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 Settlement Wiki

S2KM has published a structured settlement wiki.

S2KM's objectives and purposes:

• Publish a wiki for structured settlement professionals and stakeholders.
• Feature industry issues and knowledge leaders in web 2.0 formats.
• Encourage industry practice communities and networks to use wikis.
• Better integrate S2KM's publications with other authors, publishers and publications.

S2KM will continue to publish S2KM's blog "Beyond Structured Settlements" including future posts announcing structured settlement wiki updates.

SSP 2008 Annual Meeting - 2

The Society of Settlement Planners (SSP) hosted its 2008 Annual Meeting in Washington, D.C. on March 5-7.  Approximately 75 persons attended the SSP meeting including settlement planners, special needs attorneys and annuity provider representatives. Under direction from 2007 SSP President Anthony Alfieri and Program Chairperson Jack Meligan, SSP's 2008 educational program matched the high standards of previous SSP programs.

During SSP's business meeting, SSP members:

• Adopted the "Standards of Professional Conduct for Settlement Planners"; and
• Elected new officers and directors .
  
  • SSP elected Greg Maxwell as 2008 President and Joseph Tombs as SSP Vice President.
  • SSP Directors include: Richard Bishop; Charles Derenne; Paul Lesti; Tim Nay; and Richard Risk.
  • Nay, the first-ever President of NAELA, is also the first-ever special needs attorney to serve on SSP's Board of Directors.

SSP's Educational Program

• Ethics
  • The SSP Code of Ethics (titled: "Standards of Professional Conduct for Settlement Planners") represents a multi-year SSP project initiated and managed by SSP Director and attorney Richard Risk.
    • Carl A. Pierce, distinguished professor of law at the University of Tennessee and a reporter for the latest revision of the American Bar Association's Model Rules of Professional Conduct, assisted SSP with this ethics project.
    • Pierce introduced drafts of SSP's Code of Ethics at both the 2007 and 2008 SSP Annual Meetings.
  • Frank Johns, a leading special needs attorney and settlement planning ethicist, also advised SSP on its Code of Ethics. Johns, an SSP member, delivered SSP's featured dinner address. Johns' comments focused on ethical considerations for judges, plaintiff attorneys and trustees when selecting a structured settlement or settlement planning professional. Johns' 2008 SSP presentation also featured his proposed Request for Proposal (RFP) for settlement planners. Johns first introduced his ideas for a settlement planner RFP at the 2007 Advanced Elder Law Institute.
• Tax Panel
  • Organized by structured settlement attorney and moderator Richard Risk, SSP's Tax Panel has become the best tax discussion in the structured settlement industry.
  • In addition to Risk, SSP's 2008 tax panel participants included:
    
    • Jody J. Brewster, Tax Partner with Skadden Arps Slate Meagher & Flom;
    • Glenn F. Mackies - Tax Partner at Deloitte & Touche.
    • Michael J. Montemurro - Branch Chief at the Internal Revenue Service responsible for Income Tax and Accounting;
  • The SSP tax panel addressed several topics with single claimant 468B receiving the most attention. The structured settlement industry is waiting for written guidance from the United States Treasury Department as to whether IRC section 468B applies to single claimant cases. SSP's tax panel provided a detailed look at these single claimant 468B issues:
    • The language in IRC section 468B and existing regulations;
    • Technical and policy Issues created by the language;
    • Technical and policy arguments for and against single claimant 468B funds;
    • Impact of economic benefit on single claimant and multiple claimant 468B funds;
    • Defining single claimant and multiple claimants within IRC section 468B.
• Government Benefits -SSP devoted three presentations to government benefit issues.
  • Medicaid
    • David Lillesand, a national leader among social security and special needs trust attorneys, dropped a bombshell on the structured settlement industry at the SSP meeting.
    • Based upon Lillesand's discussions with Social Security officials including Ken Brown, Lillesand declared "inoperative" Nancy Veillon's January 31, 2006 letters to attorneys Roger Bernstein and Jay Sangerman representing the National Structured Settlement Trade Association (NSSTA).
    • NSSTA's letters from SSA are inoperative, according to Lillesand, because:
      • NSSTA's letters from SSA do not represent meaningful authority inside the SSA. POMS yes. Letters no.
      • NSSTA's letters predate (by one week), and fail to address or consider, the Deficit Reduction Act of 2005.
    • Lillesand said he expects the SSA to issue new POMS within the next few weeks.
    • However, the new POMS will not address structured settlements. Lillesand stated "The SSA Office of General Counsel will not approve structured settlement POMS at this time".
    • Lillesand and Ken Brown of the SSA will be featured speakers at the ASNP 2008 Annual Meeting March 27-29 in New Orleans.
    • Lillesand's 2008 SSP presentation focused on the "life or death" issue of Medicaid insurance for disabled persons - plus the challenges and risks for special needs attorneys who recommend annuities as funding and investment options.
    • Lillesand's SSP presentation, and his excellent supporting SSP paper, define serious immediate challenges for structured settlement and settlement planning professionals.
    • Lillesand's proposed solution:
      
      • A collaborative (multi-trade association) initiative focused on annuities and government benefits.
      • And specifically for Medicaid and structured settlements:
        
        • Convince SSA to draft POMS favorable to annuities and structured settlement annuities.
        • Incorporate the January 31, 2006 NSSTA letters into the POMS.
  • Medicare
    • SSP offered two presentations about Medicare.
      • One titled "Medicare Compliance - Medicare Set Asides (MSA) - Beware of the Medicare Super Lien" featured Paul K. Isaac and Benjamin M. Basista.
      • The other titled "Nuts and Bolts of Medicare Set Aside Arrangements" featured Douglas L. Shaw and Marge George-Ratz of Medivest.
    • For this author, neither SSP  Medicare presentation focused satisfactorily on annuity issues related to Medicare Set-Aside arrangements.
    • Request for future SSP and NSSTA presenters about Medicare Set-Aside arrangements:
      • Summarize in your presentations CMS Policy Memoranda addressing structured settlement annuities - especially the CMS October 15, 2004 Policy Memorandum;
      • Context the CMS structured settlement policy memoranda within Medicare legal authority generally;
      • Identify any Medicare legal authority that updates or supersedes the October 15, 2004 CMS Policy Memorandum;
      • Identify the issues, opportunities and risks for settlement planners and structured settlement professionals.
      • Recommend strategies to advance the use of annuities as part of developing government benefit legislation and regulations.
• Secondary Life and Annuity Markets
  • SSP's panel discussion titled "What Settlement Planners Need to Know about the Secondary Markets" expanded previous trade association discussions about structured settlement transfers (aka factoring).
  • This author moderated the SSP secondary market panel discussion which featured:
    • Rhonda Bentzen - a secondary market intermediary who is an honorary member of SSP and serves as Chairperson of SSP's Membership Committee.
    • Stephen R. Harris - a partner at Drinker Biddle & Reath who represents annuity providers;
    • Earl S. Nesbitt - the Executive Director of the National Association of Settlement Purchasers (NASP) who represents factoring companies.
  • The SSP secondary market discussion offered multiple informative perspectives on this controversial topic. It also included questions by SSP members to Nesbitt for NASP members focused upon:
    • Alleged predatory advertising by factoring companies;
    • Alleged improper use of the term "structured settlement" by factoring companies;
• Nesbitt promised to communicate SSP's concerns to NASP members.
• Legislation and Litigation Update
  • 2008 SSP President Greg Maxwell provided a summary of recent legal developments impacting settlement planners and structured settlement professionals.
  • 2007 SSP President Anthony Alfieri updated a tax analysis of sexual abuse cases.
• Case Studies - SSP offered three presentations about settlement planning advice and developments.
  • Professor Joseph Tombs introduced the "Tombs' Dissipation Index" as a settlement planning tool;
  • Jack Meligan and Michele Whitmore analyzed multiple settlement planning scenarios and recommended settlement planning techniques and tools.
  • Ward Zimmerman moderated a panel discussion about negotiation tactics featuring Charles Derenne, Michele Whitmore and Jack Meligan.
• Internet Marketing
  • Mathew Hayes provided insights and strategies to improve SSP member email marketing.
  • Hayes' SSP presentation paralleled Mark Wahlstrom's marketing presentation at the NSSTA 2008 Winter Regional Meeting;
  • In this author's opinion, Hayes and Wahlstrom should expand their Internet presentations to include emerging web 2.0 technologies and tools such as blogs, wikis and podcasts.
    

For prior S2KM coverage about:

• SSP - see this S2KM blog post.
• Web 2.0 - see this S2KM blog post
• Deficit Reduction Act of 2005 - see this S2KM blog post
• Medicare, etc. Extension Act of 2007 - see this S2KM blog post.
• Secondary Life and Annuity Markets - see this S2KM blog post.

Patrick Hindert, S2KM's blog author, is a member of SSP.

Addendum 03132008

S2KM's original post above failed to report two important events from the SSP meeting:

• David Synder - SSP honored Snyder as a founding member of the Society of Settlement Planners and historic leader among settlement planners and structured settlement professionals.  Snyder recently announced the sale of his former company Delta Settlements to Michael Upchurch.
• AAPD Leadership Gala dinner - The 2008 AAPD Gala was even better than advertised and raised more than $1 million.  Both SSP and NSSTA members attended. NSSTA was an event sponsor.

West Virginia Update

The West Virginia legislature has amended and reenacted the state's current structured settlement protection statute.  According to Representative Ronald N. Walters, one of the bill's sponsors, West Virginia Governor Joe Manchin is expected to sign House Bill 4613 into law within the next few days.

The reenacted statute is noticeably different than West Virginia House Bill 4380 which S2KM previously summarized. Most significantly, the reenacted statute does not include any maximum discount rate. The original bill contained a maximum discount rate not to exceed "the current annual average percentage rate of interest on twenty year residual mortgages offered in this state, as determined by the banking commissioner." Factoring companies claimed this maximum discount rate would eliminate structured settlement transfers in West Virginia. Walters acknowledged his original intent was to do just that.

If signed into law by Governor Manchin, the amended West Virginia statute (now titled House Bill 4613) will:

• Add some consistency between West Virginia's statute, IRC section 5891 and the Model State Structured Settlement Protection Act (Model Act) by:
  • Broadening application from "an infant or an incompetent person" to anyone with structured settlement payment rights arising from a personal injury or other claim; and
  • Eliminating a $40,000 threshold amount;
• Confirm that a court may appoint a guardian ad litem for any person; and must appoint a guardian ad litem for an infant, an incompetent or a ward of the court;
• The court will award the guardian ad litem reasonable fees for representing the consumer.
• The transfer company will pay for "such attorneys' fees and costs".
• Require the guardian ad litem to:
  • Review the requisite disclosures;
  • Make an independent inquiry to determine whether the proposed transfer:
    • Is fair and reasonable;
    • In the best interests of the consumer and any dependents of the consumer;
    • Has not been attempted or accomplished before.
• Report the results of that inquiry to the court during the hearing;
• Inform the consumer about "possible adverse tax consequence to the consumer" - a responsibility the guardian ad litem and the transfer company will now jointly share in West Virginia;
• Reconfirm the current West Virginia approval standard: the consumer must now "clearly" demonstrate that
  • He or she, or his or her family, is facing a financial hardship that the transfer would alleviate and the transfer would not subject the consumer or the consumer's family to undue hardship; or
  • The transfer is in the best interest of the consumer.

Reaction from the factoring companies to the new West Virginia statute has been generally positive. According to Earl Nesbitt, Executive Director of the National Association of Settlement Purchasers (NASP), the amended West Virginia legislation will have a "minimal impact".

Nesbitt, however, did express concern about NSSTA's conduct (or lack thereof) in West Virginia. In Nesbitt's view, NSSTA's failure to actively lobby for the Model Act in West Virginia violated the spirit, if not the letter, of NSSTA's 2000 agreement with NASP to support the Model Act.

NSSTA representatives have refused to comment about the West Virginia legislation - except to say  "NSSTA supports the Model Act."  According to Walters, NSSTA's General Counsel Craig Ulman did contact Walters early in the process to communicate that "NSSTA supports the Model Act". Other than one telephone communication, however, Walters said he has heard nothing from NSSTA and has received no support from NSSTA. "Craig [Ulman] told me I was on my own".

In Walters' view, "the Model Act does not go far enough". According to Walters, "West Virginia's new law will provide greater protection and greater clarification plus a tougher standard" than the Model Act. Walters said he may introduce additional legislation in 2009 requiring factoring companies to have insurance licenses.  Walters, one of legislative sponsors of West Virginia's House Bills 4380 and 4613, also manages the Charleston, West Virginia office of Structured Financial Associates, Inc. (SFA). SFA is a NSSTA member although Walter individually is not.

Some of the questions NSSTA members should be asking their leaders (and themselves) about settlement transfers:

• What are NSSTA's legislative and educational objectives and strategies for settlement transfers?
• What does NSSTA mean when NSSTA says "we support the Model Act"?
• How did NSSTA support the Model Act in West Virginia?
• Is the new West Virginia statute better or worse than the Model Act:
  • For consumers?
  • For state judges?
  • For transfer companies?
• What should NSSTA members say to their clients and other structured settlement stakeholders about settlement transfers?
• What conduct by NSSTA members represents best professional practices relative to settlement transfer issues and responsibilities?

For additional information:

• West Virginia's Structured Settlement Protection Statute - see this prior S2KM blog post.
• State Structured Settlement Protection Statutes - see Chapter 16 of "Structured Settlements and Periodic Payment Judgments"
• Secondary Life and Annuity Markets - see this prior S2KM blog post.

2008 AAPD Leadership Gala Dinner

On March 5, 2008, the American Association of People with Disabilities (AAPD) will host its 2008 Leadership Gala Dinner in Washington, D.C. Structured settlement leaders from both NSSTA and SSP will be attending the AAPD dinner - in addition to many Congressional and Disability leaders. Senator Bob Dole will be the Keynote Speaker. NSSTA is one of the event sponsors.

Founded in 1995, AAPD, according to its website , "is the largest cross-disability membership organization in the United States, working toward the economic self-sufficiency and political power for the more than 50 million Americans with disabilities. AAPD organizes the disability community to be a powerful force for change – economically, politically, and socially....AAPD works in coalition with other disability organizations for the full implementation and enforcement of disability nondiscrimination laws, particularly the Americans with Disabilities Act (ADA) of 1990 and the Rehabilitation Act of 1973".

The AAPD Leadership Gala Dinner serves as "a forum", according to the AAPD website: "for recognizing, empowering, and supporting both emerging and established leaders in the disability community, as well as for inspiring and mobilizing all attendees to increase their advocacy in support of realizing the promise of the Americans with Disabilities Act (ADA)."

The AAPD Gala will honor the 2008 recipients of AAPD's two leadership awards:

• Paul G. Hearne/AAPD Awards - Brett Eisenberg and Rahnee K. Patrick.
• Henry B. Betts Award - Eric Rosenthal.

Andrew J. Imparato, President and CEO of AAPD, was the featured speaker at NSSTA's 2007 Fall Meeting in Tampa, Forida. Imparato is a visionary and inspirational leader. The following comments appear in S2KM's earlier blog commentary about Imparato's presentation to NSSTA.

Andrew Imparato:

• "Outlined AAPD's strategy to:
  • Unite disabled persons as a political block and business market;
  • Change the social security statutory definition of "disability":
    • From "unable to work" to
    • Address "barriers to work" for disabled persons;
  • Create a disabled middle class - transitioning the disabled from poverty to economic self-sufficiency;
  • Extend some variation of the current structured settlement legislative model to disabled persons generally.
• "Identified AAPD's political priorities for:
  • Social Security Disability Insurance (SSDI);
  • Supplemental Security Income (SSI);
  • Medicaid; and
  • Medicare.
• "Criticized current United States' government benefit programs for:
  • Maintaining people in poverty and punishing people who try to escape poverty;
  • Not designing Medicaid and Medicare for working age persons who want to work.
• "Encouraged NSSTA members to involve themselves at the local level with independent living centers.
• "Invited NSSTA members to join AAPD and attend AAPD's March 5, 2008 Gala in Washington, D.C."

Both NSSTA and SSP are to be congratulated for supporting AAPD. The annual AAPD Gala Leadership Dinner provides an appropriate forum for NSSTA and SSP to begin to identify common goals and collaboration opportunities.

For S2KM's most recent reporting about:

• The National Structured Settlement Trade Association (NSSTA) - see this S2KM blog post.
• The Society of Settlement Planners (SSP) - see this S2KM blog post.
• Note: Patrick Hindert, S2KM's blog author, is a member of AAPD, NSSTA and SSP.