What Language is That?

A short while ago, I approached a group of friends in deep discussion only to learn that I had no idea what they were talking about.? Now I consider myself a reasonably well-read and intelligent fellow, but it was disconcerting to find myself utterly lost in their discussion. It turns out they are specialists in their field, and they were merely “talking shop,” but the language of their world was foreign to me and I quickly gave up trying to understand it.

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Contemplating this experience, I began to think about my own work and the language of my trade.? How lost would these very same friends be sitting next to me in a mediation?? Probably as lost as I was.

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Now consider the ultimate consumer of settlement planning services: an injured person.? In most cases, the first time they ever hear of a “structured settlement” is when they are in the midst of having to make one of the most serious financial decisions of their whole lives. How likely are they to make an informed decision if they don’t know what questions to ask??

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I decided to see what can be learned about structured settlements from the outside looking in.? My oldest son is fond of telling me that I have “the sum of all the world’s knowledge” in the palm of my hand, and with smartphones and the internet, indeed we all do.?? However, if you tap “structured settlements” into your phone you will get 14,700,000 “results,” most of them companies trying to persuade people who already have a structure to “sell” it for “cash now!”? Without some serious drilling down, a general internet search is not going to be helpful to anyone trying to learn what they are.?

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If I could somehow claim the #1 spot on the internet and make a webpage only for injured people, what would I put on that page?? I would simply answer the most common questions these nice people in fact do ask me at mediations:

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What is a structured settlement? – It is a stream of future payments made as an alternative to a lump sum of cash paid out in settlement of a personal injury, wrongful death, or workers compensation claim.? All future payments are received free from any state or federal income tax and are guaranteed to be made, in the amount or growth formula agreed to, on the date specified.

Why would I want a structure? – A large sum of cash received all at once certainly sounds attractive, but most people find it difficult to hang on to.? Structured settlement payments, on the other hand, are custom-designed to arrive when you need them most. Payments can be timed to pay the mortgage, fund future medical expenses, pay kids’ college expenses, and meet many of the other expenses which predictably arise throughout our lives.?

What happens to the money when I die? – This will depend on the type of plan you choose.? All guaranteed payments will be made, depending on the formula. Payments can be designed to last the lifetime of a person, or they can be made in what are called certain-only payments which are paid regardless of survivorship.? Either way, any remaining payments upon the death of the structure recipient are then set to be made either to their Estate or to a beneficiary they designated.?

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How are “guaranteed payments” guaranteed? –? Guaranteed future structured settlement payments are actually made by a life insurance company who has agreed to make payments on behalf of the settling defendants.? For vulnerable claimants who want fixed and guaranteed dollar amounts, such payments will be funded using only guaranteed annuities from highly-rated, state-regulated life insurers. When working with very high dollar sums, it is not uncommon to divide the settlement funding between several different life insurance companies to reduce risk further by diversification.?

Can I “sell” my structured settlement? Technically, yes, but it’s not as simple or fast as they make it sound and they charge exorbitant fees.? You should almost never sell your rights to these valuable future payments. ?While bona fide emergencies do arise resulting in difficult decisions, the people you see on TV who offer “CASH NOW!” don’t play nice, and they don’t play fair.? Calling them will usually make your financial situation decidedly worse.? If a person finds themselves in such a tight situation, the right thing to do is NOT call those people on TV; instead, talk to a bona fide banker about taking out a conventional loan instead.? Fully-regulated national banks charge far more reasonable rates, if sudden funds are needed.

These are just a few of the aspects about structures that I think a settling claimant should be aware of.? For more information, I would direct them to the website of the National Structured Settlement Trade Association, https://www.nssta.com/ (I have been a member for 35 years).? NSSTA is not a brokerage firm, but a professional association dedicated to the establishment and preservation of structured settlements in order to provide long-term financial security to personal injury claimants and their families.

My takeaway is this: a person need not be intimidated by new words they’re not familiar with. If you don’t know what people are talking about, speak up!? It is in your best interest to root out the hard facts and make sound decisions. Tax-free structured settlements offer truly unique financial benefits unavailable elsewhere. Learn what they are and make intelligent, informed decisions.

Would you like to have a more comprehensive discussion regarding this alternative? Contact Frank C. Kilcoyne, CSSC, at [email protected]? or call 800.544.5533. I am here to help.

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