Think Again, My Mellowing Friend!

I recently participated in a mediation where the plaintiff attorney denied his client an opportunity to structure her settlement because his client was “too old.”

She was 59.

While 59 years of age may have been considered “too old” to think about lifetime financial security in another era (like, maybe 1743), all professionals involved in the personal injury tort process — defense and plaintiff attorneys, claims representatives, judges, mediators, etc. — should consider the following before making generalizations about the appropriateness of a structured settlement for people with perhaps a touch of grey:

I. Playing the Percentages

Authors Eric Tyson and Bob Carlson cite “Underestimating Life Expectancy” as one of the eleven mistakes to avoid when planning your retirement in their new book “Personal Finance For Seniors For Dummies.” According to Tyson,

“A retirement of 20 years will be routine for those retiring in their early to mid-60s today. A significant number will be retired for 30 years and longer. Some may even spend more time in retirement than they did working.”

Age 59 may be too old to think about starting a professional career in ballet but anyone who thinks this is too old for a structured settlement is missing a great opportunity. Who among us couldn’t benefit from guaranteed, tax-advantaged cash flow that can never be outlived?

II. Centenarians Unite!

The U. S. Census Bureau projected recently that, by the year 2020, 7.3 million Americans alive will be aged 85 or older. The fastest growing segment of this fast-growing demographic? Centenarians! The ranks of those living to be 100 years old is growing 7% per year and will number nearly a quarter million within the decade.

I’m still a few years away from hitting this particular milestone myself but I’m guessing it would be a whole lot more fun having money when you turn 100 than being without. Lifetime annuities provide secure, guaranteed cash flow on a tax-advantaged basis.

III. More On Longevity

Finally, in case you missed it, I highlighted a number of other statistics that make a compelling case for choosing a lifetime annuity in an earlier newsletter. Before leaving, be sure to:

Click HERE to check out our newsletter “Live Longer . . .. Buy Annuities.”

I continue to be amazed at how many people incorrectly assume that structured settlements are only appropriate for kids. What a shame. What a wasted opportunity!

Summary
There may very well be legitimate reasons why a structured settlement is not an appropriate choice for someone anticipating a personal injury settlement. But before rejecting it out of hand for all the wrong reasons, practitioners are encouraged to consider the wealth of empirical data available to help them make an informed choice for their unique situation.

We can help you! Whether you’re a plaintiff attorney looking to augment your retirement or a claims professional seeking to recreate a plaintiff’s future work-life cash flow needs, please call anytime to let us help you decide if a lifetime annuity is appropriate.

Ex-NFL Players Find Safe Haven in the California Workers’ Compensation System: Is Dementia an Occupational Hazard?

An interesting article, published April 5, 2010 by The New York Times highlights the plight of former NFL lineman Ralph Wenzel who, at age 67, now lives in an assisted living facility due to dementia allegedly caused or aggravated by his years playing football for the Pittsburgh Steelers and San Diego Chargers.

Click HERE to read The New York Times article.
Be sure to take time to watch the sad, seven minute video also embedded in the article.

This first-of-its-kind Workers’ Compensation claim, filed with the California WCAB in Van Nuys on April 5 of this year, could have far-reaching implications. Many will be watching this case closely. The article also goes into some detail about the uniqueness of the California WC system as it pertains to all NFL players, not just those suffering from dementia.

I hope you enjoy the article. Please let me know if I can answer any questions and be sure to call anytime I can help you with a structured settlement.

“I Want My Money and I Want It Now!”
(Or, Can I Pay You To Take My Money From Me?)

You’ve seen the commercials.

A distraught person is shown screaming out the window at the top of their lungs in frustration because some evil, unnamed annuity company has separated them from their money like some latter day Silas Marner. This financial affliction appears contagious since soon seemingly everyone in the neighborhood joins the chorus. They, too, want their money and they want it now!

Then, just when all hope seems lost and suicide-by-window jumping surely looms, a savior arrives in the form of a serious but not unkindly-looking gentleman who promises these hopeless souls the “CASH” today that will render their worries moot. After all, he assures them, it’s their money and they deserve it.

Beyond disingenuous, these ads purportedly exist to help people get back what’s rightfully theirs. But an article that recently appeared in an edition of Allentown, Pennsylvania’s The Morning Call sheds a whole lot of light on how dearly people pay when they choose to sell their structured settlement benefits.

Click HERE to read The Morning Call article.

Structured settlements remain one of the absolute safest, most secure choices for those settling a personal injury claim. Why else do you think companies that purchase the rights to the future payments are willing to spend so much money on advertising to acquire them? Buying structured settlements is a great deal for the company that buys them. But something significantly south of a great deal for the person selling.

Defense and Plaintiff Attorneys Agree: Structured Settlements Work!

Just because plaintiff and defense attorneys are legal adversaries doesn’t mean they always disagree. For instance, clearly they agree on their obligation to advocate for the clients who retain their services click here to hire a lawyer. I’m pretty sure both agree it’s a good idea to show up for court on time. And, if two recent videos are any indication, both agree in the value of Structured Settlements!

These new segments, produced by the National Structured Settlements Trade Association (NSSTA), feature two prominent attorneys (one plaintiff, one defense) extolling the benefits of structured settlements in the tort resolution process. A lot of people in PA ask what is limited tort insurance, so it’s important for them to understand their rights.

Neil Galatz – Past President, Western Trial Lawyers Association and perennial Super Lawyer shares two poignant stories about clients who benefited from structured settlements and why he routinely recommends them.

Steven T. Jaffe – Top defense attorney and Martindale-Hubbell A-V rated name partner with Hall, Jaffe & Clayton in Las Vegas explains the value of structured settlement experts at the bargaining table.

I hope you enjoy these videos! We plan to feature more as they become available so be sure to check back often.

For most of the last 30 years, the idea of fixed term retirement solutions seemed about as trendy as Brylcreem. Companies offering Defined Benefit plans dwindled and serious efforts were afoot to privatize Social Security. Years of generally positive returns seduced people into believing that the stock market posed no inherent risk to their retirement plans. Then 2009 happened.

Now, just as it took a hit show like Mad Men to make Brylcreem seem cool again, it took a near-fatal economic tsunami to bring “fixed term” back into vogue where retirement planning is concerned. And while we don’t feel qualified to make recommendations on your choice of hair products, we can more than likely help you with your fixed-term retirement solutions!

The Finn Financial Group’s client base is fairly diverse. We have the honor of working with some amazing law firms of all shapes, sizes and disciplines across the United States. Some of our attorney clients are sole practitioners while some are partners with the most well-established and respected firms in the country. Our work brings us into contact with CEOs, CFOs, Company Presidents and Vice Presidents. We have assisted Owners of Corporations and Fee Only Financial Planners who have come to value our approach to helping address specific fixed-term needs.

Now, for those clients who have influence over corporate retirement plan decisions, we have something new to offer.

Who Can Benefit?
Law Firms – Businesses – Insurance Companies
Companies Under M&A Consideration
ANY Company with an Employee DB, DC, Pension or 401(k) Plan

Through our network of affiliated product providers, the Finn Financial Group is proud to offer you a full complement of fixed term Retirement and Benefit Funding Solutions. As decision-makers continue to evaluate pension liabilities, companies may be seeking better ways to manage the volatility associated with them. Some have recognized that the pension plan is an ongoing cost that is perhaps no longer viewed as a valuable benefit because a majority of participants is no longer active in their workforce.

Consider what we may be able help you with:

• As markets continue their volatility, companies may be seeking more stable pension risk solutions. We can arrange to have a customized option to remove all or some of the liabilities from your balance sheets. In addition, we can share ideas to immunize your portfolio to further reduce volatility risk.
• For Defined Contribution plans, we can arrange to structure a stream of guaranteed lifetime income for anyone participating in your 401(k) plan. Terminating or retiring participants can set aside a portion of their 401(k) balance into an annuity that will provide guaranteed lifetime income.
• Clients looking for Guaranteed Investment Contract (GIC) quotes for 401(k) or pension plans can receive competitive rates and a wide array of structures best suited to meet cash flow, funding and liability needs.

There are many choices out there and a complimentary analysis is usually the best first step. So please let us know if you are interested in learning more about any of these topics. We will arrange to join you with a provider specialist who can help evaluate your needs and offer appropriate options for you to consider.

Clients will be pleased, and often surprised, to discover that we may ultimately recommend something we cannot offer. Because our commitment lies with finding the right choice for YOU, we’re happy to point you in the right direction if our solutions don’t work.

Plan sponsors must maintain due diligence when managing retirement plans. Let us help! We are eager to serve as your primary source of fixed term solutions designed to meet a variety of your retirement planning needs. Please call to schedule an appointment to let us know what we can do for you. Wishing you continued success and, as always . . .

“You must pay taxes. But there’s no law that says you gotta leave a tip.” – Author Unknown –

As Structured Settlements continue to evolve beyond their traditional personal, physical injury roots, many people have enjoyed the benefits of having taxable income deferred into a future year while earning pre-tax interest along the way. “Structured Settlement-like” offerings abound and we are proud to offer assorted fixed-term solutions to our non-personal, physical injury clients.

After all, who among us wants to pay more in taxes than necessary?

And since the desire and ability to legally defer taxes is as old as the Tax Code itself, it makes tremendous financial sense to take advantage of available solutions to managing one’s tax burdens. Most everyone has probably achieved some sort of tax-deferral through 401(k)s, Defined Benefit Plans, 1031 Exchanges and the like. But most are unaware there are other possibilities.

The Nonqualified Assignment process, when applied to a host of nontraditional tax-deferral situations – Structured Attorney Fees, Structured Sales, Structured Employment Disputes, Structured Divorce and Child Support Agreements to name a few – is a great tool we are proud to offer to those who may qualify when these unique planning opportunities arise.

Which brings us to today’s discussion about one such application of Nonqualified Assignments:

Structured Celebrity Endorsements

Open any magazine, turn on any television show and sooner or later you’re sure to see an advertisement where a well-known person is promoting a product. Got Milk? David Beckham, Taylor Swift and even Batman are there to help encourage you to drink more. Thinking of buying a burger from a fast food chain? Paris Hilton washes a car to convince you that Carl’s Jr. is the best place to go for one even if the connection between the two remains unclear. And while advertisers typically choose a celebrity at the height of their popularity to endorse its products, one company, Nationwide Insurance, has had quite a bit of fun interjecting celebrities like MC Hammer and Kevin Federline, whose “fifteen minutes of fame” has long since passed, into its commercials.

What happens, then, when the celebrity is no longer interesting?

What if an athlete becomes injured and can no longer command lucrative endorsement deals? Or how about when scandal tarnishes the image of a role model celebrity perceived to have been beyond reproach and the contract is terminated? Or when, for seemingly no reason at all, the “flavor of the week” simply fades into “last year’s model” if you’ll pardon the mixed metaphor. What happens then?

Endorsement opportunities present a good news/bad news situation to the endorser. The endorsement money can be very good. But since it often comes during the prime income producing years, often times the resulting tax burden is higher than it would be if the income arrived in a later, post-career year. Or if the income could be spread out over time. Structured Celebrity Endorsement deals solves this problem.

Enter the American Jobs Creation Act of 2004
The passage of the American Jobs Creation Act of 2004 opened the door for the use of structured settlement-like products we were already using in other areas that involved Nonqualified Assignments. The Act added Section 409A to the Internal Revenue Code which established some ground rules for Nonqualified Deferred Compensation Plans. Final Regulations on the Act became effective on April 17, 2007. Without getting into too much detail (which we’ll save for the clients’ lawyers and CPAs), 409A establishes who can, who can’t, when, where and how to go about deferring certain taxes.

Similar to Taxable Claim Settlements and Structured Attorney Fees: The net effect of Structured Celebrity Endorsements is very similar to the Taxable Claims and Attorney Fees which have been structuring for years. The concept is the same. Different sections of the Tax Code apply.

Relatively speaking and with some notable exceptions, the vast majority of professional athletes and celebrities have a fairly short window of time within which to capitalize on their success. During one’s “It Girl” stage, they are often presented with attractive endorsement opportunities. Companies hire athletes and other celebrities to pitch products and businesses to the rest of us. In exchange, the endorser celebrity receives compensation. Often, the endorsement fee is paid in the year of services rendered or over the period of time the product is pitched.

But doesn’t Derek Jeter already make enough money playing for the Yankees? Wouldn’t he possibly be better off allocating some of his Gillette Fusion Razor money into a future year when his playing days are over? Using a Structured Celebrity Endorsement he can!

Here’s how it works:

• Clients negotiate to have their endorsement money (normally paid to them in a lump sum the year of the advertisement) paid into an annuity which pays endorsement money “and then some” out over a schedule they choose.
• The Endorsee pays the lump sum (i.e. the prearranged present value of the future compensation), through a Nonqualified Assignment process, to a highly secure life insurance company that agrees to make payments according to a prearranged schedule in the future.
• Deal done this year. No added cost to the company paying the endorsement fee. They pay the same either way.
• Highly secure payments arrive, tax-deferred and with interest, in ten, fifteen, twenty years down the road or whenever the celebrity endorser thinks the income will make the most sense. 1099s arrive in the year the income is received.
• They can set aside money for retirement, children’s education, or any future need desired. The possibilities are nearly infinite.

The process is rather straightforward and the paperwork relatively simple. Endorsers will want to consult with their own tax and/or legal counsel before entering into any agreement since we do not give tax advice. And, since there’s no way to know for sure what future tax rates may look like, clients should base their decisions on various assumptions about future interest rates and tax brackets. But it’s probably safe to say that the notion of deferring money and taxes has more than casual appeal to most people. Celebrities included.

So be sure to tell all your celebrity friends, neighbors, family and clients about this exciting opportunity we offer. We’re here to help. You might even want to mention it to those celebrities-in-waiting surrounding you. After all, you never know when the next Shawn White will emerge from your neighborhood. Chris Plys has yet to appear on a Wheaties box but with curling recently taking the Vancouver Olympics by storm, you never know. So keep your eyes open.

In the end, because celebrities and even pseudo-celebrities never know how long or how bright their star will shine, they, like all of us, should carefully plan for their future. And lest you have doubts about how fleeting celebrity can be, just ask former American Idol contestant William Hung what he thinks of the fickle public. That is, if you can find him.

“Shebang!”

Then and Now: Fifty Years of Automobile Safety

The Insurance Institute for Highway Safety celebrated its 50th anniversary in 2009. To commemorate this milestone and to demonstrate how far automobile safety has come in the past half century, the Institute arranged a crash test pitting a 1959 Chevrolet Bel Air against a 2009 Chevrolet Malibu.

Automobile accidents still claim approximately 40,000 lives every year and contribute to over 3,000,000 injuries according to the U. S. Department of Transportation. This is but one crash test yet it provides a graphic reminder that design can have a major influence on the outcome of automobile accidents.

Thank you to the Insurance Institute of Highway Safety for sharing this informational video with the public!

With the Golden Globes and SAG Awards behind us and Oscar nominations just around the corner, I thought it might be fun to dive into the film vaults to see what roles, if any, Structured Settlements have ever played in the movies.

If you’re a sucker for courtroom dramas like I am, you probably can rattle off a few of the more memorable videos or DVDs you’ve enjoyed over the years. Inherit The Wind, Primal Fear, A Few Good Men, The Firm and others may even be among your favorites.

It should come as no surprise that most films, including these, have nothing to do with Structured Settlements.

But were you aware that one “lawyer flick” featured a scene where a Structured Settlement factored prominently into the plot development?

I know, I know. Leave it to a structured settlement guy to notice something like this.

And while “factored prominently” may be a bit of a stretch, 1998’s A Civil Action starring John Travolta and Robert Duval did indeed feature some Structured Settlement dialog.

Based on a book that’s based on a true story about a lawsuit that developed over alleged contaminated drinking water in Massachusetts, the film contains a scene during which plaintiff attorney Jan Schlichtmann (Travolta) makes his initial demand for damages.

After outlining that the two codefendant corporations collectively netted a profit of more than a half billion dollars the prior year, Schlichtmann submits what he believes to be a comparatively reasonable demand for damages at the informal settlement conference he has arranged for the parties at a swank restaurant:

Schlichtmann: “Twenty-five million dollars cash.”

(Pause)

Defense attorneys collectively raise their eyebrows and exchange a few encouraging nods suggesting they are pleased this demand seems far more reasonable than they were anticipating in light of the exposure.

(NOTE: Keep in mind this film predates the Vioxx Settlement by about a decade when 25 million dollars was still considered a lot of money!)

Schlichtmann: “And another twenty-five million dollars to establish a research foundation to study the links between hazardous waste and illness.”

(Pause)

Defense attorneys, along with Schlichtmann’s own legal team, are taken aback by his audacity. But he continues . . .

Schlichtmann: “And 1.5 million dollars per family annually for 30 years.”

There it is! A structured settlement demand! Who knew Hollywood had it in ’em? Credit author Jonathan Harr for developing such a tuned-in plaintiff attorney to demand a structured settlement because he recognizes that guaranteed annual income best meets his clients’ needs.

As the film continues, settlement talks break off shortly thereafter when one of the defense attorneys tallies the figures to produce a $320 Million demand.

Unfortunately for the settlement process, this uninitiated barrister failed to take the time to contact a Certified Structured Settlement Consultant (such as yours truly) who could have readily pointed out that the demand wasn’t as “outrageous” as he had surmised. But by failing to take present value into consideration, the settlement talks prematurely and abruptly conclude with defense counsel Jerome Facher (Duval) sneaking a dinner roll into his pocket for the road.

SIDEBAR: In addition to garnering Duval an “Outstanding Performance by a Male Actor in a Supporting Role” SAG Award, A Civil Action earned Oscar nominations for Best Supporting Actor (Duval) and Best Cinematography among other awards.

I won’t spoil the rest of the movie for you if you haven’t seen it but A Civil Action is certainly worth a look-see if you’re a movie buff and missed this one the first time around.

In fact, if you haven’t seen it but would like to check it out, drop me a line and I’ll even send you a complimentary BLOCKBUSTER $5.00 gift card you can use for the purpose. No strings attached! (Limited to the first 25 respondents) Consider this my contribution to the education of the masses on the topic of structured settlements through film. Enjoy!  (August, 2014 Update: Blockbuster who? Sorry. Gift cards no longer offered)

So, here’s hoping 2010 is shaping up to be a BLOCKBUSTER year for you in more ways than one! Wishing you continued success in the year ahead, I hope you win your Oscar pool.

I’m not usually one to throw stones.

But an article recently appeared in the Daily Journal that raised my ire sufficiently to elicit a response. I’m attaching a copy of my rebuttal Letter to the Editor, published January 13, 2010 in both the San Francisco and Los Angeles editions, for your convenience.

Structured Settlements Offer Financial Security in Good and Bad Times

The Dec. 4, 2009 article by David Higgins (“Recession’s Effect on Settlement and Fees”) was loose with its facts and illogical in its conclusions.

For starters, the author simplifies the very complex subject of economics. How can he know what the future holds? If he does, then that puts him above the likes of Paul Volcker and Warren Buffett. Of special note, particularly in light of Higgins’ assurances that inflation will rise, was the economic community’s collective failure to predict our current “Great Recession.”

Second, his recommendation that people should rethink structuring their settlements and their attorney fees simply because interest rates are “at historical [sic] lows” completely misses the mark and is ingratiatingly misleading. Some things just make sense regardless of economic realities and it’s doubtful that guaranteed, tax-advantaged future income tailored to an injury victim’s (or an attorney’s) specific living needs will ever fall out of favor.

Third, let’s put today’s rates in context. Long-term interest rates have been at or below 4 percent for 71 out of the last 135 years (Irrational Exuberance, Princeton, 2005). That means since the late 19th century, interest rates have been about where they are now for more than 50 percent of the time. The last time rates were at current levels for longer than a year was 1924. They remained there for 35 years.

Finally, Higgins neglected to reference his primary connection to the structured settlement industry these days: He sells his services to clients who, for a variety of reasons, need or wish to establish a qualified settlement fund (QSF) when settling their lawsuit. While a QSF can be a necessary and useful tool in some situations, quite often it merely adds an unnecessary (and often costly) layer to the settlement process. In nearly 20 years of providing structured settlement products and services to clients across the country, I have seen very few situations where a plaintiff would have been financially better served by choosing to establish a QSF.

There’s no doubt that careful thought must be given to a client’s overall situation before deciding on which settlement option is right for them. But an unbalanced article that uses fear to discount the proven and universally accepted value of a properly crafted structured settlement plan does a disservice to all attorneys and the clients who trust them to negotiate fair settlements. Structured settlements offer financial security in good times and in bad. Attorneys and their clients who reject them out of hand based solely on assumptions about the future may wish to heed Benjamin Franklin’s maxim: “One today is worth two tomorrows.”

Dan Finn, CPCU, CSSC
President, Finn Financial Group
Newport Beach

The original article I took aim at was so full of conjecture, hyperbole and mean-spiritedness that it’s hard to imagine anyone not being able to see past its transparency. Suffice it to say the author distorted facts to argue his case that structured settlements were probably not a good idea in this economy (while not-so-subtly promoting his own agenda, by the way).

In addition to my Letter to the Editor, here’s some bonus contrarian data to support my belief that the exact opposite is actually true:
In the first quarter of 2009, fixed annuity sales grew by 74% over the same period in 2008 according to LIMRA International, Inc. (Thomas, Trevor. “Fixed Annuity Sales Surge,” National Underwriter, May 29, 2009).

That’s $36 billion worth of annuity purchases, in one quarter alone, that suggests people were fleeing their more risky investments in favor of a surer thing.

The need for safety and financial security transcends economy just as it does age, size, gender, race, nationality, creed, or almost anything else. Safe, secure, tax-advantaged, guaranteed income has a place in any economy. Don’t fall into the trap of trying to out-smart the future. She always wins!

For years, contingency fee-based attorneys-in-the-know have practiced the tax-deferral strategy known as Structured Attorney Fees. This simple, yet amazingly effective method of financial planning supplementation has allowed them to set aside funds earned during their prime income-producing years in exchange for a flow of guaranteed, uber-secure, tax-advantaged retirement income.

For those who ever doubted the wisdom of this approach to retirement security nirvana, good news arrived recently in the form of an article that appeared in Kiplinger’s Retirement Report which reinforces this practice as an exceptionally wise choice.

In “A Ladder of Annuities Can Hedge Your Bets” (Kiplinger’s Retirement Report, November, 2009, p. 6), the author, Managing Editor Rachel L. Sheedy, maintains that “laddering” annuity purchases (i.e. regularly buying annuities over time as opposed to purchasing all at once) helps achieve an optimal balance of return and hedge against inflation for those seeking retirement security.

The article goes on to describe a 25-Year MassMutual Financial Group study which compared and contrasted several retirement-income strategies only to conclude that the laddered annuity approach returned 67% more money over that span than the traditional stock/bond portfolio and was the highest performing strategy overall.

Click HERE to view the Kiplinger article online.

But it gets even better!

Because the Kiplinger article doesn’t even consider one of the primary benefits of structuring attorney fees (earning interest on pre-tax income), it’s likely a study that also included Laddered Structured Attorney Fees would have even out-performed the “regular” laddered annuity portfolio.

Practitioners are cautioned that Structured Attorney Fees typically must be arranged in advance of the conclusion of settlement negotiations. Failure to follow established procedures may result in loss of opportunity to structure fees. As such, clients are encouraged to plan ahead and seek independent tax advice as needed to avoid missteps.

For attorneys who qualify though, nothing beats a Structured Attorney Fee for combining safety, rate of return and long-term financial security. And when “laddered” over a number of years, the returns and security can be compounded leading to a future filled with many market anxiety-free nights.