactions. These companies charge modest fees ranging from $250 to $750 for taking on the assignment. Without the tax exclusion afforded under IRC 130 they would not be able to operate profitably and neither the Defendant, its insurer or plaintiff would be able to benefit.
• The security interest discussed here only applies to structured settlements where there is a qualified assignment.
• Although  the tax status of income received by a qualified assignee where there is a security interest has been codified since 1988, not all structured annuity issuers offer a security interest. Of the primary structured annuity issuers,  the assignment companies of New York Life and Liberty Life Assurance of Boston do not offer a security interest.
• A security interest is not available for structured attorney fees.
• In some states there may be extra steps needed to perfect a security interest.
• Some companies offer a security interest and a wrap around guarantee from the annuity issuer or other upstream company. One offers a security interest but no secondary guarantee.

Structured Settlements Can Make a "Win-Win For Both Sides" New York Plaintiff Lawyer

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Despite the over the top scaremongering used by certain settlement planners to get business , a leading New York plaintiff lawyer suggests that structured settlements may be a "win win" that enables an otherwise impossible settlement"

In Protecting the Catastrophically injured Plaintiff's Recovery, Michael W. Kessler, Esq. states:

"Although a structure cannot "turn water into wine", shifting certain risks to annuity issuers can sometimes create an opportunity in which the plaintiff gets more than he or she would get under a 50-A or 50-B judgment AND still enable the Defendant to pay less than it would otherwise be obligated to pay. This can make it a win win for both sides".

Article 50A of the New York Civil Practice Law and Rules (CPLR) is New York's periodic payment of judgments statute dealing with periodic payment of damages on medical, dental or pediatric malpractice cases.

Article 50B of the New York Civil Practice Law and Rules (CPLR) is New York's periodic payment of judgments statute dealing with payment of damages on personal injury, injury to property and wrongful death actions.

 

 

 

What is "Period Certain and Life" or "Period Certain" in an Annuity?

by John Darer® CLU ChFC MSSC RSP CLTC

Question:  "I have a structured settlement from an accident settlement that says " years certain and life", or "lump sum certain". What does that mean?"

Answer:

Years Certain or Period Certain with structured settlement  annuity, simply means the number of years that the structured settlement payments will be paid regardless of whether or not the payee of the structured settlement annuity (or retirement annuity) survives the entire payment schedule.

In some cases the number of years certain is referred to as the number of years guaranteed although such usage may be misleading because when there is a years certain and life the payee is guaranteed to receive payments for the rest of his or her life. 

A 2017 legal decision examines the use of "guarantee" in settlement documents from another angle. In a lawsuit against the United States arising from the ELNY shortfall, plaintiffs argued (unsuccessfully) that a period certain period, referred to as a guaranteed period, meant the United States guaranteed the payments when the document expressly said they didn't. 

For more information on the types of structured settlement payments available please contact me at 888-325-8640 for structured settlement quotes. 

 

 

 

 

John Hancock Announces Organizational Changes

John Hancock has announced organizational changes pending regulatory approval

Pending regulatory approval, John Hancock Life Insurance Company (“JHLICO”, which issues structured settlement annuities (and guarantees the payment of periodic payment obligations assigned to John Hancock Assignment) is to be merged into John Hancock Life Insurance Company (U.S.A.) (“JHUSA”). As a result, John Hancock is to withdraw JHLICO’s license to do business in New York.

Under the withdrawal plan approved by the New York Insurance Department, JHUSA will then
assume direct responsibility for the payment of all claims and benefits, and for all other policy
obligations, under in force policies, certificates, or contracts. Servicing will continue without interruption.

All new insurance policies and annuity contracts in New York will be issued by John Hancock Life
Insurance Company of New York or John Hancock Life & Health Insurance Company.

A few bullet points from the John Hancock Q&A

1. Not final yet. It is pending regulatory approval.
2. The withdrawal and realignment is taking place in sequel to the Manulife Financial Corporation acquisition of John Hancock Financial Services, Inc. in 2004.  Despite the integration having been successful, as is often the case in combining large organizations, John Hancock now has an excess of legal entities. As a result, this measure is part of the process of streamlining these entities to better position the company for future growth.
3. We expect the withdrawal and realignment will become effective at the end of the day on December 31, 2009 and your policy, certificate, or contract to be endorsed effective at that time to show John Hancock Life Insurance Company (U.S.A.) as the insurer

Useful reference pieces

New York John Hancock Questions and Answers on Merger

Download NYWithdrawalClientQA

Sample Cover Letter To Be Going Out to John Hancock clients (also presumably to structured settlement annuitants) along with the Q&A

Download Subsidiary Reorganization Cover Letter and Info Sheet

Q2 2009 Financials

John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York., as provided by John Hancock

Download JHUSA and JHNY Financials Q2 09