The United States structured settlement industry has been in existence for more than 40 years and continues to expand its scope, complexity and importance within the context of personal injury settlement planning. The industry consists of both a primary and secondary market and includes "off-shore" funding products. Certain structured settlement products utilizing periodic payments provide tax advantages. With increasing frequency, structured settlement products are being integrated with other financial and insurance products and government benefits into personal injury settlement plans utilizing 468B Qualified Settlement Funds and consisting of settlement trusts, special needs trusts, and Medicare set-aside arrangements.
Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided professionals and other stakeholders involved with structured settlements an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand issues and fashion settlements and judgments utilizing periodic payments. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.
Co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, S2P2J features an online version as well as the traditional hardcopy. Online S2P2J includes a search feature and download capability plus link features to access individual book sections, appendices, footnotes, cases and statutes.
Publisher Law Journal Press anticipates a March 2017 distribution date for hardcopy supplements for S2P2J Release 61 with online S2P2J subscribers receiving their update simultaneously with no additional subscription charge. Competent professionals confronted by structured settlement issues should have access to an up-to-date copy (or the online version) of this indispensable source book.
Release 61 Highlights - Release 61 will feature new, updated and/or expanded sections addressing the following structured settlement topics among others:
- Ezell v. Lexington Ins. Co. - Although the Complaint in this class action lawsuit was only recently filed, Release 61summarizes the Complaint and considers the plaintiffs' allegations from the perspective of "the best protection for the defense against the risk of future claims by claimants that they were misled in understanding how the 'cost' was calculated..." S2P2J's recommendation (with sample Appendix documentation): "[D]isclose the material elements of how the agreed amount will be allocated to acquire the funding vehicle and put a long-term obigor in place. Full disclosure of such elements would eliminate any basis for a later claim that a settling claimant was misled when agreeing to a structured settlement."
- Special Needs Trust (SNT) Fairness Act - Among NSSTA's strategies for growing the structured settlement market, the importance of special needs (SN) attorneys is receiving greater recognition and priority. With the enactment of the SNT Fairness Act in December 2016, the growth potential for both SNTs and structured settlements has expanded. Prior to December 2016, an injured person who received settlement funds could not create his/her own SNT. Only a parent, grandparent, guardian or court could establish a first party SNT. With this new legislation, persons with disabilities can create their own SNT unless they are mentally or legally incompetent to do so. Release 61 integrates coverage of the SNT Fairness Act into S2P2J's broader coverage of structured settlements and government benefits including Medicaid, Medicare, Veterans Benefits, Federally Assisted Housing, the Affordable Care Act and ABLE Accounts.
- Contract Rights - Although a structured settlement results in a contractual obligation to make periodic payments, a party that is released from liability need not become contractually obligated for the future payments. Release 61 summarizes and discusses Nutt v. United States, a 2016 case brought by an ELNY shortfall victim. The case provides an example of how the wording of a structured settlement agreement determines whether a claimant has enforceable rights against a specific defendant, separate from the life insurance company that issued the annuity. The Court of Appeals affirmed a trial court's holding finding the language of the 1985 settlement agreement required the United States only to purchase annuities to fund future periodic payments and did not require the Government to make or guarantee the payments.
- Off-Shore Companies - The increase in popularity of non-qualified assignments has resulted in efforts by some companies to offer what appear to be qualified assignments funded by companies located outside the United States. They sometimes purchase factoring rights to structured settlement payments and use these rights to offer higher effective interest rates than traditional annuity-financed structured settlements. Sales materials supporting these transactions sometimes maintain that these arrangements offer the same level of benefits and protection as traditional structured settlements. Release 61 expands prior S2P2J discussions of the substantial risks to parties entering into such agreements with offshore companies including risks for the professionals who recommend such transactions.
- Settlement Documentation - Once the terms of a structured settlement have been determined, all required closing documents must be drafted in a manner which fulfills each client's financial expectations and protects each client's legal interests. Skill is required to avoid mistakes and to anticipate potential future issues that could impact periodic payments. S2P2J devotes an entire chapter to "case closing" including issues arising after case closing. Release 61 highlights recent cases detailing the consequences of problematic settlement documentation followed by a divorce, bankruptcy, unanticipated death sequences or disputed estates.
- ELNY Class Action - Release 61 includes a summary update for a class action (Kelly v. Ringler) brought on behalf of ELNY shortfall victims which remains unresolved after a Federal District Court in Oregon denied dismissal of claims based on negligence and on certain Oregon and Alaskan statutory provisions, while granting dismissal of a claim that defendants had a continuing duty to inform the plaintiffs that their annuity stream from ELNY was threatened because of its declining financial condition. A similar class action against structured settlement broker EPS was settled in 2015. Note: this paragraph was edited on February 16, 2017.
- Secondary Market Updates - Until 2016, almost all secondary market case law developments related to transfers under state protection statutes. In 2016, the federal Consumer Financial Protection Bureau (CFPB) filed Complaints against two structured settlement factoring companies, J.G. Wentworth and Access Funding. Release 61 updates and extends S2P2J earlier coverage of CFPB involvement in these cases and its potential jurisdiction to protect recipients of factoring transactions. Additional secondary market topics addressed in Release 61 include: Brenston case follow-up; anti-assignment provisions; commutations vs. transfers; case law defining "best interest" and proscription of split payments under some state protection statutes; continuing litigation involving arbitration clauses; plus expanded discussion of securitization including risks and issues with "re-cycled" structured settlements.
Previous recent S2P2J releases have highlighted and addressed the following structured settlement related developments and market growth opportunities:
- Updated Structured Settlement History Chart.
- Updated analysis of changes impacting primary market structured settlement business practices.
- Background coverage of the Consumer Financial Protection Bureau's civil investigation of J.G. Wentworth.
- Historical context for Washington Post reporting about abusive secondary market business practices in Maryland.
- Case examples for various tax concepts, provided by Professor Ken Melani of the University of Notre Dame, who teaches the tax section of NSSTA's CSSC program.
- Duties of settlement trustees under the Uniform Prudent Investors Act plus factors settlement trustees must consider when making investments.
- Analysis of NSSTA's recent marketing surveys of claims executives, claims professionals and plaintiff attorneys.
- Summary of a recent California lawsuit warning of potential malpractice dangers for plaintiff attorneys who are: 1) uninformed; 2) lack competent advisors; and/or 3) act carelessly; with regards to structured settlement issues.
- Expanded discussion of "product suitability" and how it impacts structured settlement and settlement planning professionals.
- Wrongful Convictions Tax Relief Act of 2015.
- Court decisions analyzing "safe harbor" annuity rules under the Deficit Reduction Act of 2005 when annuities are used to preserve Medicaid eligibility.
- New cases where courts have identified questions to help judges determine whether proposed transfers of future payment rights meet the "best interest" test under various state Structured Settlement Protection Acts.
- Non-qualified assignment issues - including tax and security issues raised by off-shore assignment companies.
- Expanded coverage of Workers Compensation and Liability MSAs.
- Summary and discussion of recent PLR for indexed annuities and commutation riders.
- Introduction to ABLE Accounts.
- Practice tips for minimizing the risk of an IRS settlement challenge.
- Updated summary of lessons learned from the Executive Life Insurance of New York (ELNY) insolvency.
- Periodic payment reinsurance as an alternative means of funding structured settlements.
Also Note: all three S2P2J co-authors will appear on the same panel March 2 at the SSP 2017 Annual Conference in Las Vegas to lead a discussion titled "Current Developments in the Structured Settlement Industry."