Beyond Structured Settlements

2008 ASNP Annual Meeting

The Second Annual Meeting of the Academy of Special Needs Planners (ASNP), titled "Beyond Nuts & Bolts: When Theory Meets Reality", took place March 27-29, 2008 in New Orleans. Open to non-ASNP members, ASNP's 2008 program attracted more than 100 attendees plus nine sponsors and exhibitors.

Program Chairperson Frank Johns, ASNP's founders and ASNP's staff are to be congratulated for maintaining the high educational standards ASNP established in 2007. In addition to the excellent presentations, ASNP's educational program featured detailed and valuable handout materials in hardcopy and CD ROM formats. The 2008 ASNP program was noteworthy, in part, because it offered multiple presentations highlighting settlement planning and structured settlement issues - many of which S2KM identified and recommended in S2KM's summary of ASNP's 2007 Annual Meeting.

Several ASNP program presentations featured members of the Society of Settlement Planners (SSP). In addition to Johns, SSP member presenters included Michele Whitmore, Tim Nay, Jack Meligan, Joseph Tombs, David Lillesand and this blog's author, Patrick Hindert. Several additional SSP, National Structured Settlement Trade Association (NSSTA) and National Association of Settlement Purchasers (NASP) members participated as sponsors, exhibitors and/or attendees.

Summary of the 2008 ASNP Annual Meeting

Families Helping Families - ASNP's "extra-curricular" program in New Orleans featured a social service project where 30 ASNP conference attendees assisted Families Helping Families of Southeast Louisiana repair and improve its office headquarters. Many special needs professionals have disabled family members. Their commitment to disabled persons is genuine. The ASNP work project represented a hands-on demonstration of their commitment and complemented the participation and support NSSTA and SSP provided earlier this month in Washington, D.C. for the AAPD Leadership Gala Dinner.

Special Needs Trusts for Wealthy Families - Michael Gilfix opened the ASNP Educational Program with a detailed analysis of the challenges facing special needs planners whose clients include wealthy families with disabled members. Gilfix's analysis addressed the meanings of "wealth" and "disability" in the context of public benefits as well as planning considerations to meet the cost of care and services for such clients.

Tax Considerations of Grantor vs. Non-Grantor Trusts - Vincent Russo provided a tax-oriented introduction to various trusts used in special needs planning. Russo identified drafting issues, reviewed a Fiduciary Income Tax Return (Form 1041) and highlighted a variety of "tax traps". Russo's discussion supplemented his tax presentation at the 2007 ASNP Annual Meeting.

Special Needs Financial Planning - Two financial planners, Cynthia Haddad and Sal Salvo, offered an overview of comprehensive special needs financial planning. Haddad reviewed sample case studies from a book she co-authors. Salvo discussed the role of life insurance and shared his experience of caring and planning for his own disabled child.

Secondary Life and Annuity Markets - This blog's author introduced ASNP members to life settlements, structured settlement transfers and Medicaid annuity transfers. Issues addressed included secondary market history, public policy considerations, existing laws and regulations, and reactions from the primary markets - as well as the professional responsibilities and planning options for special needs attorneys.

Prudent Investment - William Browning discussed the management role and investment duties of trustees for special needs trusts. Browning's presentation highlighted the general impact of the Uniform Prudent Investor Act (UPIA) for trustees in the context of modern portfolio theory as well as recent litigation against trustees.  Browning's presentation did not mention structured settlement annuities.

Ethical Pitfalls for Attorneys Acting as Fiduciaries - Frank Johns addressed ethical challenges special needs attorneys encounter when representing a fiduciary or serving as self-appointed fiduciaries. Johns' commentary included consideration of the ABA Model Rules of Professional Conduct, the NAELA Aspirational Standards and the ACTEC Commentaries to the Model Rules of Professional Conduct.

Difficult Trust Beneficiaries - Patricia Dudek and Cynthia Barrett shared their personal experiences and recommendations for special needs attorneys and trustees who encounter difficult trust beneficiaries including distribution authority and strategies for avoiding professional liability.

Trusts and the Funding of Tort Recoveries - Michele Whitmore reviewed the relationship of structured settlements and special needs planning from a settlement planning perspective. Whitmore summarized the history of structured settlements and highlighted various abuses including how "over-structuring" has contributed to the development of the secondary annuity market. Whitmore recommended a collaborative and plaintiff-controlled settlement planning strategy based upon damage analysis, 468B Qualified Settlement Funds, Medicare Set-Aside Arrangements and Special Needs Trusts.

Settlement Planning and Special Needs Planning - Tim Nay moderated a panel discussion featuring Jack Meligan and Joseph Tombs that highlighted collaboration opportunities for settlement planners and special needs attorneys. Meligan differentiated needs-based settlement planners from product-based structured settlement intermediaries. Meligan criticized defendants who seek to control or restrict any claimant's right to select his or her own settlement advisors and products. He summarized the mission and history of the Society of Settlement Planners (SSP) and noted the recently adopted SSP Standards of Professional Conduct. Tombs outlined the SSP Registered Settlement Planner (RSP) certification program and distinguished a settlement planner from a plaintiff structured settlement broker.

Personal Injury Litigation - Evan Krame and Diedre Wachbrit offered advice and recommended guidelines for special needs attorneys who work with trial attorneys. Their presentation included advice for special needs attorneys about structured settlements and structured settlement advisors. They also identified several trust companies that currently offer special needs trust services.

Why Fiduciaries Get Sued - Richard Milstein and Frank Johns examined several areas of trustee liability and discussed special needs trust case studies that highlighted areas of greatest risk for trustees. Milstein and Johns included their own list of the top ten reasons special needs trustees are sued as well as their recommended remedies.

SSI Rules for Trust Administration - Ken Brown and David Lillesand discussed current Supplemental Security Income (SSI) rules and issues impacting the administration of special needs trusts. Brown summarized the general SSI rules for disbursements from trusts as well as specific rules relating to home ownership. Lillesand outlined the sources of SSI law and summarized trust administration and trust creation issues. Both Brown and Lillesand addressed structured settlements. According to Brown, the Social Security Administration (SSA) has identified structured settlements for future POMS but they are not currently a priority. According to Lillesand, the lack of structured settlement POMS continues to pose a risk for those claimants and their attorneys who attempt to fund special needs trusts with structured settlement annuities. If and when structured settlement POMS are drafted, Lillesand recommended the POMS should also address secondary market annuity issues.

Section 8 Housing and Special Needs Trusts - Kevin Urbatsch explained why special needs trusts and Section 8 Housing rules are not fully compatible. According to Urbatsch, some local public housing agencies (PHAs) are taking the position that every distribution from a special needs trust qualifies as income for the Section 8 recipient including distributions for medical expenses. This result can cause the elimination of a Section 8 voucher. Re-qualification for Section 8 may take months or even years.

Sponsors and Exhibitors

• MassMutual
• J.G. Wentworth
• Legal Directives
• ResCare Premier
• CORE Health Care
• MetDESK
• The Halpern Group
• First Capital Surety & Trust
• Wells Fargo

For additional information about structured settlements, see S2KM's Structured Settlement Wiki.

Structured Settlements in 2007

Happy holidays from S2KM Limited. Thank you for reading S2KM's blog during 2007. This final 2007 S2KM blog post highlights some of this year's important structured settlement developments and issues.  For additional background information, see:

• S2KM Mid-2007 Structured Settlement Report
• Structured Settlements in 2006

Industry Growth and Development

• Industry insiders are predicting final 2007 structured settlement annuity sales (qualified and non-qualified) will match or slightly exceed total 2006 production of $6.1 billion.
• Membership growth in 2007 for the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP), the primary structured settlement trade associations, also appears flat. Neither of these associations has articulated a strategy for growing the structured settlement industry.
• NSSTA replaced long-time Executive Director Randy Dyer in 2007 with association management company Smith Bucklin. NSSTA has announced it will continue a business relationship with Dyer. However, NSSTA has not yet announced Dyer's new role or responsibilities.
• Annuity provider Mass Mutual exited the structured settlement industry in 2007 joining other recent industry departures such as Genworth, Travelers and Aegon. No new annuity providers entered the structured settlement market in 2007.
• The secondary life and annuity markets continued to be controversial within the structured settlement industry in 2007. Semetra resigned from NSSTA in 2007 based in part on their disagreement with NSSTA's Bylaw Amendments related to structured settlement factoring. Neither NSSTA nor SSP allows factoring companies to join their associations.
• Although the secondary structured settlement market continues to grow in 2007, the overall pace of its growth appears to have leveled off for many, but not all, participants.
• Preliminary strategic recognition and some consolidation continued during 2007 within these overlapping markets:
  
  • Structured settlements;
  • Personal injury settlement planning;
  • Litigation funding;
  • Special needs planning;
  • Secondary insurance and annuity markets.

Legislation and Regulations    

• New York Governor Eliot Spitzer announced a $750 million "agreement in principle" for Executive Life of New York in 2007. The agreement is designed to continue paying all ELNY annuitants 100% of their benefits. The announcement represents a public relations victory for the structured settlement industry. Many questions about the agreement, however, remain unanswered. For example: the amount of contributions from indemnity (casualty) insurers who own or have assigned structured settlement annuities.
• State Medicaid Agencies are continuing to adopt annuity provisions from the Deficit Reduction Act into their state Medicaid Plans. Interpretations and applications of these new annuity rules remain inconsistent creating process bottlenecks and denials. The impact of the secondary annuity markets on Medicaid qualification remains unclear in 2007. The Social Security Administration (SSA) announced in 2007 that it will draft POMS for annuities in 2008. For additional information about the Deficit Reduction Act, see:
  • Release 41 of "Structured Settlements and Periodic Payment Judgments";
  • Inconvenient Questions; and
  • NAELA Annuity Policy White Paper.
• 48 states have enacted structured settlement protection statutes. Overall, these statutes appear to be accomplishing their purposes and functioning with increasing certainty and efficiency. Pennsylvania's judiciary adopted Pennsyvania Rule 229.2 in 2007 tightening some rules and processes within that state's protection statute.
• The U.S. Treasury has not ruled on single claimant 468B funds in 2007.

Case Law - some of the significant 2007 cases:    

• DOJ Sovereign Immunity Defense - see "Drinker Biddle's Structured Settlement Update" for analysis of two DOJ sovereign immunity cases: Transamerica v. Settlement Capital and Continental Casualty v. United States.
• Primary Market Disclosure Case - "Pullman & Comley's Structured Settlement Insights" provided the first Internet analysis of Joseph v. The City of New York which Pullman & Comley characterizes as ""the first court opinion to analyze the requirements in structured settlement protection acts that disclosures be made when negotiating a structured settlement."
• Rapid Settlements cases challenging secondary market laws and business practices including:
  
  • Rapid v. Symetra; and
  • CNA v. Rapid Settlements

• Murphy v. IRS - Eleven months after ruling that taxing damage awards for nonphysical compensatory damages violated the United States Constitution, the United States Court of Appeals for the District of Columbia Circuit has reversed itself in Murphy v. IRS by holding that the United States can tax awards for emotional distress and injury to reputation.
• Macomber v. Travelers - the parties agreed to a confidential settlement in 2007.  It is unclear what legal precedents, if any, the earlier Connecticut State Supreme Court rulings in this case will hold for current or future structured settlement litigation.
  

Educational Programs and Resources

• Both NSSTA and SSP offered certification programs in 2007.    
• S2KM attended educational programs for the following trade associations in 2007 and wrote blog posts (see links) evaluating their structured settlement educational programs:          
  
  • National Structured Settlement Trade Association (NSSTA).          
  • Society of Settlement Planners (SSP)          
  • American Association for Justice (AAJ)          
  • National Academy of Elder Law Attorneys (NAELA)          
  • Academy of Special Needs Planners (ASNP)          
  • National Association of Settlement Purchasers (NASP)    
• The structured settlement industry continued to offer various additional educational resources in 2007:          
  
  • Blogs, podcasts, wikis and concept maps;          
    
  • Digital and hardcopy newsletters;          
    
  • Hardcopy legal textbooks.

Business Standards and Practices

• 2007 developments
  
  • Broker Relations Initiative - status report provided in this S2KM blog post.
  • SSP Ethics Project - status report provided in this S2KM blog post.
• 2007 issues:
  
  • Structured settlement public policy
  • Claim management vs. settlement planning
  • Consumer and investor protection including:
    
    • Compensation disclosure;
    • Informed consent;
    • Single claimant 468B funds;
    • Unfair claim practice legislation;
    • Fiduciary responsibilities for professional advisors.

• Additional compensation issues:
  • Rebating
  • Affinity programs
  • Secondary market transactions
• Unauthorized practice of law.

Secondary Life and Annuity Markets - 1

Recent developments related to the secondary life insurance and annuity markets should encourage several professional associations to learn more about these markets - and to provide improved education in 2008 for their members about these markets.

Responsible professional associations include:

• The National Structured Settlement Trade Association (NSSTA)
• The Society of Settlement Planners (SSP)
• The National Academy of Elder Law Attorneys (NAELA)
• The American Association for Justice (AAJ)
• The Academy of Special Needs Planners (ASNP)
• The Special Needs Alliance (SNA)

Recent secondary market developments include:

• Mealey's Conference: "Life Insurance in the Secondary Market" - Mealey's in-person conference, developed in collaboration with Drinker Biddle, is occuring December 11-12, 2007 at the Harvard Club of New York City.
• Deal Flow Media (DFM) - DFM, a publisher and educator focusing on specialty financial markets including life settlements, has announced it will enter the structured settlement market in 2008.
• A.M. Best - A.M. Best recently introduced "Best's Structured Finance Center", a web portal for the insurance-linked securities market.
• NCOIL - The National Conference of Insurance Legislators (NCOIL) adopted a Model Life Settlements Act at its most recent meeting.
  

For additional information about life settlements, see:

• Wikipedia's "life settlement" entry
  
• New York Insurance Department's "Life Settlements: Top Ten Questions".
• Deal Flow Media's "The Life Settlements Report"

For additional and related S2KM commentary, see:

• Structured Settlement Secondary Market
  • Structured Settlement Transfers
  • Settlement Transfer Update
  • Settlement Transfers - Release 39
  • How the Primary Market Views Factoring
  • NSSTA Bylaw Amendments
  • J.G. Wentworth v. Peachtree Settlement Funding
  • Settlement Transfers: Wentworth and Symetra
  • Rapid v. Symetra
  • Review of Robert Wood's article: "Structured Settlements: Factor vs.Commute".
  • See also: Chapter 16 in hardcopy "Structured Settlements and Periodic Payment Judgments" written by Daniel Hindert, Joseph Dehner and Patrick Hindert.
• National Association of Settlement Purchasers (NASP)
  
  • 2007 Annual Meeting
  • 2006 Annual Meeting
  • NASP Wiki
• Deal Flow Media
  • Deal Flow Media structured settlement webinar
• Drinker Biddle
  • Drinker Biddle's "Structured Settlement Update"

Structured Settlement Educational Programs - Fall 2007

Fall of 2007 features many association meetings and educational events that should interest structured settlement attorneys, other structured settlement professionals and stakeholders.

This S2KM blog post:

• Highlights these Fall 2007 meetings and educational events; and
• Features related commentary and analysis from S2KM and structured settlement knowledge leaders.

National Structured Settlement Trade Association (NSSTA)

• 2007 Certified Structured Settlement Consultant (CSSC) Seminar - October 3-7 at the University of Notre Dame.
• 2007 NSSTA Fall Regional Meeting - October 10-12 in Tampa, FL.
• Prior S2KM coverage of NSSTA
  • NSSTA 2007 Winter Meeting
  • NSSTA Bylaw Amendments
  • NSSTA 2006 Fall Regional Meeting
  • NSSTA 2006 Annual Meeting

Society of Settlement Planners (SSP)

• 2007 SSP Fall Meeting - September 7-8 in Scottsdale, AZ
• 2007 SSP Registered Settlement Planner (RSP) Program: First Course - September 10 to December 12 at Texas Tech University.
• Prior S2KM coverage of SSP
  • SSP 2007 Annual Meeting
  • SSP's 2007 Educational Seminar
  • SSP to Create Professional Designation
  • SSP 2006 Annual Meeting
  • SSP's 2005 Annual Meeting

National Association of Settlement Purchasers (NASP)

• 2007 NASP Annual Meeting - October 18-19 in Washington, D.C.
• Prior S2KM coverage of NASP
  • NASP 2006 Annual Meeting
  • How the Primary Market Views Factoring

National Academy of Elder Law Attorneys (NAELA)

• 2007 NAELA Advanced Elder Law Institute - November 2-4 in Memphis, TN
• Prior S2KM coverage of NAELA
  • NAELA Annuity Policy White Paper
  • NAELA 2006 Advanced Institute

Special Needs Planners

• Special Needs Planning associations and educational institutions include:
  • Academy of Special Needs Planners (ASNP): Ask2007 Program - October 18 in Clearwater, FL
  • Special Needs Alliance (SNA): Fall 2007 Meeting - October 20 in Clearwater, FL
  • Stetson Law School - Special Needs Trust Program: October 18-19 in Clearwater, FL
• Prior S2KM blog posts about special needs planning
  • Academy of Special Needs Planners
  • Structured Settlements and Government Benefits
  • The Deficit Reduction Act of 2005
  • Inconvenient Questions
  • Selecting a Settlement Trustee
  • Special Needs Trusts
  • Settlement Trusts
• S2KM wiki for special needs planners
  • Structured Settlement Law

National Alliance of Medicare Set-Aside Professionals (NAMSAP)

• NAMSAP's 2007 Annual Meeting - November 2 in San Diego
• Prior S2KM coverage of NAMSAP
  • NAMSAP
  • Medicare Set-Aside Arrangements

American Association for Justice (AAJ)

• AAJ's two annual conventions for 2007 have already occurred.
• Prior S2KM coverage of AAJ
  • AAJ 2007 Annual Conference
  • AAJ 2007 Winter Meeting
  • AAJ 2006 Annual Meeting

Additional Educational Resources - for structured settlement attorneys, other professionals and stakeholders:

• Attorney Joseph J. Dehner addresses:
  • Structured Settlement Public Policy;
  • The DOJ's Structured Settlement Program
• Attorney Robert W. Wood addresses:
  • Structured Attorney Fees
  • Single Claimant 468B Fund
  • Structured Settlements: Factor vs. Commute?
• Additional S2KM blog posts, podcasts, wikis and concept maps:
  
  • Web 2.0 for Lawyers
• Social Network Technologies
• Introduction to Podcasting
• Knowledge Management and Structured Settlements
• Concept Maps
• Overview of the Structured Settlement Markets
• Structured Settlement Public Policy
• The Future of Structured Settlements
• Structured Settlement Transfers - aka factoring
• Structured Settlements and Government Benefits

• Hardcopy legal textbooks:
  • "Negotiating and Settling Tort Cases" - by Matt Garretson and Guy O. Kornblum
  • "Structured Settlements and Periodic Payment Judgments" - by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert
  • "Taxation of Damage Awards and Settlement Payments" - by Robert W. Wood

S2KM Podcast Review - 1

This blog post highlights and summarizes S2KM's first six audio podcasts which can be subscribed to and are accessible from the upper left corner of S2KM's blog: "Beyond Structured Settlements". Future S2KM reviews will also highlight podcasts from other structured settlement podcast sites including Ringler Radio, The Settlement Channel and The Factoring Channel.

Truffle Media Networks - S2KM initiated its own podcast channel (S2KM Podcast Channel) June 10, 2007 in collaboration with Truffle Media Networks.  Ned Arthur of Truffle Media hosts S2KM's podcasts. During the past six weeks, S2KM and Truffle Media have begun to develop a collaborative public podcast library.  We intend to continue this collaboration throughout 2007.

Preliminary S2KM podcasts focus on these topics and people:

Participant introductions

• Ned Arthur - S2KM Podcast Tape 1 introduces S2KM Podcast host Ned Arthur and Ned's company, Truffle Media Networks. In Tape 1, Ned and Patrick Hindert, S2KM's Managing Director and blog editor, discuss Ned's background and provide an overview of Truffle Media Networks. They also discuss the application of podcasting to the following industries:
  • Structured settlements - including the primary and secondary United States markets
  • Personal injury settlement planning
  • Special needs planning
  • Secondary insurance markets for annuities and life insurance
• Barbara Bowen - S2KM Podcast Tape 4 introduces Dr. Barbara Bowen, Managing Director of Sound Knowledge Strategies. Barbara is a knowledge management (KM) expert who specializes in eliciting and visually representing tacit knowledge to achieve shared mental models. In Tape 4, Ned and Barbara discuss Barbara's educational and professional background and introduce concept maps. In subsequent S2KM podcasts, Barbara and Ned will discuss specific S2KM concept maps including "How does Web 2.0 Impact Lawyers".
• Joseph Dehner - S2KM Tape 5 introduces Joseph Dehner, a partner in the law firm Frost Brown Todd and co-author of "Structured Settlements and Periodic Payment Judgments". Ned and Joe discuss Joe's historical study of, and role within, the structured settlement industry beginning in 1977. Ned also elicits Joe's preliminary S2KM podcast analysis of structured settlement public policy. Joe will be providing additional podcast commentary about structured settlement public policy for S2KM during the next couple of weeks.

Supplemental S2KM reporting - The following S2KM podcasts supplement prior S2KM blog reporting:

• Special Needs Attorneys - In S2KM Podcast Tape 2, Ned and Patrick discuss the relationship between structured settlements and special needs attorneys. Related S2KM commentary and analysis includes:
  • Structured Settlement Law - a public wiki S2KM developed for a June 12, 2007 presentation to the Academy of Special Needs Planners.
  • Academy of Special Needs Planners - an S2KM blog post reviewing the Academy's March 2007 Annual Conference.
  • Inconvenient Questions - S2KM's three-part series about the Deficit Reduction Act of 2005 and its potential impact on structured settlements.
• Structured Settlement Mid-2007 Report - In S2KM Podcast Tape 3, Ned and Patrick identify and review important mid-2007 structured settlement industry developments as highlighted in a prior S2KM blog post. They also review June 2007 structured settlement newsletters from the law firms Drinker Biddle and Pullman & Comley.
• AAJ 2007 Annual Conference - In S2KM Podcast Tape 6, Ned and Patrick review the American Association for Justice (AAJ) 2007 Annual Meeting which occurred in July 2007. S2KM's blog coverage of the AAJ meeting included three posts. S2KM and Truffle Media will be publishing additional AAJ Conference podcast reviews in August featuring other structured settlement stakeholder attendees.

For additional information about podcasting, see S2KM's prior blog post "Introduction to Podcasting" which features an embedded concept map developed by Barbara Bowen.

S2KM Mid-2007 Structured Settlement Report

As Fourth of July 2007 quickly approaches, structured settlement stakeholder associations are re-organizing under their 2007 leadership.  These stakeholder associations include:

• National Structured Settlement Trade Association (NSSTA).
• Society of Settlement Planners (SSP)
• American Association for Justice (AAJ)
• National Association of Trial Lawyer Executives (NATLE)
• National Academy of Elder Law Attorneys (NAELA)
• Academy of Special Needs Planners (ASNP)
• Special Needs Alliance (SNA)
• National Alliance of Medicare Set-aside Professionals (NAMSAP)
• National Association of Settlement Purchasers (NASP)

As  unsollicited input to these associations, S2KM offers this mid-year 2007 summary of important structured settlement legal developments. 

S2KM's Podcast 3 (accessible from S2KM's blog courtesy of Truffle Media Networks) provides a related audio summary.

Mid-2007 Structured Settlement Legal Developments

• Potential $600 Million Shortfall at Executive Life of New York - "Drinker Biddle's Structured Settlement Update" provided an early Internet analysis of this story.  NSSTA has reacted swiftly by announcing an "ELNY Task Force".  In a June 29, 2007 written message to NSSTA members, President Henry Strong also announced:
  • Two-time NSSTA President Len Blonder will Chair NSSTA's ELNY Task Force;   
    
  • NSSTA has already met directly with the New York Liquidation Bureau; and   
    
  • NSSTA has initiated "productive discussions" with the American Counsel of Life Insurers (ACLI).
• Social Security POMS to Address Structured Settlements - S2KM first reported this announcement by the SSA's Ken Brown in an April 9, 2007 blog post titled: "Academy of Special Needs Planners".  See these S2KM blog posts for additional background and analysis:
  • Structured Settlements and Government Benefits
  • Deficit Reduction Act of 2005 (DRA) - S2KM's 3-part blog series titled "Inconvenient Questions" reviews Sylvius von Saucken's 2007 article about the DRA and structured settlements.
  • Release 41 of "Structured Settlements and Periodic Payment Judgments" includes a new Chapter 15 titled "Government Benefits and Structured Settlements".
• First Primary Market Disclosure Case - "Pullman & Comley's Structured Settlement Insights" provided the first Internet analysis of Joseph v. The City of New York which Pullman & Comley characterizes as ""the first court opinion to analyze the requirements in structured settlement protection acts that disclosures be made when negotiating a structured settlement."  
• DOJ Sovereign Immunity Defense Voids Transfers - see "Drinker Biddle's Structured Settlement Update" for analysis of two DOJ sovereign immunity cases: Transamerica v. Settlement Capital and Continental Casualty v. United States.
  
• New Pennsylvania Rule 229.2 - S2KM reported and analyzed this change to the Pennsylvania Structured Settlement Protection Act in a June 27, 2007 blog post.
• Rapid v. Symetra - S2KM reported this case in a June 19, 2007 blog post.  The case confirms the general rule that, even following the enactment of IRC Section 5891, courts will enforce a clear and explicit anti-assignment provision in structured settlement agreements provided the interested parties timely object after having been given notice and an opportunity to be heard. For additional S2KM reporting about Rapid, see: CNA v. Rapid Settlements.

Check back for continuing S2KM blog and podcast reports and commentary covering important structured settlement issues and events - including exclusive S2KM reports from the 2007 AAJ Annual Convention July 13-18, 2007 in Chicago. 

For previous S2KM analysis of the structured settlement industry, see:

• Structured Settlement History
• Structured Settlements in 2006
• Structured Settlement Transaction Diagram
• Overview of the Structured Settlement Market
• Structured Settlement Transfers: Good or Bad?
• How the Primary Market Views Factoring
• The Future of Structured Settlements

Structured Settlements and Government Benefits

The structured settlement industry currently is facing many challenges. Among the most difficult and important is whether and how structured settlement laws and products can be successfully integrated with government benefit laws and funding vehicles.

The primary structured settlement laws include federal tax laws and state protection statutes as well as state periodic payment of judgment statutes. The primary structured settlement product is the annuity funded qualified assignment. The relevant government benefit laws include Medicaid and Medicare. The primary funding vehicles for structured settlements related to Medicaid and Medicare are special needs trusts and Medicare set-aside arrangements.

The Deficit Reduction Act of 2005 (DRA), which is now being implemented by the Center for Medicare and Medicaid Services (CMS) and the state Medicaid agencies, represents the most immediate and serious challenge for structured settlements. Although the DRA does not specifically reference (or exclude) structured settlements, it does impose serious restrictions on annuities as qualification requirements for Medicaid long term care eligibility. These requirements, which potentially negate (or at least reduce) the advantages of structured settlements, include:

• Irrevocable
• Non-assignable

• Actuarially sound

• No balloon payments or deferrals

• State as beneficiary

In an article titled "The DRA of 2005 - What Havoc has Congress Wrought", attorney Sylvius von Saucken analyzes the arguments for and against applying the DRA to structured settlements - including structured settlements used to fund special needs trusts. Earlier this year, von Saucken summarized his article and conclusions in separate presentations to the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA). For a detailed review of von Sauken's article, see S2KM's three earlier blog posts titled "Inconvenient Questions".

To date, neither SSP nor NSSTA has announced any strategies to address the issues created by the DRA for structured settlements - or any long term plans to successfully integrate structured settlements with government benefit laws. Neither organization has significant internal expertise with government benefit laws or lobbying. As an additional challenge, Medicaid lobbying requires both federal and state strategies and resources. SSP has limited lobbying experience or resources. Although NSSTA has some experience with state lobbying (structured settlement protection statutes), most of its lobbying experience and expertise focuses on federal issues - primarily federal tax issues.

In contemplating their options and strategies for addressing the DRA and for positively integrating structured settlements with government benefits, both SSP and NSSTA should consider developing closer relationships with the following associations which do have expertise with government benefit laws and lobbying - as well as the human resources to effectively track changes and challenges created by state-specific Medicaid rules:

• The National Academy of Elder Law Attorneys (NAELA);

• The Academy of Special Needs Planners (ASNP); and

• The Special Needs Alliance (SNA).

For additional information about structured settlements and government benefits see Release 41 of "Structured Settlements and Periodic Payment Judgments".

Academy of Special Needs Planners

The Academy of Special Needs Planners (ASNP) hosted its first annual conference March 23-24, 2007 at the Marriott Evergreen Conference Resort in Stone Mountain, Georgia. Open to non-ASNP members, the conference attracted more than 100 participants (mostly disability attorneys) and showcased ASNP's knowledge leaders among the 15 speakers.

This report looks at the ASNP conference specifically from a structured settlement perspective.

Conclusions and recommendations:

• ASNP's collective legal knowledge is extensive, impressive and important for disabled persons, their families, plaintiff attorneys and structured settlement professionals.
• The ASNP conference speakers and handout materials were excellent. Except for the structured settlement handouts (one written in 1996), almost all of the handout materials appeared to be written or updated specifically for this ASNP conference.
• Although most of the ASNP conference topics related indirectly to structured settlements:
  • None of the ASNP speakers or topics focused directly on structured settlement legal issues;
  • No one from the traditional structured settlement industry attended the ASNP conference or exhibited at the ASNP conference.
• Expanding the structured settlement market requires expanded legal knowledge, scholarship and advocacy.
• One priority topic: how do (and how should) government benefit rules interact with structured settlements?
• Special needs law should incorporate structured settlement legal issues and funding options within its scope of competencies, education and expertise.
• ASNP members should understand structured settlements - and offer legal services to plaintiff attorneys for structured settlement funding options such as:
  
  • Qualified (under IRC section 130) assignments;
  • Non-qualified (under IRC section 130) assignments;
  • Qualified (under IRC section 468B) settlement funds;
  • Self-settled special needs trusts - funded with structured settlement annuities;
  • Pooled trusts - funded with structured settlement annuities;
  • Medicare set-aside arrangements - funded with structured settlement annuities; and
  • Structured settlement factoring transactions - as defined in IRC section 5891 and the 46 state structured settlement protection statutes.

What follows is S2KM's summary of the 2007 ASNP conference presentations - highlighting related structured settlement issues which S2KM encourages ASNP members to address in future ASNP conferences, legal research and legal commentary.

Vincent Russo opened the program with an impressive overview of the "Tax Consequences of Trusts in a Special Needs Practice". S2KM would like to see Russo (and other special needs tax experts) incorporate and address these IRC sections in their SNT analysis: 104(a); 130; 468B; and 5891 - including statutory definitions and penalties. What recommendations can ASNP offer for resolving apparent conflicts among Medicaid, Medicare and tax laws related to structured settlements?

Diedre Wachbrit and Ira Wiesner highlighted special needs advisors and optional protection clauses In their presentation titled "Advanced Drafting Issues: Care Committees, Trust Protectors and Distribution Provisions". S2KM would like to see Wachbrit and Wiesner address advanced drafting issues for SNTs funded with structured settlement annuities. These issues include assignment language; beneficiary designations; and annuity payment rights transfer strategies.

Frank Johns and Patricia Dudek spoke about "Ethics and Administration of Special Needs Trusts, Pooled and Independent". Structured settlements and settlement transfers create many ethical and administration issues for SNTs. The ethics issues include: conflicts of interest; fee arrangements; requirements for disclosure, confidentiality and informed consent; scope of representation; and allocation of authority.  The administration issues specific to structured settlements in SNTs include settlement transfer issues. Johns is already a recognized and published knowledge leader for structured settlement ethical issues. S2KM hopes Johns, Dudek and ASNP will continue to focus on structured settlement ethical and administration issues.

Susan Hartley, Martha Ford and William Browning spoke about pooled trusts. Ford's presentation was valuable in understanding the original legislative intent and process in 1993 that created statutory safe harbors for (d)(4)(A) and (C) trusts. Hartley addressed pooled trust management and administrative issues. Browning was simultaneously amusing and insightful while defending and promoting the growing use of pooled trusts. S2KM questions: what role should structured settlement annuities play in pooled trusts? What are the advantages and disadvantages of structured settlement annuities compared with other funding options for pooled trusts?

Michael Gilfix, David Lillesand and Ken Brown examined current SSI issues. Responding to questions following his presentation, Brown stated SSA will issue new POMS in 2007 and the POMS will address structured settlements. Issues S2KM would like these experts to address:

• The roles of SSA, CMS and state Medicaid agencies in determining structured settlement annuity rules for Medicaid eligibility;
• Current SSI rules for structured settlement annuities - and the legal authority for such rules;
• The impact of the Deficit Reduction Act of 2005 on structured settlement annuities.

Carrie Frank offered a plaintiff attorney perspective for special needs attorneys. Her presentation referenced structured settlements and highlighted qualified settlement funds. S2KM encourages ASNP to continue examining the issues Frank identified:

• What is the scope of legal knowledge, responsibilities and liabilities for special needs and personal injury settlement planning?
• What standards and competencies do (should) plaintiff attorneys possess for special needs and personal injury settlement planning?
• What are the appropriate roles, responsibilities, competencies, and compensation for various settlement and special needs planning participants?
• What are the most important structured settlement legal issues related to special needs planning?

John Campbell presented a detailed look at Medicare and Medicaid liens as well as Medicare Set-Aside trusts. Campbell referenced structured settlements and highlighted the growing interaction of Medicare and Medicaid (Medicare Set-aside Special Needs Trusts). S2KM welcomes and encourages Campbell's continuing commentary about structured settlements - especially the conflicting Medicare and Medicaid rules for structured settlements.

The ASNP sponsors and exhibitors greatly enhanced the ASNP conference.

• Notably and coincidentally, MassMutual Financial Group (which recently left the structured settlement industry) was the Platinum Sponsor for ASNP's first conference.
• ASNP conference exhibitors included:
  
  • First Capital Surety & Trust Company;
  • Knights Administration;
  • Krause Financial Services;
  • MetDESK; and
  • Smart Marketing.
• The exhibitor handout materials were surprisingly valuable - especially:
  
  • Krause Financial Services' Medicaid Annuity handouts; and
  • Mass Mutual's 2006 Resource Guide.
• Although MetLife appears to be among the leaders in estate planning for special kids, the MetLife marketing materials do not reference structured settlements.

Congratulations to Harry Margolis and other ASNP founders and members.  Stay focused on structured settlement legal issues.  The structured settlement industry needs your legal expertise to help understand and resolve many of the "Inconvenient Questions" it now faces.