Beyond Structured Settlements

NASP 2009 Annual Meeting - 2

The purpose of this S2KM blog post is to summarize educational discussions which occurred at the NASP 2009 Annual Meeting. In a prior post (NASP 2009 Annual Meeting-1), S2KM listed the discussion topics, moderators, speakers and panelists and also identified Van Tran as the winner of the NASP 2009 Alexander Hamilton award. In subsequent blog posts, S2KM will provide analysis and feature interviews with selected NASP educational program participants.

2009 Legislative Developments - Matthew Bracy summarized California Senate Bill 510 which Governor Arnold Swarzenegger signed into law October 11, 2009 and which becomes effective January 1, 2010. Among changes to the California structured settlement protection statute, SB 510 adds factors for the court to consider when determining whether a proposed transfer is fair, reasonable and in the payee's best interest. These factors now include the reasonable preference of the payee considering age and mental capacity. Bracy also summarized the new North Dakota structured settlement protection statute which generally follows the NCOIL Model Act. North Dakota becomes the 47th state to enact structured settlement protection legislation.

Legal Case Update - Tricia Laborde's legal case update focused primarily on the Fresno County cases and Rapid Settlement cases. Among other holdings in Scioteco v. Henderson, a California appellate court ruled that public policy supports state court approved structured settlement factoring transactions. In Allstate v. Rapid Settlements, which denied Rapid's appeal, U.S. Third Circuit Judge Joseph F. Weis, Jr. noted: "We are one of the many courts to face Rapid Settlements' transparent attempt to use this arbitration scheme to evade the legislatures' intentions to protect the recipients of structured settlement payments".

What Happened in California? - A panel of legal and political experts provided background and analysis of SB 510 and the Fresno County cases. NASP lobbyist Carl London summarized the collaboration between NASP and Consumer Attorneys of California (formerly the California Trial Lawyers), plus the role of California legislator Van Tran, in securing enactment of SB 510. Linda Morris, General Counsel for J.G. Wentworth, provided background information and strategic commentary about appellate decisions for the Fresno County cases which she characterized as an important victory for the structured settlement industry.

Transactional Structured Settlement Issues - A panel of attorneys discussed practical problems in securing judicial approval for proposed structured settlement transfers. Some of the issues discussed: difficulties in determining the domicile of transient payees; privacy issues including the impact of Pennsylvania Rule 229.2; difficulties in finding independent professional advisers; and what happens when judges attempt to re-negotiate agreed upon transfers.

Structured Settlement Capital Markets - A panel of factoring company executives discussed how the 2008-2009 capital market upheaval has changed the secondary structured settlement market.
The changes:

• The cost of funds today for factoring companies (8 to 9%) equals the best discount rates offered for transfers two years ago;
• Bundling purchases of individual payment rights into a security is financially less efficient and/or available today;
• Marketing and court costs for factoring companies remain high;
• Perceived financial risks for potential insurer failure have increased;
• The impact of a potential ELNY liquidation remains uncertain.

Structured Settlement Court Practices and Issues - Judges Edward Burke of Arizona and Christopher Marshall of Oregon joined a panel of attorneys in discussing settlement transfer court practices and issues including: prior transfers by the same payee; the roles of transfer attorneys and independent professional advisers; privacy concerns for transferring payees; the advantages of utilizing a single state judge for all transfer requests; plus other problems which cause continuing judicial concerns about factoring and factoring companies.

Factoring and the Structured Settlement Tax Subsidy - Jeremy Babener addressed the important role IRC 130 and 104 tax subsidies have played in the growth of structured settlements. He summarized the political and public policy attacks against, and defenses for, structured settlement factoring transactions and questioned whether:

• The tax subsidy prevents dissipation?
• The tax subsidy discourages factoring?
• Factoring undermines the tax subsidy?

Babener challenged NASP to develop better information about who actually sells structured settlement payment rights and why.

Structured Settlement Bankruptcies - Bruce Akerly summarized his recent paper titled "The Impact of an Annuity Servicer's Bankruptcy on the Annuitant and Structured Settlement Purchaser". Akerly's conclusions:

• "The annuity payments received by a structured settlement servicing company, as well as the servicing agreement itself, become property of the bankrupt estate"; and
• "It may be possible to draft provisions in the servicing agreement to anticipate some of the consequences of the servicing company entering bankruptcy and perhaps lessen the impact on all parties."

Re-thinking Structured Settlements - a multi-disciplinary panel of industry experts addressed strategic structured settlement issues:

• What developments in 2009 will most impact the future of structured settlements?
• What are the best (and worst) structured settlement standards and business practices?
• Which structured settlement myths are most out-of-line with reality?
• How will commutations change the structured settlement market?
• What knowledge and skill sets are most important for future success in the structured settlement industry?

For S2KM reports about prior NASP meetings, see the structured settlement wiki.

NSSTA 2009 Fall Educational Conference

Meeting at the Mandalay Bay Hotel in Las Vegas on October 15 and 16, the NSSTA 2009 Fall Educational Conference provided a potpourri of perspectives on the central topic of structured settlements.

Although lacking a unifying theme and failing to provide noteworthy handout materials, the conference did offer a general industry overview and did address several important industry developments without encouraging or generating meaningful discussion or detailed inquiry.

The general overview featured structured settlement perspectives from selected industry stakeholders:

• Plaintiff attorneys - Neil Galatz and Jeffrey Mitchell;
• Defense attorney - Steve Jaffe;
• Special needs attorney - James O'Reilly (with NSSTA member Thomas Spratt);
• Life company executive - Joseph Barnet;
• Annuity agents (discussing mediation) - Tony Robinson; Alice Frisbee; Kathleen Osler; and Traci Kaas;
• Attorney and annuity agent (discussing history, myths and opportunities) - Karen Meyers;
• Congresswoman Shelley Berkley.

Industry developments featured:

• NSSTA General Counsel Craig Ulman;
• NSSTA lobbyist Eric Vaughn;
• NSSTA Legal Committee representatives - Peter Vodola; Ilana Hanau; Michael Miller; and Mark Alpert.

The most important industry developments discussed in Las Vegas:

• Warnings from Vaughn and Congresswoman Berkley about anticipated federal tax reform in 2010;
• Vaughn's report that some federal health care reform proposals include tort reform and periodic payment of judgments;
• Ulman's update about the increasingly precarious financial condition of Executive Life of New York;
• Alpert's summary of PLR 121876-08 permitting a tax-free "restructuring" of periodic payments;
• Hanau's summary of the Henderson v. Sioteco case where a California appellate court reversed earlier Fresno County trial court decisions and declared that public policy now supports state court approved factoring transactions.
• Vodola's summary of California's new structured settlement protection statute (SB 510) which includes a detailed definition for "best interest".

From a critical perspective, NSSTA's 2009 Fall Educational Conference represented a series of "missed opportunities".

Missed opportunity #1 - Karen Meyers, who co-developed and annually presents NSSTA's "Certified Structured Settlement Consultant" (CSSC) program, addressed a NSSTA educational program for the first time in several years - and didn't talk about the CSSC program.

Missed opportunity #2 - Meyers spoke instead about structured settlement myths - yet failed to address the most fundamental and controversial NSSTA myths including "squandering injury victims" (see: "Dissipation Studies") and "how structured settlements enable injury victims to live free of reliance on government assistance" (see: "Structured Settlement Credo")

Missed opportunity #3 - NSSTA's educational program failed to acknowledge, respond to, or apparently understand, two recent strategic challenges which question the focus and scope of NSSTA education:

• Internal challenge - Joseph DiGangi's "Settlement Consulting" presentation at the NSSTA 2009 Winter Meeting;
• External challenge - The Society of Settlement Planners (SSP) Registered Settlement Planner Certification Program.

Missed opportunity #4 - related to missed opportunity #3: NSSTA's educational programs continue to ignore the strategic relationship among structured settlements, financial planning and life care planning.

Missed opportunity #5 - although NSSTA's legal committee has successfully expanded the scope of NSSTA's structured settlement legal education (from "Tax Posse" to "All Things Considered"), their programs tend to be repetitive (e.g. "Contracts 101") and fail to translate current legal developments into broader topical presentations.

Suggested future legal committee educational topics:

• What NSSTA members need to know (and tell their clients) about IRC 5891, state protection statutes and structured settlement factoring transactions;
• What NSSTA members need to know (and tell their clients) about IRC 468B qualified settlement funds;
• Comparative business standards and practices for various structured settlement stakeholders and "competitors" - insurance agents; financial securities salespersons; attorneys; trustees.
• Transactional analysis - what does a structured settlement look like in the context of 468B qualified settlement funds; special needs trusts; Medicare set-aside arrangements; and secondary market transfers?
• Integrating annuities with settlement trusts - how do integrated products impact traditional structured settlement planning, documentation and education?

Many structured settlement leaders no longer attend NSSTA educational conferences - especially those leaders who are defining the future of the structured settlement industry. When those industry leaders do attend NSSTA conferences, they attend primarily for networking opportunities or committee meetings - not for the educational programs.

With some exceptions, NSSTA's educational programs are no longer educational. They are mundane, repetitive and suitable primarily for persons new to the industry. Controversial subjects do not appear on the program - or they are circumscribed to avoid controversy. Debate is discouraged. Speakers rarely face tough questions - or provide handout materials.

Perhaps it is time for NSSTA to re-think structured settlements and structured settlement education. What will it take to attract a new generation of structured settlement leaders to join and participate in NSSTA? What will it take to re-engage the industry's best and brightest professionals in NSSTA's educational programs? The NSSTA Fall 2009 educational conference in Las Vegas highlighted those issues without providing any answers.

For prior S2KM reports about NSSTA educational programs, see S2KM's structured settlement wiki.

Jeremy Babener Interview - 2

S2KM introduced, summarized and reviewed a paper written by Jeremy Babener  titled "Structured Settlements and Single-Claimant Qualified Settlement Funds: Regulating in Accordance with Structured Settlement History" (QSF paper), in four prior blog posts:

• Single Claimant 468B QSF Update;
• Jeremy Babener's QSF Paper;
• S2KM Reviews Jeremy Babener's QSF Paper - 1;
• S2KM Reviews Jeremy Babener's QSF Paper - 2.
  

S2KM previously interviewed Babener (Jeremy Babener Interview) as part of the S2KM blog series "Dissipation Studies" which featured Babener's paper titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements".

This S2KM post publishes an exclusive interview with Jeremy Babener about his QSF paper. S2KM also features Babener in S2KM's structured settlement public policy wiki.

S2KM: Jeremy, what are the principle conclusions and recommendations in your QSF paper?

Babener: The paper focuses on the Treasury’s treatment of single-claimant QSFs, recommending their explicit eligibility for the structured settlement tax subsidy. In order to properly consider the subject, however, one must view the present question in the context of three decades of structured settlement tax and policy history.

The paper narrates a pattern of increased economic control being allowed to structured settlement recipients, the most well known example being factoring. It also analyzes previously made arguments in the single-claimant QSF debate. Doing both provides the legal and interpretive bases for future Treasury action.

The paper describes the historical benefits that defendants and casualty insurers have captured by using structured settlements, arguably at the expense of personal injury claimants. The paper explains how single-claimant QSFs are currently being used, and how such use helps to achieve the structured settlement tax subsidy’s purpose. Doing both provides the policy rationale for future Treasury, or perhaps legislative action.

S2KM: What surprised you most about your findings?

Babener: I was quite surprised by the methods used by some plaintiff representatives to avoid defendants' detection of QSF use (so as to avoid defendant opposition to the QSF's creation). Representatives sometimes arrange for QSFs to be created in a state different from that in which the personal injury action was filed, and direct the defendant to write a lump sum check to a name not typically associated with a QSF. In fact, because QSF regulations merely require that a government entity create the QSF, some have contemplated petitioning non-judicial entities.

S2KM: What caused you to focus on single claimant QSFs?

Babener: I clerked at the U.S. Department of Justice’s Federal Tort Claims Act Section during the summer of 2008. After being introduced to structured settlements there I began researching their use, purpose, and the policy behind Congress’ subsidy for them. In my research I focused on the effectiveness of the subsidy.

The subsidy’s purpose is to decrease premature dissipation by encouraging long-term planning (by committing to periodic payments over time). It is important to ask if the plaintiff-defendant negotiation table, where settlements are typically structured, is the opportune place for long-term planning to occur.

This led me to QSFs, which offer defendants a fast and permanent settlement option, and plaintiffs an unhurried and less combative option. Thus, my work addresses the great deal of uncertainty among practitioners as to whether their single-claimant clients can use QSFs and still benefit from the structured settlement tax subsidy.

S2KM: Did you write your QSF paper for a specific class or seminar?

Babener: I wrote both my papers – the dissipation paper and the QSF paper – for a course called Tax and Social Policy.

S2KM: What were the primary resources for your research?

Babener: I set out to use all relevant sources that I could find on structured settlements and QSFs. The paper relies on treatises, articles, textbooks, cases, memos, presentations, web sites, and interviews.

S2KM: How many persons did you interview and how did you select them?

Babener: I contacted as many within the structured settlement industry as I could, and spoke with any who were willing. I formally interviewed some two-dozen individuals, including representatives of the National Structured Settlements Trade Association, the National Association of Settlement Purchasers, and the Society of Settlement Planners. Among those interviewed were plaintiff and defense attorneys, plaintiff and defense side structured settlement brokers, casualty and life insurance representatives, factoring attorneys, QSF administrators, structured settlement commentators, law professors, treatise authors, and a state court judge.

S2KM: What linkage, if any, exists between your QSF paper and your dissipation paper?

Babener: The dissipation paper was actually the result of research for the QSF paper. In order to explain the justification for the structured settlement tax subsidy I needed to find the basis for the claim that lump sum recipients frequently dissipate their settlements. In time, I realized that the empirical work cited could not be found.
The dissipation paper observes that there is no empirical foundation for the structured settlement tax subsidy, though much anecdotal evidence exists. The QSF paper looks to increasing the effectiveness of that subsidy by structuring in a non-combative and less hurried context.

S2KM: Why, in your opinion, has Treasury delayed clarifying the application of 468B to single claimants?

Babener: The issue has been in the Treasury’s Priority Guidance Plan since 2004. It is not unclear why it has not been addressed. I cite to work recommending against such clarification in the paper, and to disagreement within the Treasury. However, needed regulations are delayed all the time for any number of reasons.

S2KM: What are the strongest public policy arguments for and against single claimant QSFs?

Babener: The public policy argument for allowing single-claimant QSF structured settlements to benefit from the tax subsidy is very strong. Settlements are often hurried and contentious. In addition, the parties, including the plaintiff, are likely concerned with the final amount more than scheduling future periodic payments to accurately match future needs. QSFs, as Robert Wood has observed in his work, provide a “tax free way station” for settlement monies. This allows the plaintiff, hopefully with the help of informed advisers, to properly structure the receipt of future monies. It may also enable plaintiffs to capture more of the benefits of structuring, including more of the tax subsidy, by removing the defendant from the structuring process.

Opponents of such Treasury action argue that the use of single-claimant QSFs will lead to less structured settlements, and therefore more premature dissipation of settlement monies. Because defendants have historically been able to decrease settlement costs by structuring, they have had an incentive to push for using a structured settlement during negotiations. By removing defendants from the structuring process, QSFs may result in many plaintiffs not being pushed to structure.

However, there are at least two problems with this argument. First, it must be remembered that while defendants have an economic incentive to structure, they do not have an economic incentive to structure accurately, matching the timing of plaintiff’s future payments with future needs. Second, just as defendants have an incentive to structure to mitigate settlement costs, other parties have an economic incentive to encourage plaintiff to structure even outside of plaintiff-defendant negotiations. These are structured settlement advisers (and possibly QSF administrators), whose business depends upon plaintiffs understanding the benefits of structuring.

There will surely be plaintiffs whose use of single-claimant QSFs ends in a lump sum distribution rather than structuring. But, there are likely many more who will structure, who otherwise would not have as a result of the plaintiff-defendant settlement process. By increasing the frequency of structuring, and the accurate matching of future payments to future needs, the use of QSFs will prevent premature dissipation (and the need to factor) in many cases.

S2KM: When and where will your QSF paper be published?

Babener: The paper will be published by the NYU Journal of Legislation & Public Policy in March, 2010.

S2KM: What other structured settlement issues, if any, interest you?

Babener: The processes of settling, structuring, and factoring raise many practical and policy questions from the perspectives of plaintiff, defendant, and society alike. A previous S2KM post listed several issues that neither of my papers have addressed, such as structured settlement public policy in relation to government benefits such as Social Security, Medicare, and Medicaid. These are subjects of increasing importance, and I hope to join the ongoing discussion.

Thank you, Jeremy, for this interview and for sharing your QSF paper. Good luck with your professional career.

S2KM Reviews Jeremy Babener's QSF Paper - 2

While researching his paper "Structured Settlements and Single-Claimant Qualified Settlement Funds: Regulating in Accordance with Structured Settlement History" (QSF paper), Jeremy Babener interviewed many structured settlement industry leaders including Patrick Hindert, Managing Director of S2KM Limited.

This S2KM blog post features Jeremy Babener's research interview with Patrick Hindert - with emphasis (bold type) added subsequently by Patrick Hindert for this publication.

Prior S2KM blog posts about Babener's QSF paper:

• Single Claimant 468B QSF Update
• Jeremy Babener's QSF Paper
• S2KM Reviews Jeremy Babener's QSF Paper - 1

Secondary market

• Babener: How frequently do structured settlement consultants discuss the secondary market with injury victims?
• Hindert:
  
  • While some settlement planners may discuss the secondary market with their clients, most primary market structured settlement advisers do not.
  • Most structured settlement annuity providers and their agents are not qualified to advise anyone about "structured settlement transfers" (aka "factoring").

Anti-assignment clauses

• Babener: Do courts enforce anti-assignment clauses in structured settlement documents?
• Hindert:
  
  • Structured settlement anti-assignment clauses are generally enforceable but not self-executing.
  • A party to the related documents (eg. annuity provider) must act to enforce the clause.
  • Since IRC 5891 was enacted, relatively few annuity providers attempt to enforce structured settlement anti-assignment clauses except in unusual circumstances.

Annuity commissions

• Babener: What is the typical commission for structured settlement annuities?
• Hindert:
  
  • The "standard" structured settlement annuity commission is four (4%) percent of premium which is paid by the product provider to its agents (aka "consultants" or "brokers") .
  • Frequently, multiple agents share the four percent commission.
  • Such "commission sharing" creates conflicts of interests which are rarely disclosed to the structured settlement recipient or his/her attorneys.

Taxing structured settlement recipients

• Babener: Many structured settlement consultants believe the majority of structured settlement recipients pay taxes - or would otherwise pay taxes but for the structured settlement tax subsidy.
• Hindert: Where is the objective proof? Many structured settlement industry "beliefs" don't square with the facts or the law. Your dissipation and QSF papers help to prove this thesis.

Do defendants save money using structured settlements?

• Babener: Have defendants and their liability insurers historically saved money using structured settlements by negotiating based on nominal rather than present values?
• Hindert:
  • Many structured settlement agents and intermediaries proclaim defendants save money using structured settlements.
  • Where is the independent, objective proof?
  • If true, what are the reasons:
    
    • Misrepresentation?
    • Failure to disclose?
    • Unauthorized practice of law?
  • Most structured settlements are negotiated using lump sums which are subsequently transitioned into structured settlements.
  • Why would any informed plaintiff attorney ever knowingly accept a lower fee from his client for a structured settlement settlement costing defendants less than an alternative cash settlement?
  • Under current CMS rules for workers compensation Medicare set-aside agreements (WCMSA), annuities are valued more cost advantageously for defendants than lump sums because of the CMS required "set-off" method for calculating present value.
  • This CMS valuation method also means that annuities underfund WCMSAs because the annuities do not include any inflation provisions.

Defendant savings - 2

• Babener: How frequently would you estimate that defendants save money using structured settlements?
• Hindert:
  • If and when defendants save money today using structured settlements, the primary reasons are misrepresentations, failure to disclose, unauthorized practice of law and/or undue sales pressure to fund using affiliated companies and agents.
  • Plaintiff attorneys should be, and probably will become, more aggressive in discovery to elicit information from defendants about structured settlement compensation, conflicts of interest, and company policies as well as more accurate cost and present value calculations.
  • When calculating any cost savings from structured settlements, defendants should anticipate and factor in costs from potential lawsuits for bad business behavior resulting from their current structured settlement programs.

Defendant savings -3

• Babener: What is your estimate of the amount of money defendants save using structured settlements?
• Hindert:
  • I have never seen an independent study demonstrating or explaining whether, or more importantly why, defendants save money using structured settlements.
  • Any cost savings result primarily from:
    
    • Misrepresentations;
    • Failure to disclose; or
    • Negotiation pressure to direct annuity sales to affiliated companies.
  • One of the results of high pressure structured settlement sales in a claim management context is to increase the likelihood the recipient will subsequently attempt to sell their payment rights.
  • If you ignore profits from product sales and assume full disclosure of compensation and costs with no misrepresentations and no unauthorized practice of law (agents providing legal services to save defendants legal costs), how do defendants save money using structured settlements?

Approved lists

• Babener: Have defendants and their liability insurers historically saved money on structured settlement costs by insisting on purchasing annuities from affiliates and particular life insurance companies?
• Hindert:
  • For the best evidence of defendant savings from affiliated programs, and the best explanation for such savings, review the allegations of misrepresentation and non-disclosure in the Spencer v. Hartford case.
  • When calculating "defense savings", it is important to differentiate:
    • claim savings - if any;
    • profits from structured settlement annuity sales; and
    • future liabilities resulting from structured settlement annuity sales.

Qualified Settlement Funds

• Babener: Assuming there are no defendant savings, do you think that structuring a settlement with a QSF is superior to structuring directly with a defendant?
• Hindert:
  • Yes, I believe structuring a settlement with a QSF is inherently superior to structuring with a defendant in a claim management model.
  • The objectives, processes and knowledge resources are completely different in these two settings.
  • Both the plaintiff and defendant receive judicial protection and a trustee/administrator whose role is to develop settlement solutions for all QSF beneficiaries.
  • QSFs permit and require allocation among claimant beneficiaries and lien holders - including Medicare and Medicaid.
  • Claimants and their advisers can objectively consider needs, resources and best interests.
  • The primary (only) negative of QSFs for plaintiffs is the cost.
  • Key questions about QSFs are the costs - and how to substantial decrease those costs as well as the time necessary for QSF disbursements and termination.

Jeremy Babener's QSF Paper

Background and Summary

This S2KM blog post summarizes a legal research paper by Jeremy Babener titled "Structured Settlements and Single-Claimant Qualified Settlement Funds: Regulating in Accordance with Structured Settlement History" (QSF paper).

Babener's QSF paper will be published in the NYU Journal of Legislation & Public Policy in March 2010. Babener has made available an online abstract of his QSF paper. S2KM has received an advanced copy of Babener's QSF paper which S2KM will review and discuss as part of S2KM's 2009 blog series Single Claimant 468B QSF Update.

S2KM previously published a series of blog posts titled "Dissipation Studies" featuring a paper by Babener titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements," (dissipation paper) which will be published in the NYU Journal of Law & Business in November 2009.

Babener's QSF paper consists of 68 pages organized into seven sections (summarized below) with 453 footnotes. The footnotes reference Babener's extensive research including interviews with a cross-section of structured settlement industry participants.

Babener's QSF paper traces how far Congress and the IRS have eroded the original application of two tax doctrines, economic benefit and constructive receipt, to structured settlements.

Babener recommends the United States Treasury eliminate any ambiguity about 468B single-claimant QSFs and allow such use consistent with existing structured settlement public policy and structured settlement tax law.

Abstract - In his SSRN online abstract, Babener:

• Introduces a primary assertion and theme: defendants have captured much of the benefit of the structured settlement tax subsidy.
• Questions whether and why economic benefit and constructive receipt should be different for single and multi-claimant QSFs.
• Argues those tax doctrines are no longer strictly applicable to structured settlements.
• Recommends that Treasury clarify and extend QSFs to single claimants consistent with structured settlement public policy and tax history.

Introduction - Babener begins his analysis of structured settlement public policy by focusing on dissipation and the tax doctrines of constructive receipt and economic benefit. He explains the original incentive for injury victims to sacrifice control to qualify for the structured settlement tax subsidy. He argues that subsequent laws, regulations and rulings have substantially deconstructed these two tax doctrines as applied to structured settlements while continuing to fulfill the original purpose of the 1982 structured settlement legislation.

What is a Structured Settlement?

• Discusses the use and popularity of structured settlements.
• Explains how the tax subsidy increases the value of a structured settlement.
• Outlines a typical structured settlement to show how the tax subsidy works.

The First Stage: Birth, Subsidy, Justification, and Doctrine

• Details the early history of structured settlements including pre-1980 PLRs and the passage of the 1982 legislation.
• Highlights the original application of the economic benefit and constructive receipt doctrines to structured settlements.
• Finds no explicit Congressional justification for structured settlements in legislative history until 2001 when Congress:
  • Enacted IRC 5891;
  • Retroactively identified "avoiding dissipation" as the justification for the structured settlement tax subsidy.

Allowing Constructive Receipt and Economic Benefit

• Narrates the erosion of the constructive receipt and economic benefit tax doctrines as applied to structured settlements.
• Highlights as legislative examples:
  • Technical and Miscellaneous Revenue Act of 1988 - allowing "secured creditor status"; and
  • Victims of Terrorism Tax Relief Act of 2001 - allowing transfers of payment rights ("factoring") pursuant to state protection statutes.
• Analyzes how factoring both undermines and promotes the purpose of the structured settlement tax subsidy.
• Suggests this erosion of constructive receipt and economic benefit for structured settlements can be seen as advancing the purpose of the original 1982 legislation.

Helping the Wrong Party

• Explains how defendants save money on claims by capturing part of the structured settlement tax subsidy.
• Argues that such defense business practices and results detract from the purpose of the structured settlement tax subsidy.

The Next Step Away from the Two Tax Doctrines: QSFs

• Describes how some injury victims and their advisers utilize single-claimant QSFs to:
  • Control the purchase of structured settlement annuities; and
  • Capture increased structured settlement benefits.
• Identifies and analyzes the arguments against single claimant QSFs.
• Explains why some industry stakeholders view "one or more" as ambiguous.
• Argues the IRS should apply the tax doctrines of constructive receipt and economic benefit to single claimant QSFs consistent with how the IRS and Congress have done so historically for structured settlements - narrowly or not at all.
• Suggests that such increased erosion of these tax doctrines to structured settlements is consistent with past erosion and serves the purpose of the original 1982 legislation that created the tax subsidy.

Conclusion - restates Babener's thesis and recommendations.

Single Claimant 468B QSF Update

S2KM supports and promotes the application of IRC section 468B qualified settlement funds (QSFs) for single claimants in appropriate cases as a superior settlement planning model benefiting all structured settlement stakeholders.

S2KM has previously reported and reviewed professional commentary addressing single claimant QSFs by industry knowledge leaders including Robert Wood, Richard Risk and John Campbell.

See, for example:

• Single Claimant 468B Funds
• IRC 468B Funds Revisited
• Robert Wood and 468B Funds
• IRC 468B and 5891

Jeremy Babener, a third year law student at New York University, has written a valuable and timely addition to the public QSF discussion with his new legal paper titled "Structured Settlements and Single-Claimant Qualified Settlement Funds: Regulating in Accordance with Structured Settlement History" (QSF paper).

Babener's QSF paper will be published in the NYU Journal of Legislation & Public Policy in March 2010. Babener has made available online an abstract of his QSF paper which S2KM will review and discuss in a new series of blog posts.

In a prior blog series titled "Dissipation Studies," S2KM reviewed Babener's first structured settlement paper titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements," (dissipation paper) which includes extensive Appendices with detailed analysis of 12 dissipation studies relevant to U.S structured settlements.

Babener's dissipation paper, which will be published in the NYU Journal of Law & Business in November 2009, debunks one of the fundamental myths of the traditional structured settlement credo - the false and misleading claim that "nine out of 10 lump sum recipients of personal injury settlements dissipate their entire recovery within five years."

Because Babener's two papers address important public policy issues, S2KM will also feature Babener's papers on S2KM's structured settlement public policy wiki.

S2KM invites and encourages industry knowledge leaders and professional associations to review and discuss Babener's two structured settlement papers.

Additional S2KM posts in this series:

• Jeremy Babener's QSF Paper;
• S2KM Reviews Jeremy Babener's QSF Paper-1;
• S2KM Reviews Jeremy Babener's QSF Paper-2;
• Jeremy Babener Interview-2.

Jeremy Babener Responds

Because of the interest generated by law student Jeremy Babener’s research concerning lump sum dissipation, S2KM has invited Babener to continue to participate in the resulting online dialogue.

Jeremy Babener:

First, thank you to structured settlement industry leaders and commentators for integrating my research into the continuing dialogue about structured settlements. Commentators include: Patrick Hindert, Matt Bracy, and John Darer.

In discussing my paper, all three commentators have used my research to expand old and new arguments about structured settlements. This industry discussion is one of the goals of my research.

The primary purpose of this blog post is to respond directly to one of Mr. Darer’s recent postings, which appears to misunderstand and mischaracterize the thrust of the paper itself. Mr. Darer writes that my paper “attack[s] a statistic that [Babener] opines is the flawed basis for the structured settlement tax subsidy.”

The paper does attack the statistic that 90% of lump sum recipients prematurely dissipate their settlement in five years. My article, however, does not argue that the statistic is the basis for the structured settlement tax subsidy, nor does it argue that the subsidy is necessarily flawed.

Congress legislated the 1982 tax subsidy based on testimony asserting that premature dissipation of lump sum settlements was very common. As my paper notes, today’s industry practitioners attest to the same assertion. Thus, the paper’s introduction states: “The absence of such documented empirical evidence to support favorable tax treatment of structured settlements does not negate the validity of the consensus of professional opinion.  From a policy standpoint, however, the fundamental importance of this subsidy demands more than mere opinion. A policy that impacts millions of taxpayers and subsidy recipients is deserving of a substantiated empirical foundation.”

Mr. Darer’s post makes an interesting point in providing statistics related to the “spendthrift proclivities of Americans.” There is much evidence to suggest that Americans are not saving at sufficient levels. For this reason, the paper observes Americans’ history of consuming through debt, quoting those who have written, “buying dreams on credit is an American invention.”

However, these statistics relate to Americans generally, not the subset of those American recipients of lump sum settlements. For example, my paper discusses how analogizing to lottery winners may not be helpful in drawing conclusions about personal injury lump sum settlements.

My paper addresses every statistic it could find directly related to personal injury lump sum dissipation. While it analyzes data indirectly pertaining to the issue, such discussion must be limited. Mr. Darer's cited data fits within and informs the larger dialogue about Americans generally.

Thanks again to industry leaders and commentators who have integrated my work into their continuing structured settlements dialogue.  Special thanks to Patrick Hindert and S2KM for making this forum available.

Jeremy Babener

NYU Law ‘10

Jeremy Babener Interview

Jeremy Babener , a third year Juris Doctor candidate at New York University has completed a seminal structured settlement paper a copy of which is available for download online in pdf format.

S2KM introduced, summarized and reviewed Jeremy Babener's paper, titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements", in two prior S2KM blog posts:

• Dissipation Studies; and
• Jeremy Babener's Dissipation Paper.

This S2KM post features an exclusive interview with Jeremy Babener about his dissipation paper.

S2KM: Jeremy, what are the principle conclusions of your paper?

Jeremy Babener: The structured settlement subsidy, or tax exclusion, is premised upon the belief that claimants prematurely dissipate lump sum settlements. This belief has long been held within the structured settlement industry, and is frequently cited as a proven fact. Anecdotal evidence from industry practitioners, representing a broad cross-section of interests, certainly suggests the belief to be true. However, the article explores the available empirical data. It concludes that the frequency of the dissipating claimant has yet to be proven, and that citations relied upon as evidence lack applicability, or sometimes any substance at all.

S2KM: What surprised you the most about your findings?

Jeremy Babener: The thesis itself is surprising. The use and citation of an unproven statistic by so many in an industry exposes how reliant we are on others’ accurate reporting. It also exemplifies how assertions consistent with one’s previous experiences can bypass criticism.

S2KM: How did you become aware of, and interested in, structured settlements?

Jeremy Babener: I clerked for the U.S. Department of Justice, in the Federal Tort Claims Act Section during the Summer of 2008. As some of the cases moved toward settlement, I was introduced to the concept of the structured settlement. Some commentators call it “a benefit to both sides.” I wanted to learn more.

S2KM: Why did you focus your first structured settlement paper on dissipation studies?

Jeremy Babener: Writing this paper was not planned. In my research for a different article on the single claimant qualified settlement fund issue, I repeatedly read that “90% of lump sum claimants squander their award within five years.” Though I attempted to track down the source of the statistic, I was most surprised to find that I could not. I thought it important for the structured settlement industry to know. Of course, nearly all those I spoke to in the industry believe that most lump sum claimants do prematurely dissipate their settlement, based on personal and anecdotal experience.

S2KM: Did you write the paper for a specific class or seminar?

Jeremy Babener: I wrote the paper during my year in the NYU Journal of Law & Business’ note-writing program, and also for a law course entitled “Tax and Social Policy.”

S2KM: Where and when do you expect to publish your paper and who is your intended audience?

Jeremy Babener: I will be submitting my article to an array of journals and law reviews in August. I wrote the article with those in the structured settlement and factoring industries in mind. However, I think it pertains to many areas where long-term care and financial stability are important, including Medicare.

S2KM: How can interested persons obtain a copy of your paper?

Jeremy Babener: The abstract and draft of the article are available on SSRN. I will also be launching a website with Patrick Hindert. It will provide ongoing posts addressing structured settlement issues, including those introduced by this article.

S2KM: How many dissipation studies did you review as part of this project?

Jeremy Babener: The article reviews twelve studies. Four are American, published between 1936 and 1971. The eight others come from Britain, Canada, Australia, and Scotland, between 1973 and 1994. The article also reviews reports by the Canadian Manitoba Law Commission (1987) and the Law Reform Commission of Ireland (1996).

S2KM: What additional sources did you utilize in your research?

Jeremy Babener: I learned the most about the industry by speaking with those that populate it, including settlement planners, attorneys, and insurance company representatives. The treatises and articles on structured settlements provided an invaluable list of references. I was also fortunate that inquiries to foreign libraries and governments resulted in the requested reports, enabling me to track down nearly every citation I came across.

S2KM: How does the secondary market for structured settlements impact your paper and your view of structured settlement dissipation?

Jeremy Babener: The ability of structured settlement payees to sell their future stream of income for a lump sum amount undermines the purpose of the tax subsidy (i.e. preventing premature dissipation of settlement monies). On the other hand, the flexibility inherent in the ability to factor encourages personal injury claimants to structure their settlements in the first place, which may decrease total settlement dissipation. The factoring industry has produced statistics suggesting that those payees who factor do so responsibly. The sources of such statistics should be analyzed. A modern study on structured settlement factoring may be needed to appreciate the nuances of the issue.

S2KM: What are the earliest and most recent references you located for the statistic that 90% of lump sum injury recipients dissipate their recoveries in 5 years?

Jeremy Babener: The Journal of Commerce reported the 90%-5-year statistic in 1978, quoting T.V. Mangelsdorf, a life insurance underwriter. Today, some commentators, like Paul Lesti, discuss the statistic without reporting it as fact. However, the statistic is cited as proven in articles, on broker websites, and even in Negotiating and Settling Tort Cases, a treatise available on Westlaw.

S2KM: Based upon your research, is the term "squander" an accurate or fair characterization of injury victims?

Jeremy Babener; Where lump sum recipients exhaust their settlement monies in a shorter time than the monies are meant to last, I believe a more accurate characterization would be "premature dissipation". the term "squander" carries a particularly derogatory tone. Though I am not sure I would put it in such strong terms, Washington & Lee School of Law Professor Adam Scales argues quite convincingly, "What is objectionable in the rhetoric of structured settlement enthusiasts is the unsubtle attribution to tort claimants of characteristics, values and habits that are generally held in contempt in American political discourse: a lack of self-control, and the concomitent propensity to wind up om welfare."

S2KM: Did you locate any evidence that injury victims have a greater propensity than other persons to spend money wastefully or foolishly?

Jeremy Babener: The strongest evidence of lump sum recipients’ propensity to prematurely dissipate their settlement comes from anecdotal evidence throughout the industry. A few studies make conclusions that lump sum recipients spend money irresponsibly. However, such studies often have substantial flaws, lack applicability, or provide conclusions based on subjective judgments. For example, some studies criticize the use of lump sum settlement monies on ordinary living expenses.

S2KM: Assuming injury victims do dissipate lump sums, what other explanations, besides a propensity to squander, might explain this occurrence?

Jeremy Babener: The “propensity to squander” addresses the post-settlement decisions of lump sum claimants. However, the settlement amount itself cannot be overlooked. It is important to note the fact that where claimants accept settlements they receive less than the value of their original claim. Once legal and other fees are subtracted, the leftover sum may simply be inadequate. Thus, the money will not last as long as originally intended. For example, a 1984 Australian study of 86 accident claimants found many examples of inadequate settlements, but only seven examples of mismanagement.

S2KM: Did you find any evidence that injury victims manage lump sums responsibly?

Jeremy Babener: Yes, though the studies are either old or foreign. The famed 1971 American “Widows Study,” which some cite to as the source of the 90%-5-year statistic, actually found unwise spending “very much the exception.” Foreign studies also suggest that lump sum recipients can and often do act responsibly, including studies from Scotland (1993), Australia (1992), and Canada (1983). Foreign law commission reports have made similar conclusions.

S2KM: In your opinion, why haven't there been any recent and relevant dissipation studies in the U.S.?

Jeremy Babener: The industry considered performing such a study in the mid-1990s. Then, a few years ago, at least one insurance company was contemplating the idea. Some believe the study would be very difficult to perform; others believe the industry is concerned that the results might not be entirely favorable. I think that there has been little need to prove the contention because so many in the industry, based on personal and anecdotal experience, believe it to be true.

S2KM: Are you planning to write any additional papers related to structured settlements?

Jeremy Babener: I have drafted an article on the use of qualified settlement funds by single party claimants. I will be sharing it with those in the industry prior to submitting it to the NYU Journal of Law and Business this Fall.

Thank you, Jeremy for this interview and for sharing your dissipation paper which has been long overdue in the structured settlement industry. Good luck and future success with your studies, your writing and your professional career.

For related S2KM blog posts, see:

• Dissipation Studies;
• Jeremy Babener Dissipation Paper;
• Structured Settlement 2009 Strategic Analysis;
  
• Structured Settlement Surveys;
• J.G. Wentworth Survey;
• Settlement Consulting;
• Structured Settlement Credo.

Jeremy Babener's Dissipation Paper

Jeremy Babener, a third year Juris Doctor candidate at New York University School of Law, has completed a seminal research paper titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements" which identifies and analyzes 12 historical dissipation studies plus two law commission dissipation reports.

This S2KM blog post summarizes and reviews Babener's dissipation paper. A prior S2KM post introduced dissipation studies and "claimant centric" business models as strategically important for structured settlements and settlement planning. A subsequent post will feature an interview with Jeremy Babener about his dissipation paper.

Babener's conclusions about injury victim dissipation studies:

• No existing published dissipation study supports either of two structured settlement industry claims:
  • Injury victims "squander" lump sum awards;
  • Nine out of 10 lump sum injury victim recipients dissipate their awards within five years - the "90% - five year" statistic.
• Dissipation studies exist which reach the opposite conclusion - injury victims have no more propensity to dissipate lump sums than non-injury victims.

Scope: Although Babener's dissipation paper is comprehensive, it focuses on a specific topic - the 90% - five year statistic.

Babener's dissipation paper does not:

• Contend that claimants spend money responsibly. Instead, it "exposes as industry allegory the frequently stated belief that studies have proven [injury victim squandering] to be true." Babener recommends a new United States study to develop "empirical and substantiated" dissipation statistics for injury victims because the United States tax subsidy for structured settlements is premised on this belief.
• Address possible explanations for injury victim dissipation besides "squandering". Other commentators, however, have identified two explanations which deserve greater consideration and analysis:
  • Alternative # 1 - Asset and income qualification requirements for certain government benefits (including Medicaid and SSI) which:
    • Force and re-enforce recipients into poverty; and,
    • For many persons, require asset spend down strategies (dissipation) to qualify.
  • Alternative # 2 - Inadequate funds - where the proposed settlement plans:
    • Don't exist; or
    • Make inaccurate or unrealistic assumptions; or they are:
    • Under-funded; or
    • Improperly implemented; or
    • Badly administered.
• Characterize the secondary market as either proving or disproving claimant dissipation characteristics.

Babener's paper contains six sections - each of which S2KM separately summarizes below.

• Section I - Introduction. Babener focuses on the linkage between the structured settlement tax subsidy and dissipation studies.
• Section II - An Empty Statistic? Babener attempts, but fails, to locate any source supporting the 90%- five year statistic.
• Section III - Other Evidence of Lump Sum Use. Babener reviews other studies casting light on claimants' financial responsibility.
• Section IV - The Informed Conclusions of Others. Babener examines why the unproven 90%-five year assertion endures.
• Section V - Rhetoric of the Dissipating Claimant. Babener addresses the rhetoric of the enduring assertion, calling for a modern American study to answer the question long thought answered.
• Section VI - Conclusion:
  • Appendices (the surveys);
  • The lack of evidence for the 90%-5 year statistic;
  • Other evidence of lump sum dissipation;
  • Evidence of responsible lump sum usage.

Section 1 - Introduction

Babener's paper does not contend that personal injury claimants responsibly expend lump sum settlement monies. Instead, the paper exposes as industry allegory the frequently stated (but unsubstantiated and largely unanalyzed) belief that studies prove injury victims prematurely dissipate lump sums. Babener's paper highlights the federal income tax subsidy for structured settlements and estimates the annual subsidy to total between $360 and $840 million per year assuming $6 billion of annual structured settlement annuity sales. Babener's paper incorporates and builds upon the findings of two other authors who have studied dissipation, Ellen S. Pryor and Adam F. Scales. Babener's paper also reviews and relies upon 12 studies and two law commission reports - most of which are from non-United States countries. Babener also conducted extensive interviews with structured settlement practitioners.

Section 2 - An Empty Statistic?

Babener identifies and traces historic references from 1978 to 2009 citing "insurance studies" which allegedly support the 90% - five year statistic. In every case, Babener finds the reference either lacks any citation or cites to a study that does not support the 90%-5 year statistic. Although articles, treatises and practitioners continue to cite the statistic as proven, Babener's research does not discover any study that supports the 90%-5 year statistic. That statistic, which Professor Scales characterized as "the most consistently repeated 'fact'" in structured settlement law and lore, appears to be a mythical falsehood. Babener does not explore the consequences of this industry myth which extend beyond the scope of his paper.

Section 3 - Other Evidence

Babener summarizes his findings after reviewing 12 dissipation studies plus two law commission reports and references his more detailed analyses of these sources in his paper's Appendices. None of the dissipation studies or reports support the 90% - five year statistic. According to Babener's analysis, seven of these studies, plus two law commission reports support an opposite conclusion: lump sum recipients do not spend their recoveries unwisely.

The law commission reports Babener analyzes are by the Law Reform Commission in Ireland in 1996 and the Canadian Manitoba Law Commission in 1987. The Law Reform Commission of Ireland found "studies recently conducted by the Law Commission and the Disability Management Group of the University of Edinburgh have shown that the risk of dissipation is less than was widely believed and that those awarded very high damages are least likely to fritter away their compensation".

The 12 dissipation studies Babener reviews in his paper are listed here chronologically:

• 1947 U.S. Retirement Railroad Board Compensation study;
• 1959 University of Michigan study;
• 1973 British Personal Injury study;
• 1983 Australian Accident Compensation study;
• 1983 Canadian Auto Accident Compensation study;
• 1984 British Personal Injury study;
• 1984 Australian Traffic Accident study;
• 1987 Canadian Manitoba Law Commission study;
• 1992 Australian Auto Accident study;
• 1993 Scottish PersonaI Injury Compensation study;
• 1994 British Personal Injury Compensation study;
• 1996 Law Reform Commission of Ireland study.

Section 4 - Informed Conclusions of Others

Babener acknowledges that none of the studies he cites and analyzes is directly analogous to 21st century United States injury victims. Babener calls for a modern American study of injury victim dissipation to support the structured settlement tax subsidy.

Section 5 - Rhetoric of the Dissipating Claimant

In discussing and analyzing the continuing rhetoric within the structured settlement industry, especially the pejorative and unproven characterization of injury victims as "squanderers", Babener quotes from Adam Scales' 2002 paper. Scales argues that the image of the dissipating claimant has "intuitive appeal". According to Scales, “What is objectionable in the rhetoric of structured settlement enthusiasts is the unsubtle attribution to tort claimants of characteristics, values, and habits that are generally held in contempt in American political discourse: a lack of self-control, and the concomitant propensity to wind up on welfare." Scales continues, “An essential element of the discussion has been the assumption that successful tort claimants simply cannot be trusted with large sums of money."

Section 6 - Conclusion and Appendices - Babener concludes his paper by calling for a modern American dissipation study. In his paper's Appendices, Babener analyzes existing dissipation studies under three categories:

• Appendix A - frequently cited dissipation studies which do not support the 90%-five year statistic;
• Appendix B - other studies suggesting lump sum settlement recipients dissipate;
• Appendix C - studies offering evidence of responsible money management by injury victims.

For related S2KM blog posts, see:

• Dissipation Studies;
• Jeremy Babener Interview;
• Structured Settlement 2009 Strategic Analysis;
  
• Structured Settlement Surveys;
• J.G. Wentworth Survey;
• Settlement Consulting;
• Structured Settlement Credo.

Dissipation Studies

The United States structured settlement industry has drifted into an era of unprecedented transition and change with stagnant annuity growth and without any articulated industry strategic plan or strategic planning process.

Forces causing structured settlement transition and change:

• Financial service regulatory reform - with consumer protections;
• Tax reform - with reviews of existing subsidies plus potential new tax-subsidized products for disabled persons;
• Health care reform - with expected new rules for Medicaid (special needs trusts) and Medicare (set-aside arrangements);
• Internet-based business models - with improved performance standards and metrics for communication; planning; marketing; learning; product development and work processes;
• Class action lawsuits - exposing bad structured settlement business practices regardless of whether these practices are illegal under current laws;
• Growth of affiliated business markets - special needs planning; lien resolution; the secondary market; Medicare secondary payer practice; life care planning; settlement trusts; and money management of settlement proceeds;
• Retirement and/or death of first generation structured settlement industry leaders.

To recognize strategic change and successfully transition to settlement planning, a larger, more complex business, the structured settlement industry needs new focus, new vision, new leaders, and new "claimant centric" business models.

To better understand and grow their market, the new structured settlement leaders should begin by re-examining industry myths about their customers (injury victims). Where the myths are wrong and misguided, these new industry leaders should reject the historical myths and re-invent structured settlements based upon truth not fiction.

Among structured settlement industry myths, two are especially pernicious, long-standing and related:

• Myth #1: injury victims squander lump sums. Nine out of 10 lump sum recipients dissipate the entire amount within five years.
• Myth #2: structured settlements enable injury victims to live free of reliance on government assistance.

What have been the consequences of these industry myths for the structured settlements?

• Inefficient and anti-claimant business models;
• Product sales instead of settlement solutions;
• Bad business practices - whether or not illegal;
• Lack of market research and product development;
• Selectively incomplete education;
• Defensive and anti-growth political strategies;
• Abandonment of injury victim customers to the secondary market;
• Stagnant structured settlement annuity growth.

What if both myths are false?

Expert commentators have already challenged both myths:

• Adam Scales - When Professor Adam Scales first questioned the myth of squandering injury victims in his remarkable 2002 University of Wisconsin Law Review article titled: "Against Settlement Factoring? The Market in Tort Claims has Arrived", he was reviled by leaders of the primary structured settlement market. Seven years following the publication of Professor Scales' article, structured settlement and settlement planning leaders continue to quote false dissipation statistics and mis-characterize existing dissipation studies to promote a negative and false psychological and financial profile of injury victims.
• David Lillesand - David Lillesand, a leading social security and special needs attorney, has spoken and written about the critical need for serious injury victims to qualify for Medicaid. According to Lillesand, Medicaid is a "life or death" matter for such individuals. Structured settlements do not enable serious injury victims to live free of reliance on government assistance. To the contrary, unless the annuities are paid into a special needs trust, structured settlement annuity payments disqualify injury victims from receiving Medicaid. Even when structured settlement annuities are paid into a special needs trust, the legal rules for structured settlements are either unaddressed by current legislation and regulations and/or uncertain in their application and requirements.

Meet Jeremy Babener , part of a new generation of structured settlement knowledge leaders, and a third year law student at New York University. Babener has accomplished something no one in the structured settlement industry has attempted - a comprehensive review of historic dissipation studies involving injury victims. Babener's new legal research paper, titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements," includes extensive Appendices with detailed analysis of 12 dissipation studies relevant to U.S structured settlements.

Babener's paper, which examines and challenges the myth of the squandering injury victim:

• Refutes the existence of any published study supporting the statistic that "90% of lump sum recipients dissipate their recoveries within five years".
• Identifies existing dissipation studies that reach a contradictory conclusion: injury victims have no greater propensity to dissipate money than non-injury victims.
• Incorporates interviews from a cross-section of structured settlement industry practitioners who support the assertion of common lump sum dissipation based on personal and anecdotal experience.
• Calls for a modern study to ground the structured settlement subsidy in proven data.

S2KM begins its public 2009 strategic re-evaluation of structured settlements with a blog series about dissipation studies featuring Jeremy Babener's research. In subsequent posts, S2KM will summarize and review Babener's new dissipation paper and interview Babener about his dissipation research.

For related S2KM blog posts, see:

• Jeremy Babener Dissipation Paper;
• Jeremy Babener Interview;
• Jeremy Babener Responds;
• Settlement Consulting;
• Structured Settlement Credo.