The Finn Blog

Car Accident Statistics

March 15, 2021 – Structured settlements and automobile accidents are inextricably linked. The vast majority of structured settlements we place each year stem from motor vehicle accidents.

If you are unfortunate enough to be one of the six million people in the United States involved in an automobile accident each year, there is a less than 1% chance your injuries will be fatal.

This is one of the many conclusions gleaned from “Car Accident Statistics You Need to Know in 2021,” a consolidated deep dive of resource material assembled on the topic courtesy of Darrigo & Diaz Personal Injury Law Form.

But just in case, want to tip the odds in your favor of NOT dying in a car wreck? Here are some tips.

Don’t speed.

Wear your seat belt.

Don’t drive between 4:00 pm and 8:00 pm on Saturdays.

Don’t be a teenager.

Don’t be male.

Of course, fatalities represent only one adverse outcome stemming from automobile accidents.

Non-Fatal Accidents

Automobiel accidentFor the lucky ones who survive, injuries will be mild and temporary.

Some, though, will sustain catastrophic injuries leaving them with medical problems that require ongoing and extensive future care.

Regardless of the cause and severity of the accident, it’s not unusual for the injured parties to file claims or lawsuits against the at-fault party to ensure the financial impact of an accident.

Structured Settlements

When resolving claims and lawsuits, clients often choose structured settlements as an effective method of ensuring funds for their future care will be there when needed.

Also, structured settlements can provide guaranteed future income when someone is unable to return to their pre-accident employment.

For the family of someone killed in an automobile accident, structured settlements help ease financial strain. Carrying on with life after losing a loved one is challenging enough without the added burden of financial difficulties.

I hope you enjoy the link to the accident statistics. Because knowledge is power, a few minutes spent perusing these attachments will increase awareness helping increase your chances of avoiding an auto accident.

Photo by Harlie Raethel on Unsplash

Social Inflation and Its Impact on BI Settlements

January 27, 2021 – What is social inflation? If you’re a stat junkie who happens to work in or around the personal injury litigation arena, have I got a white paper for you!

Last June, the Insurance Research Council published Social Inflation: Evidence and Impact on Property-Casualty Insurance. This fascinating 18-pager is very readable. Further, it lays bare the impact evolving societal trends have on the rising cost of settlement and verdict values. By extension, social inflation impacts insurance industry profitability.

Every policyholder, claims handler, actuary, lawyer, and citizen who reads this paper will get a helpful glimpse of the future.

Anger Driving Claims Costs?

social inflation anger

Personal injury lawsuit filings seem to correlate directly to societal anger.

One of the more interesting tidbits is the observed link between Americans’ general anger and their tendency to file personal injury lawsuits.

Recent Gallop polling suggests nearly one in four people are angry on any given day – the highest level in more than a decade.

No analysis was performed indicating the source of individuals’ anger.

A Role for Structured Settlements

Because of their unique ability to match future dollars with future needs, structured settlements can be especially helpful in addressing another social inflation trend. The so-called “nuclear” verdicts, or those exceeding $10 million, have emerged as a major threat to long-term insurance company viability.

With personal injury filings expected to continue increasing and nuclear verdicts a statistical reality, structured settlement usage is expected to continue serving a vital role in dispute resolution.

Perhaps the biggest stunner of the paper is this statistic: Average jury verdicts against trucking firms have increased a whopping 654% since 2012 and now top $17 million!

With actuarial-adjusted pricing available for those with severe injuries, structured settlements permit the negotiating parties to resolve their claims more cost-effectively before trial.

Somber Final Thought

It’s worth mentioning all the data collected for this paper predated the emergence of COVID-19. It will be interesting to see the pandemic’s impact on social inflation going forward.

Photo by Icons8 Team on Unsplash

Who’s Ready for 2021?

December 30, 2020 – As we wind down the year that couldn’t have been crazier, today we focus on everything positive and reach out to express our heartfelt thanks to all who helped contribute to our success.

This past year, we helped secure the futures of 85 individuals facing assorted financial challenges in 2020. They valued our expertise sufficiently to have entrusted us to help them make decisions involving nearly $24 million.

We are honored and humbled by the ongoing vote of confidence our clients have placed in us and wanted to send out a big CDC-compliant:

So just who did we help this past year?

Most of our clients were folks receiving settlement proceeds from a personal injury claim or lawsuit. We helped them choose risk-appropriate structured settlement or trust options with an emphasis on safety and tax efficiency.

We aided claims professionals, businesses, government entities and hospitals who require professional expertise in helping evaluate litigation exposure and negotiate effective claim settlements.

We added to our ever-expanding list of satisfied plaintiff attorneys who secure their own futures by deferring their contingency fees into fixed income annuities and managed equity accounts.

We helped a few people defer, reduce, or eliminate capital gains taxes by facilitating a structured installment sale when they were selling property.

We Zoomed into your homes and socially distanced offices to help provide specialized training on a variety of topics. We presented helpful information to claims offices, realtor groups and industry professionals on structured settlements, structured installment sales and other areas of interest.

THANK YOU for allowing us the privilege of serving you!

What’s Next?

Our pledge to you going forward is to keep doing more of the same AND MORE in 2021 and beyond! Whatever your financial future needs, if we can’t help you, we’ll find someone who can.

So, as we say goodbye to this historic (for all the wrong reasons) moment in time, we send you our most sincere wishes for a very safe and Happy New Year.

We understand your lives are different and some of you have suffered more personal losses than the rest of us. We send our most positive thoughts to you with high hopes the year ahead will bring peace and a return to some semblance of normalcy.

IRS: Tax Implications of Settlements and Judgments

December 18, 2020 – Special thanks to the National Structured Settlements Trade Association (NSSTA) for calling our attention to a recent brief from the IRS which addresses important distinctions in the tax treatment of various personal injury damages.

[Click HERE] to read the brief.

Today, we share this summary with our clients who require guidance on matters involving taxation when receiving injury damages.

Despite plenty of clarity on the topic, there remains sufficient misunderstanding regarding certain recoveries. How to differentiate between a physical (tax-free) injury and a non-physical (taxable) one, for instance.

Claims involving emotion distress are especially vexing to some.

This update helps address the key question every stakeholder needs to ask prior to finalizing any personal injury settlement:

“What was the settlement (and its corresponding payments) intended to replace?” 

This four-page memo doesn’t specifically address the topic of structured settlements. We remind our clients, however, that proper income planning is crucial to maximizing indemnification.

Especially when receiving taxable damages, a structured settlement can enhance the overall value of one’s settlement significantly by increasing the after-tax recovery.

Whereas all damages (except punitive damages) paid on account of personal, physical injuries are tax-free under 26 U.S.C. § 104(a)(2) whether as a lump sum “or as periodic payments,” all other damages are considered taxable.

Taxable damages, on the other hand, are taxed as income is received. When settling for a single lump sum, all taxes will be due in the year the settlement is finalized. On larger settlements, this can have a severe negative impact on a client’s net recovery.

By structuring taxable recoveries, most people can mitigate their tax burden by spreading out their recovery over several years. The net effect of this strategy is a more tax efficient settlement.

Please don’t hesitate to contact us BEFORE your case settles to ensure you preserve all your post-settlement options. Meanwhile, I hope you find this resource helpful. Let us know if you have any questions.

The Buffett Indicator

November 10, 2020 – Please, please, please, PLEASE understand the stock market is not without risk.

The stock market has had a phenomenal run over the course of the past decade. Fortunes have been made, lost for a bit, then made again.

If you’re among those who have benefited from this prolonged bull run, CONGRATULATIONS! You beat the house in Vegas.

Alas, human nature is such that prolonged stock market success often lulls investors into a false sense of security. They remain solidly invested even when certain indicators suggest it may be wise to pull back.

And just like the gambler who can’t walk away from the table when they’re ahead, bad times may lie ahead.

Now is one of those times. It’s actually been here for the better part of a year.

The Buffett Indicator

Warren Buffett has few peers when it comes to investing success. Using a combination of skill, common sense, patience, and a shrewdness which belies his folksy nature, Buffett has amassed a personal fortune and personifies wealth building acumen.

Because his words carry so much weight, the Buffett Indicator, which has historically pinpointed when stocks may be overvalued and could come crashing down, is something everyone with market exposure should pay close attention to and can be simplified as follows:

Market Capitalization/Quarterly GDP

The higher the Buffett Indicator number, the greater the risk.

Comparing Historical Buffett Indicators

According to this graph from DQYDJ.com, the Buffett Indicator hit 2.227 during Q2 2020. That’s really high! Throw in a global pandemic and stimulus spending over the past ten months and the market would seem even more precarious.

For the same reason athletic teams review film of games already played, sometimes backward glances can help shed light on how to prepare for the future. For perspective and to see what may lie ahead, let’s pick a few select periods starting when the nonagenarian Buffett was a spry 30-something year old investor:

Quarter Year – Buffett Indicator – DJIA – Years until DJIA returned

Q4 1968 – 1.022 – 6,529 – 25 years

Q1 2000 – 1.886 – 15,526 – 6.9 years

Q2 2007 – 1.524 – 16,747 – 6 years

Q1 2020 – 2.160 – 29,276 – ???

IF the market does tank, are you comfortable waiting six, seven, or even twenty-five years until the markets return to their pre-crash levels? That’s a lot of cash you’ll be burning.

Remember the Roaring Twenties? Of course, you don’t. Unless you’re 105 or older! That decade was one of exponential economic growth and widespread prosperity. It was an amazing time for many. Until it wasn’t. Once the bubble popped, the Great Depression arrived sending stock values plummeting along with the economy which took more than twenty-five years to recover from!

Your Safest Bet

So, if you are in or near retirement and are still fully invested in the market, do yourself a huge favor and GET OUT NOW! At least partially. You don’t need to completely eliminate your market exposure, but converting some of your portfolio into a stream of safe, secure, tax-advantaged cash flows will go a long way toward preserving what you’ve earned and protecting yourself from potentially catastrophic loss.

If you are about to receive money from a personal injury settlement, here’s another little bit of Warren Buffett wisdom worth sharing. Structured settlements remain the safest, surest choice for anyone ready to settle their insurance claim. Some options even include stock market-driven upside potential without the downside risk.

Pension vs. Lump Sum

September 22, 2020 – Two related AARP Bulletin articles may have bearing on your retirement plans. In short, companies are temping retirees with offers to pay their retirement benefits as a single, commuted lump sum instead of honoring their monthly pension obligations.

If you or anyone you know works for an organization that even offers a pension anymore, it’s worth your time to thumb through two recent articles:  “Treasury Department OKs More Lump-Sum Pension Payments” and “Pension or Lump Sum?”

A few highlights from these articles:

According to a MetLife study, 20% of those who opted for the lump sum spent the entire sum within five and a half years.

Of those who weren’t broke by then, 35 percent worried they would run out of money.

Most economists warn that people can rarely, if ever, replicate the security of a pension.

Less ethical financial advisors may be biased against the pension since they can benefit from investing your money.

Lump sum buyouts tend to benefit the company offering them more than the individual receiving them.

(NOTE: The articles don’t even mention taxes which would also be a consideration)

COVID-19 likely hasn’t left its final impression on our economy yet. As such, businesses with pension obligations may find themselves forced to accelerate layoffs, early retirements, or staff reductions to remain financially viable. Wise retirees-to-be will want to be prepared.

Compare Before Deciding

There may be many non-financial reasons for choosing a lump sum over the pension payments, but if you are confronted with the choice, how do you determine whether the pension or lump sum buyout is the better deal?

After reflecting on the information contained in these articles, a sensible move is to ANALYZE VALUES by comparing if the pension payments you’re forfeiting can be replicated in the marketplace with the lump sum you’re being offered.

We can help you estimate the fair market value of your pension.

Call us before you commit.

No cost. No obligation.

For Example:

A 60-year-old female in Pennsylvania is offered early retirement by her company. Her employment contract requires the company to pay her a monthly retirement benefit of $1,000 for as long as she and/or her 60-year-old spouse live. (NOTE: Assumes an opposite sex couple in this example. Although different actuarial tables would be applied in most states when calculating values for same sex spouses, the same analysis is used).

Before completing her retirement paperwork, the company tells her she has the option of taking her retirement in a single lump sum instead of the monthly income and they offer her $225,000.00.

Is this a good deal?

Could they replace $1,000 a month for $225,000?

A quick survey of life companies rated A+ or better by A.M. Best reveals it would cost approximately $275,000 to replace the pension this couple would be giving up. As such, the short answer to this question is, no, the employer is not offering them market value for the pension.

On the other hand, let’s assume the company offered her $325,000 for the same $1,000 per month lifetime benefits. In that instance, these folks would be better off taking the lump sum because they could buy a traditional annuity that would pay lifetime income which EXCEEDS $1,000 per month for lump sum offered.

A decision on whether to accept a lump sum payout in exchange for your future pension benefits should not be based on pricing alone. But people always like knowing if they’re being treated fairly so assessing value is a good starting point. You might be surprised.

I have no problem confessing our firm’s bias: Generally speaking, sticking with the pension will be the better choice. We’re big fans of secure income you can never outlive. That said, these articles provide solid practical tips for deciding what your best option will be. Everyone’s situation is different.

Whatever you do, don’t end up with an empty nest egg. There may be valid reasons to choose the lump sum over the pension benefits. But our advice is to think long and hard before doing so.

Photo courtesy of Luke Brugger at Unsplash.com.

 

 

Coronavirus Auto Injury Data

May 8, 2020 – Remember that credit you received on your auto insurance bill last month due to the anticipated lower claims costs since fewer people would be on the road during the coronavirus pandemic shelter-in-place orders?

Don’t be surprised if that ends rather quickly.

According to a recent article in Digital Insurance, a periodical aimed at senior insurance executives, those assumptions may have been faulty. (“Data may imply coronavirus auto-premium reductions were premature.”)

While there are certainly fewer vehicles on the road, it turns out many are traveling faster and perhaps feeling overly secure and paying less attention because of the low traffic, leading to more speeding tickets being issued and a higher fatality rate when crashes occur.

This can be especially problematic where 18-wheelers are involved. Speed + Mass + Collision usually = Very Bad Outcome.

This tracks with some of the conversations I’ve had recently with claims personnel and plaintiff attorneys. Overall, it’s too soon to know how all this will play out but all signs point toward the possibility of lower claims counts with higher severity until traffic patterns return to normal.

Until then, a timely reminder to be extra vigilant when driving during this pandemic.

Photo by Michael Jin on Unsplash

Roubini has a bad feeling on this one, all right?

March 3, 2020 – Remember the line in Platoon when Sgt. O’Neill (John C. McGinley) expresses his concerns about a pending military conflict with Staff Sgt. Barnes (Tom Berenger)?

“Bob, I got a bad feeling on this one, all right? I mean, I got a bad feeling. I don’t think I’m gonna make it outta here! D’ya understand what I’m sayin’ to you?”

Sgt. Red O’Neill

While the prospects of seeing one’s entire life savings evaporate due to fallout from a global pandemic pale in comparison to the psychological trauma experienced by the brave men and women who experience the harsh realities of war, this line came to mind when I read yesterday’s MarketWatch article quoting economist Nouriel Roubini who sees bad things ahead for the market.

“I expect global equities to tank by 30% to 40% this year.”

Nouriel Roubini

Investors may want to heed Roubini’s advice given he was one of the few economists to correctly predict the 2008 financial crisis. To avoid financial catastrophe, Dr. Roubini is urging people to seek safety NOW.

And he’s not the only one doing so. About a year and a half ago, we published a blog citing other experts suggesting clients may also wish to pare down their exposure to stocks in favor of safer options.

Where Can You Find Safety?

In addition to buying safe bonds, structured settlements and retirement annuities remain some of the safest choices for those who require certainty.

Even with interest rates at or near historic lows, structured settlements and retirement annuities remain attractive alternatives. Something about making some money (especially when there’s a decided tax advantage) is more attractive than losing a lot of money.

Consider all these available options clients are currently talking to us about:

Tax-free structured settlements for physical injuries.

Tax-deferred structured settlements for nonphysical injuries.

Tax-efficient structured installment sales to reduce or eliminate capital gains taxes when selling qualifying appreciated assets or businesses.

Fixed indexed annuities which allow participants to benefit from market ups but shield them from market downs.

Market indexed structured settlement options with downside protection.

A structured settlement option that accounts for future interest rate increases.

Multi-Year Guaranteed Annuities (MYGAs) for “better than CD” rates.

Even if you still have faith in the market for the long-term, almost everyone would be wise to consider converting at least some of their safety net to something that is actually safe.

And if Dr. Roubini ends up being right, there’s no time like the present to make a move before things get really bad.

Let us know if we can help save you from drowning.

Structured Settlements: Structured Installment Sales

Eleventh in a series of blog posts dedicated to helping clients decide when a structured settlement should be considered.

Today’s Installment (npi): Structured Installment Sales

February 5, 2020 – For this segment in our series of educational offerings, we’re going off-topic slightly because we wish to present a structured settlement offshoot product designed to help clients defer and sometimes eliminate capital gains taxes when selling qualifying appreciated assets: Structured Installment Sales.

Be sure to visit our companion site: MyStructuredSale.com

Real estate investors, business owners, property owners, and the realtors, business brokers, lawyers and accountants who represent and advise them will find this simple-to-implement alternative to traditional sales worthy of their time.

As any accounting major can tell you, deferring taxes and accelerating deductions is one of the fundamental tenets of accounting.

Structured installment sales help conveniently with the deferring taxes part of that formula.

The process is simple:

Step 1: Buyer and seller negotiate a price for the property or business.

Step 2: Seller decides how much of the net settlement proceeds to defer.

Step 3: Seller contacts a firm specializing in structured installment sales annuity quotes. (We hear Finn Financial Group is pretty good!)

Step 4: Terms of the structured installment sale are incorporated into the sales agreement and closing documents.

Step 5: At closing, all relevant documents are executed, and the funds dispensed to the appropriate parties.

Although Treasury regulations have permitted installment reporting for taxes since 1918, it wasn’t until 1980, when Congress passed Public Law 96-471, that Section 453 of the Internal Revenue Code was modified laying the foundation for what would become known as Structured Installment Sales. Publication 537 contains information on installment sale eligibility requirements.

In 2005, Allstate Life, in an effort to explore expanded applications for structured settlements, researched a utilization in the appreciated asset world and rolled out a product they called a structured sale. Prudential soon followed but just as the concept was beginning to gather major traction, the Great Recession hit wiping out investment equity and the opportunity to defer taxes with it.

Now, with property values up over the past decade, this tax deferring option is poised for a major resurgence. So much so that one of the largest insurers in the world, MetLife, has chosen to offer Structured Installment Sales through its specialized, appointed agency force.

Click [HERE] to watch MetLife’s 1:12 promotional video on the topic.

Structured installment sales are also available through Independent Life as well as an option funded by U.S. Treasuries.

When a structured installment sale is being considered, the parties involved need to be cognizant of a few basic rules:

A decision to defer sales proceeds must be made prior to finalizing any sales agreement to avoid constructive receipt;

Terms of the deferral should be incorporated into any sales agreement;

Plan design and deferral options may be limited;

Buyer and seller must execute certain required documents prepared by the firm implementing the structured installment sale;

The annuity must be funded directly by or on behalf of the buyer through the closing process.

The Tax Cuts and Jobs Act gives even added incentives for certain taxpayers to defer recognition of gain into future years. Those contemplating selling any qualifying appreciated asset would be well-advised to consider doing so via the structured installment sale method.

Unless they like paying taxes you can otherwise avoid.

World’s Largest Insurers

February 3, 2020 – Of the Top 25 largest insurers in the world in terms of (2108) non-banking assets, five of them are domiciled in the United States. (“Best’s Review,” February 2020, p. 27)

Those who resolve their personal injury claims and lawsuits with structured settlements can take comfort in knowing that all five of these well-capitalized American markets or their affiliates are active in the structured settlement marketplace. Their ranking and total assets in USD follow.

World’s Largest Insurers:

3 – Prudential Financial, Inc. – $815,078,000,000

5 – Berkshire Hathaway Inc. – $707,794,000,000

6- MetLife, Inc. – $687,538,000,000

17 – American International Group, Inc. – $491,984,000,000

25 – New York Life Insurance Company – $339,144,000,000

That’s a lot of financial security for those who are dependent upon future payments to meet ongoing healthcare and living needs.

Structured settlements were created to help accident survivors manage their lives with peace of mind that they’ll have the funds in the future when they’re needed.

With excellent companies like these and the handful of additional highly rated life markets providing safety and security reassurance, the industry is poised for many more successful years of making peoples’ lives better.

THANK YOU to our life company partners for their commitment to the structured settlements industry.

Finn Financial Group