I recently received an email from a trial lawyer friend introducing me to another attorney. While the email touted my company’s expert settlement planning, the author specifically called out structured settlements as our offered service. And it got me thinking: How many attorneys – and people in general – think that settlement planning equates only to structures?
I’ll start by saying that structured settlements are still a viable option for many people who are going to receive a settlement. They essentially provide guaranteed, long-term periodic payments as an alternative to having the plaintiff receive one large lump sum settlement. They allow for better financial planning now and in the future, and for taxable settlements and jury verdicts (non-injury related, punitive damages, etc.), structured settlements can help with tax planning year over year, too. Traditional annuities are still the go-to for many attorneys, but the more modern investment-backed structured structure offers unique benefits while still providing guaranteed periodic payments. So, yes, structured settlements are still a big part of settlement planning.
But that’s only a drop in the bucket in terms of what comprehensive settlement planning can entail for the individual plaintiff. Injured clients who have means-tested government benefits have a low-income threshold they cannot cross without losing eligibility, and a settlement can easily put them over it; implementing strategies such as a pooled or traditional special needs trust or ABLE account can help a plaintiff avoid losing benefits after settlement. For those receiving Medicare, there are secondary payer rules that a beneficiary must comply with after settlement. When needed, an expert planner can use unique tools, such as a Medicare set aside, to help them keep Medicare after settlement.
Beyond benefits preservation, there are other strategies at settlement planners’ fingertips. A domestic asset protection trust can help someone protect their asset from unexpected future financial losses, such as those from creditors, bankruptcy, divorce, judgments, and business failure.
Settlement planning isn’t only for plaintiffs. Trial lawyers can work with expert planners to plan for their own short- and long-term financial needs. Attorneys earning contingency fees have the unique opportunity to defer an unlimited amount of income into future periodic payments. By spreading fees over time, they can control exactly when their money comes in and only pay taxes on the amount they receive in any given year.
It can be difficult to quickly decide which of these tools would be best as settlement approaches. To help ease the burden of a short amount of time, settlement planners can establish a qualified settlement fund to hold the settlement proceeds after the conclusion of a lawsuit. The defendant pays into the account and is generally released from the litigation, after which the attorney and plaintiff can take the time they need to implement the right planning strategies around their settlement and/or fee.
It’s easy to see that modern settlement planning has evolved to include many solutions in addition to structured settlements. All in all, settlement planning ensures that a hard-won settlement or jury verdict is as beneficial as possible. Experts build a plan customized to the individual and then help put it in place. If you’re interested in learning more about how we can help you or your client, DM me on LinkedIn.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).