Structured Settlements: Post-Verdict Negotiations

Structured Settlements: Post-Verdict Negotiations

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

Today’s Installment: Post-Verdict Negotiations

May 15, 2019 When personal injury lawsuits are adjudicated, it’s a safe bet that one side or the other will be displeased with the end result. Usually it’s just a matter of degrees of disappointment.

Once the jury renders its decision – whether a defense verdict, one of the “runaway” variety in favor of the plaintiff, or somewhere in between – litigation participants have few choices about what happens next regardless of which side of the v. they stand.

They can accept the verdict, appeal it, or seek to compromise the decision.

In all but a few rare instances, a structured settlement can be a powerful, if underused, tool at this phase. Yet surprisingly, many claims professionals and attorneys (plaintiff and defense) alike incorrectly assume that a structured settlement is not possible once a verdict is rendered.

While it is true that a final judgment with no appealable issues triggers constructive receipt and therefore cannot be structured, in most cases structured settlements are not only possible but quite useful following a trial.

Constructive Receipt

One of the keys to whether or not an individual has forfeited the opportunity to structure a settlement or verdict lies within the doctrine of constructive receipt.

26 CFR § 1.451-2 outlines the rules and requirements for constructive receipt. Tax triggers occur whenever a taxpayer has an unfettered right to funds. A taxpayer need not be in actual possession of funds in order for them to owe taxes on money that is otherwise taxable (or, to remain eligible for a structured settlement where tax-free funds are being paid). They merely need to be able to access them if they wanted.

The “substantial limitation” of an unsettled lawsuit under appeal consideration with no settlement documents yet executed opens the door for structured settlement consideration.

Risk Mitigation

For the same reason structured settlements are useful in pre-trial settlement negotiations, they can also be helpful once a verdict is reached regardless of which side the verdict favors.

Because either party will usually be in a position to consider their appeal options post-verdict, any tool that can help them avoid the additional time, expense and risk associated with another trial will be welcome.

A structured settlement can help increase the overall value of the verdict at no additional cost to either party. This can be welcome news for plaintiffs who feel the jurors misjudged their case and awarded too little.

For the defense, it may allow them to resolve a claim for its verdict value by guaranteeing more total dollars to the plaintiff (albeit over time) thereby lessening their motivation to appeal.

Punitive Damages

When they appear in a verdict sheet, punitive damages offer a unique opportunity for structured settlement usage.

Because they are fully taxable, punitive damages paid as a single lump sum can significantly dilute the overall net value of any verdict for the plaintiff.

But by utilizing a nonphysical injury structured settlement and spreading damages (and the accompanying tax liability) out over time, it is entirely possible for the defense to pay less than the verdict while increasing the amount of money the plaintiff puts in their pocket due to the reduction in taxes owed.

NOTE: This topic will be covered in greater detail in a future blog post.

Pre-or-post-verdict, a structured settlement is one of the best tools litigants have to increase the overall value of whatever money is in play. When verdicts are the result of a personal, physical injury, structured settlements can enhance the overall value of the outcome at no additional cost for either party and should be explored.

Photo by Tim Gouw on Unsplash

Structured Settlements: Fatalities

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

Today’s Installment: Fatalities

May 7, 2019 – “Death is a crisis that all families encounter, and it is recognized as the most stressful life event families face . . .”

The preceding quote was excerpted from Chapter 4, “Death, Dying, and Grief in Families” (Murray, Toth & Clinkenbeard, 2005), of Families & Change: Coping with Stressful Events and Transitions, a best-selling text of compilation scholarly research on a topic most of us would sooner avoid.

No death can be minimized, but the unexpected, sudden death of a loved one leaves families feeling especially violated as they struggle for comfort that is too slow in arriving and acceptance of a new reality they never asked for.

The ensuing grief takes a significant emotional toll on psyches and many families fracture to the point of permanent dysfunction as a result.

When survivors file insurance claims and wrongful death lawsuits due to negligence alleged to have caused a fatality, they experience a new set of stressors inherent in the litigation process which can prolong their suffering and worsen their already-fragile sense of being.

And that’s just the emotional toll.

Why Structured Settlements for Fatalities?

When the decedent was the family’s contributory wage earner, the loss of their steady income adds yet another layer of vexing complexity to the survivor responsible for keeping the family together.

Life insurance will help, but the ongoing cost of raising a family, particularly when young children are left behind, can remain long after life insurance proceeds are spent.

Few cases cry out for structured settlements as loudly as those involving fatalities. Especially when a principal wage earner leaves small children behind.

Because a structured settlement can be crafted to replicate lost future income, structuring that portion of the claim serves the family better than a single lump sum of cash ever could. It stabilizes their financial situation and eliminates daunting decision making.

In fact, an argument can be made that attorneys and claims associates do the family a grave disservice when they don’t structure the settlement. Given the unpredictability of the stock market and most people’s inexperience in managing large sums of money effectively, a lump sum simply fails to adequately meet the needs of the family over time.

Structured settlements offer secure, guaranteed, tax-free future income at rates superior to anything else of commensurate risk.

No other investment strategy can legitimately make a similar claim.

In Addition to Wage Loss

Structuring the decedent’s wage loss to help ease the financial stress for surviving family members should be considered the minimum “do the right thing” moment when resolving a wrongful death claim.

And because, unlike wages, structured settlement benefits flow 100% income tax-free for wrongful death claims, net income can be replaced for less money than would be possible absent the structured settlement.

In addition to lost wages through the date of retirement, the decedent likely would have still been earning pension credits or contributing to Social Security and/or a defined benefit retirement plan. For this reason, many structured settlement plans include spousal income for life to help make up the shortfall.

Also, reserving some general damage funds for the kids’ college education is often a sensible component of any litigation outcome. Especially if the case requires court approval, attorneys will find that structured settlements make for a better end result on minors’ cases and help ensure a smooth court approval process. (See Structured Settlements; Minors)

Idea: When a child is lost, we’ve even seen families structure annual scholarship funds as a way to help keep their offspring’s memory alive.

An annual contribution to MADD, the high school wrestling team or charity of the family’s choice ensures a continuing legacy versus a single lump sum which can be forgotten after a one-time donation is made. 

Predator protection

Another advantage of structuring wrongful death claims is the protection it affords the surviving spouse and children.

Some widows/widowers inadvisably jump into new marriages before they are emotionally ready. Some become easy targets for “Dirty Johns” who troll the obituaries looking for vulnerable prey and newfound benefactors.

Structured settlement contracts established prior to the new marriage remain premarital property generally exempt from divorce settlement consideration should the new marriage eventually sour.

While it’s true cash personal injury settlements would also be considered premarital property, it’s much easier to lose track of those assets if commingled with other funds or purchases.

Conclusion

Sudden death is hard enough to deal with emotionally without added financial stress. Structured settlements can’t bring a loved one back to life. But they can help ensure the financial aspects of dealing with grief are eased and should be strongly considered on wrongful death claims.

Recommended reading and additional resource:

“Surviving Sudden Loss: Stories from those who have lived it”

Collected personal accounts of people who have lost loved ones unexpectedly through air disasters, 9/11, SIDS, and auto and construction accidents. Written by friend of our firm, Heidi Snow, whose fiancé died in the TWA Flight 800 crash off Long Island in 1996 and whose grief mentoring nonprofit helps those who are left behind in the wake of air disasters.

Photo by dylan nolte on Unsplash