Beyond Structured Settlements

ASNP 2012 Annual Meeting

The Academy of Special Needs Planners (ASNP) hosted its Sixth Annual Conference March 8-10, 2012 in Memphis, Tennessee. Consistent with its prior conferences, ASNP and Conference Chairperson Michele Fuller provided an exceptional educational experience featuring preeminent speakers, valuable topics, quality handout materials, plus effective interaction with sponsors and exhibitors.

ASNP is one of three national associations of attorneys, the others being the Special Needs Alliance (SNA) and the National Academy of Elder Law Attorneys (NAELA), whose members engage in special needs planning. The primary difference between special needs planning and settlement planning is that special needs planning includes clients whose disabilities result from many causes including but not limited to personal injury or workers compensation accidents.

One of the highlights of the ASNP conference was a special introductory program titled "Basics of Special Needs Planning" presented by Fuller and two other nationally renowned special needs attorneys, Kevin Urbatsch and David Lillesand. This program addressed the core components of special needs planning (including the role of structured settlements), explained public benefits, and discussed the basics of special need trust (SNT) administration.

Structured settlements were also addressed by other ASNP presenters:

• Rene Reixach - During his presentation titled "Impact Litigation", Reixach highlighted continuing litigation whereby state Medicaid agencies are attempting to disqualify SNTs funded with structured settlements arguing the existence of the secondary market makes structured settlement annuities "saleable" and therefore "countable" as an "available resource".
• Eric Skidmore - Skidmore, a Supervisor in the Office of SSI and Representative Payee Policy at the Social Security Administration (SSA), provided a "Social Security Update" during which he reconfirmed an unpublished SSA position supporting what Reixach reported - i.e. the SSA believes the existence of the secondary market renders structured settlement annuities "available resources" that potentially disqualify special needs trusts beneficiaries from receiving Medicaid.
• Jason Lazarus - Speaking about "Liability MSAs", Lazarus reconfirmed the current cost advantages of funding Medicare Set-Aside arrangements (MSAs) with structured settlement annuities as opposed to cash. His presentation included structured settlement case examples that underscored this cost advantage.

One glaring omission that characterizes most national structured settlement and settlement planning conferences is the surprising lack of attention paid to real life problems and issues experienced by persons with disabilities and their families. The 2012 ASNP conference emphasized these real life problems and issues with three valuable presentations:

• Annette Hines and Linda Brown - Hines and Brown, both special needs attorneys whose families include persons with disabilities, spoke about "Transition Planning" - the change in status for disabled persons from behaving as a student to assuming emergent adult roles in the community. Subtopics discussed: a "Day in My Life" from a parents' perspective; myths about special needs planning; transition agencies; disability support systems; selecting trustees and guardians; role of guardians; personal budgets; housing options including Section 8 qualification and the rent vs.buy decisions; plus group home issues including expense sharing.
• Vincent Russo and Michael Amoruso - Russo and Amoruso presented a series of video vignette interviews of families with disabled persons in their discussion titled "Creating the Right Plan for the Right Situation." Each of the interviews originally appeared on the television show "Family Comes First" for which Russo serves as a host. After the ASNP audience watched each interview, Russo and Amoruso asked questions and offered observations to help ASNP conference attendees learn to differentiate individuals and families on the basis of such issues as: independence; information needs and overloads; life visions; and legal capacity. They emphasized the need to make special needs trusts responsive to specific family situations.
• Harry Margolis and Jerry Hulick - Margolis and Hulick discussed a special needs case study from a financial perspective that emphasized the role of life insurance.  Note: although life insurance companies feature prominently in both the special needs and structured settlement markets, there appears to be almost no overlap among agents distributing their products even though both markets focus on disabled individuals and their families.

Another glaring omission to date at national structured settlement and settlement planning conferences has been the lack of educational inquiry about how the Patient Protection and Affordable Care Act [Affordable Care Act (ACA) - aka Health Care Reform] impacts their customers, their products and their traditional business models. The justification for this educational omission may be the uncertainty resulting from the current constitutional review of the ACA by the United States Supreme Court.

Fortunately, the ASNP has not been paralyzed educationally by this constitutional uncertainty. At the ASNP 2011 Annual Meeting, Cynthia Barrett offered her introductory analysis of how Health Care Reform impacts persons with disabilities. At the ASNP 2012 Annual Meeting, David Lillesand discussed how the prohibition against "pre-existing condition" exclusions mandated by the ACA (already in effect in 22 states) impacts special needs legal practice generally and self-settled (first party) special needs trusts specifically.

In summary, based upon his experience in Florida, where the ACA's prohibition against pre-existing exclusions currently exists, Lillesand believes:

• The need for self-settled (first party) special needs trusts has decreased (except when a beneficiary requires long term institutional care) because the ACA provides better insurance options than Medicaid for many persons with pre-existing medical conditions including personal injury victims.
• Existing self-settled (first party) special needs trusts should be reviewed, in the context of the ACA's prohibition against pre-existing condition exclusions and available medical insurance options, and in many cases terminated.
• Damages for future medical costs in personal injury lawsuits could be reduced assuming the premium costs of newly available insurance premiums become admissible in proving and/or defending damages.

Apropos to transition planning for persons with disabilities and terminating special needs trusts, Travis Finchum, Fuller and Urbatsch spoke about "Trust Transitions" - what to do when your bank trustee doesn't want you anymore or you don't want them? Their subtopics included: "the dark side of pooled trusts"; security of funds managed by individual trustees and pooled trusts; trust protectors; questions to ask potential private professional trustees; fiduciary certification and standards; plus discussion and analysis of trust provisions and revision issues.

To help ASNP attendees improve their legal practice, Steve Riley addressed "Key Strategies for Growing Your Practice and One Sure Fire Way to Kill It". The killer, according to Riley: "Inertia - which is easy; but change is hard" - which is also a good lesson for structured settlement and settlement planning stakeholders.

Congratulations to Chairperson Michele Fuller, the speakers and exhibitors for another outstanding ASNP educational conference. For S2KM's reporting about prior ASNP educational conferences, see the structured settlement wiki.

Structured Settlements in 2010 - 2

Beginning in 2004, S2KM has utilized this blog ("Beyond Structured Settlements") and related web 2.0 publications to report and analyze strategic developments impacting the structured settlement and special needs settlement planning (aka settlement consulting) industries.

Featuring industry leaders, commentators and professional association conferences, S2KM has attempted to highlight how legal and technology changes are redefining the traditional (pre-2001) structured settlement market including structured settlement public policy as well as structured settlement business standards, business practices and business models.

From S2KM's perspective, the following categories, people and developments defined the structured settlement and special needs settlement planning industries in 2010:

Professional associations

• S2KM attended seven professional educational conferences during 2010 which addressed structured settlement and/or special needs settlement planning issues:
  • National Structured Settlement Trade Association (NSSTA) - 2
  • Society of Settlement Planners (SSP)
  • National Association of Settlement Purchasers (NASP)
  • National Alliance of Medicare Set-Aside Professionals (NAMSAP)
  • National Academy of Elder Law Attorneys (NAELA)
  • Academy of Special Needs Planners (ASNP)
• As a general observation, all of these conferences were valuable and complementary. For S2KM's 2010 (plus historical) conference reports, see S2KM's structured settlement wiki.
• SSP, NASP and NAMSAP deserve special recognition for their 2010 strategic educational discussions featuring industry leaders, commentators and critics who offered alternative perspectives for improving and growing the structured settlement and special needs settlement planning markets.
• By comparison, NSSTA remains reluctant to openly discuss strategic industry issues or to include alternative perspectives in their educational programs. More positively, NSSTA representatives and members increasingly attend and speak at non-NSSTA structured settlement and special needs settlement planning conferences.
• NAELA's educational conferences are noteworthy because they regularly feature sections or entire programs titled "unprograms". NAELA's unprograms are moderated group discussions about specific topics. NAELA's 2010 Special Needs Summit included six separate one hour unprograms with a concluding unprogram wrap-up session. One example of a 2010 NAELA unprogram was titled "Collaboration Opportunities for Special Needs Attorneys and Financial Planners".

Industry leaders

• NSSTA promoted Eric Vaughn, who previously served as NSSTA's lobbyist, to replace Joseph Ricci as NSSTA's new Executive Director effective July 1, 2010. Peter Arnold, previously NSSTA's Marketing Director, was similarly promoted to serve as NSSTA's Associate Executive Director. NSSTA's Board of Directors elected Michael Kelly as its 2010 President and Dan Finn as its President-elect. NSSTA honored Congressman Peter Stark during its Annual Meeting as its 2010 Legislator of the Year. NSSTA also gave special recognition to Karen Meyers and Joseph Bornstein for their contributions to NSSTA's CSSC and NSSTAPAC programs respectively..
• SSP elected Jason Lazarus as its President for 2010-11 and Charles Schell as Vice President. SSP honored Richard Risk with the designation of "life member" for his contributions to SSP and the settlement planning industry. Joseph Tombs continues as Director of SSP's RSP certification program.
• NASP named Matthew Bracy as its new President succeeding Robin Shapiro. Earl Nesbitt continues as NASP's Executive Director.
• NAMSAP elected Michael Westcott as its President.
• NAELA honored Dick Traum as the first recipient of NAELA's Special Needs Leadership Award. Traum is the founder and CEO of Achilles International, a non-profit organization providing community support for athletes with disabilities with members in more than 70 countries.
• Amy Palmiero-Winters, ultra-marathoner and lower-leg amputee, was named during 2010 as the winner of the 2009 James E. Sullivan Award given annually to the top amateur athlete in the United States.

Industry commentators

• For the past several years, Robert Wood has been the preeminent tax commentator and author for the structured settlement and settlement planning industries. Wood's publications appear on the Wood & Porter website.
• During 2010, Jeremy Babener emerged as an important new structured settlement tax commentator and author specializing in public policy and proposing an expanded structured settlement tax subsidy. In addition to authoring several structured settlement articles for tax and legal journals, Babener participated as a featured speaker at both the SSP and NASP 2010 Annual Meetings and authored two blog posts for S2KM during 2010. Babener discussed his structured settlement writing (accessible on S2KM's structured settlement public policy wiki and Babener's Tax Structuring website) in this 2010 S2KM interview.
• Additional authors who wrote and published 2010 legal articles about structured settlement and special needs settlement planning issues included: Daniel Hindert, Matt Garretson, Sylvius von Saucken, Peter Wayne, Mark Popolizio, Gregg Polsky and Brant Hellwig.
• Both the Legal Broadcast Network and Ringler Radio continued to produce and distribute podcasts featuring structured settlement commentators during 2010.
• An increasing number of structured settlement and special needs settlement planning professionals published blogs during 2010 joining industry blogging pioneers such as John Darer, Mark Wahlstrom, Matthew Bracy and Jack Meligan.
• Incisive Media published two new updates (Release 47 and Release 48) for "Structured Settlements and Periodic Payment Judgments" during 2010.

Legislation

• Both the Patient Protection and Affordable Care Act (Health Care Reform) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) redesign the legal environment in which the structured settlement and personal injury settlement planning markets operate.
• Among the anticipated strategic consequences of health care reform:
  • An estimated 16 million more Medicaid participants - and therefore:
  • More special needs trusts;
  • More special needs attorneys;
  • More structured settlement annuities payable to trustees.
• Dodd-Frank re-writes federal banking law and creates a new Bureau of Consumer Financial Protection. A key question, as yet unanswered, is whether the sale and/or purchase of structured settlement annuities constitutes a "financial product or service" under Dodd-Frank requiring regulatory supervision by the Bureau.

Regulations

• The United States Department of Treasury held a public hearing on February 23, 2010 focused on proposed new regulations for Internal Revenue Code section 104(a)(2). The proposed regulations, if enacted, would:
  • Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
  • Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) tax exclusion.
  • A subsequent S2KM interview featured John McCullough and Richard Risk, two of the structured settlement industry members who spoke at the hearing.
• The Centers for Medicare and Medicaid Services (CMS) continued to issue administrative guidance during 2010 for enforcement of the Medicare Secondary Payer (MSP) Act of 1980 and the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) reporting requirements for insurers. Featured discussions during the NAMSAP 2010 Annual meeting highlighted:
  • The increasing importance and complexity of the MSP statute for all personal injury stakeholders;
  • The need for these personal injury stakeholders (and their professional associations) to cooperate politically and educationally;
  • The challenges of integrating structured settlements, including rated ages, with Medicare set-aside arrangements (MSAs) in the context of health care reform, CMS MSA regulations and related judicial rulings;
  • The evolving business models, claim management strategies and professional skill sets which are now emerging to address these challenges.

Case law

• The Spencer v. Hartford class action lawsuit which settled in 2010 represents one of the most important legal developments in the history of the structured settlement industry.
• Hartford's gross settlement payment of $72.5 million represents 4.5% of total premium dollars Hartford used to purchase structured settlement annuities for class members from January 1, 1997 to June 7, 2010.
• Among the plaintiffs allegations:
  • Hartford and its attorneys, brokers and agents violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed common law fraud in structuring its settlements.
  • Hartford's structured settlements were priced so Hartford retained 15% of the value of the structured settlements.
  • Hartford and its attorneys, brokers and agents misrepresented structured settlements including explicit or implicit reference to:
    • The "cost" of the annuity or structured settlement or portion of the settlement being structured; and/or
    • The "value" of the annuity or structured settlement or portion of the settlement being structured.
• Hartford, which stopped writing new structured settlement business in 2009, denied the allegations.

Technology

• Despite the accelerating technology advances revolutionizing society generally, the structured settlement and special needs settlement planning industries have been slow to study and incorporate these advances into their educational programs and business models.
• The best industry-sponsored technology education programs during 2010 were offered by Mark Miller during a NAELA webinar and Harry Margolis at the ASNP 2010 Annual Meeting. Both presentations provided introductory overviews of web 2.0 and including recommendations for integrating specific social networking tools into special needs legal practices.
• NSSTA initiated a NSSTA blog during 2010 and offered an educational program about Internet marketing during its 2010 Fall Education program.

Public policy

• Both SSP and NASP featured specific discussions and presentations about structured settlement public policy during their 2010 Annual Meetings. The discussions included industry commentators representing diverse viewpoints and priorities.
• Jeremy Babener followed his 2009 paper debunking industry myths concerning "structured settlement dissipation studies" with several 2010 articles and papers addressing structured settlement public policy issues. Babener's public policy writing is featured on S2KM's structured settlement public policy wiki.
• Release 47 of "Structured Settlements and Periodic Payment Judgments" re-examined several structured settlement public policy issues related to single claimant 468B funds, structured settlement factoring transactions, dissipation by personal injury victims, the Deficit Reduction Act of 2005, special needs trusts and Medicare set-aside arrangements.
• In a 2010 Boston College Law Review article, professors Gregg Polsky and Brant Hellwig challenged the application of any structured settlement tax benefit for deferring attorney fees or payments to non-physically injured tort plaintiffs under general common law tax principles.

Business standards and practices

• The Spencer v. Hartford case raises many issues about structured settlement business standards and practices which require greater education and analysis if the primary market expects to improve and grow. For example;
  • Is the primary structured settlement market capable of self-regulation?
  • Why shouldn't key elements of the state structured settlement protection statutes (judicial approval; best interest test; compensation disclosure) be applied to primary market transactions?
  • As an additional requirement, or as an alternative, why haven't plaintiff attorneys and plaintiff consultants insisted upon a claimant's written informed consent before entering into a structured settlement?
  • Why haven't the SSP's Standards of Professional Conduct received more public discussion and analysis within the structured settlement industry?
• "Cash now" advertising represents one of the most highly criticized secondary market business practices. Although this practice continues to exist, NASP took an important educational step during its 2010 Annual Meeting by highlighting this issue and inviting secondary market critics to participate in the discussion.

Business models

• While other segments of, and products within, the special needs settlement planning market have expanded and improved in recent years, the structured settlement primary market in general has stagnated and retrenched.
• During 2010, however, representatives of the primary structured settlement market increasingly recognized their interdependency, and interacted, with other settlement planning professionals and professional associations such as special needs attorneys, life care planners, Medicare set-aside professionals and secondary structured settlement market participants.
• Future industry improvement and growth will require even greater appreciation and identification of shared interests as well as expanded implementation of shared political strategies, educational programs and business models.

Prior S2KM annual reports about the structured settlement industry and reports about industry association conferences are available on S2KM's structured settlement wiki.

25 Questions to Evaluate Pooled Trusts

Health care reform (Patient Protection and Affordable Care Act), enacted on March 23, 2010, has re-defined the structured settlement and personal injury settlement consulting marketplace: whether current participants realize it - or (more probably) do not.

Among the strategic consequences of health care reform:

• An estimated 16 million more Medicaid participants - and therefore:
• More special needs trusts;
• More special needs attorneys;
• More structured settlement annuities payable to trustees.

Without focusing specifically on health care reform (not then enacted), the ASNP 2010 Annual Meeting included valuable presentations and handout resources indirectly related to health care reform, structured settlements and settlement planning/consulting.

Among those valuable presentations was Evan J. Krame's analysis titled "Not Very Special Trusts: Fixing Trusts to be Special and Using Pooled Trusts". As part of his ASNP trust analysis, Krame introduced a document he wrote titled "25 Questions to Evaluate Pooled Trusts".

In addition to his legal practice and teaching activities, Krame serves as President of Shared Horizons, Inc. Shared Horizons is trustee of the Wesley Vinner Memorial Trust (a pooled trust) serving people with disabilities in the District of Columbia and Maryland.

Krame has granted permission for S2KM to re-publish his list of 25 Questions here in S2KM blog format.

Trust Structures

• Check the Trust Agreement and Joinder Agreement? What do the documents say? For example, what powers does the trustee have?
• Is the trust approved and monitored by any state agencies?
• Who/what is really serving as the trustee? Is it the non-profit organization that created the trust or is it a third party hired to administer the trust?

Is this Trust Right for You?

• What are the costs of participation? Is there an initiation fee, an annual fee or a termination fee?
• How are the disbursements approved? What is the ease and method of disbursements? Who signs disbursement checks?
• What is the availability of advocacy on behalf of the beneficiary?
• How do they manage public benefit issues?
• How do they monitor the beneficiaries?
• Will the trust own illiquid or uncommon assets such as cars or homes?

Trust Management

• What is the reputation of the non-profit and/or trust management organizations?
• What is the organizational structure? Check on staff, space and activities.
• Who are the officers of the non-profit? What are their skills and background?
• What is the function of the board of the non-profit trustee?
• How long has the trust been in existence? Is there any reason to believe it could fail? How appropriately is the pooled trust compensated?
• How are the trust assets invested? Is there an investment policy in force that is followed? Is there an independent investment adviser? Is there an investment review committee? Is there an allocation model?
• How do they maintain separate shares? Do they uphold the duty to segregate?
• Is there liability and casualty insurance in place?
• How do they meet their duty to inform? Are statements provided to beneficiaries and state agencies (as required)?
• How do they meet their duty to account?
• How do they maintain their records? Are they precise, complete and accurate?
• How do they meet their duty of confidentiality?
• Do they have and/or employ legal counsel?
• Are there termination procedures in place?
• What is the policy as to funds at the death of a beneficiary?
• How do they handle income tax reporting?

Additional S2KM resources about settlement trusts:

• Settlement trusts re-visited
• Settlement trusts
• Single claimant 468B funds
• Selecting a settlement trustee
• Settlement trust due diligence
• Special Needs Trusts X
• Richard Halpern

ASNP 2010 Annual Meeting

The Academy of Special Needs Planners (ASNP) hosted its 2010 Annual Meeting in Charleston, South Carolina March 18-20, 2010. More than 100 special needs attorneys participated as well as nine exhibitors. MassMutual Financial Group was the program sponsor.

The timing of the ASNP 2010 conference was historically significant. It followed by less than one month NAELA's Special Needs Summit and occurred just days prior to enactment of United States Health Care Reform (Patient Protection and Affordable Care Act) on March 23, 2010.

Topics and Speakers

• "Living with Autism" study - Joanne Gruszkos introduced a new study about autism, conducted by Easter Seals with sponsorship from MassMutual. The study addresses family issues and challenges related to life care planning for autistic individuals.
• Special needs trusts - Professor Jeffrey Pennell deconstructed a typical third party special needs trust from a tax and trust attorney perspective, then joined a panel including special needs attorneys Michele Fuller and Kevin Urbatsch to reconstruct the same trust from a more holistic viewpoint. Evan Krame discussed how to fix trusts to make them qualify for special needs purposes and also offered guidance in using pooled trusts. Krame's handout materials included a useful guide titled "25 Questions to Evaluate Pooled Trusts".
• SSI and SSDI Updates - David Lillesand summarized developments impacting Social Security including extensive and valuable reference materials featuring charts, diagrams and recent regulatory rulings.
• Marketing for Special Needs Attorneys - Harry Margolis and Vincent Russo discussed traditional and non-traditional methods for special needs attorneys to market their expertise. Margolis' non-traditional analysis complemented an earlier NAELA webinar by ASNP COO Mark Miller. Margolis provided an introductory overview of web 2.0 including recommendations about specific social networking tools.
• IRC 468B Qualified Settlement Funds - Jason Lazarus re-introduced QSFs emphasizing practical applications as well as expanding professional opportunities for special needs attorneys in settlement planning. Lazarus addressed current political issues impacting the use of QSFs in single claimant cases.
• Special Needs Advocacy and Litigation - Patricia Harrison spoke generally and summarized historically federal and state based special needs litigation. Saundra Gumerove spoke more specifically about special education advocacy and litigation.
• Additional topics - Sanford Mall spoke about Military and Veterans benefits as increasingly important for special needs planning. Mall separately addressed how to obtain and coordinate funding for healthcare. Dr. Harriett Mall discussed the psychology of poverty.

Congratulations to ASNP 2010 program co-chairs Frank Johns and Franchelle Millender for continuing ASNP's high standard of educational excellence. In addition to interesting topics and speakers and valuable handout materials, ASNP conferences are also characterized by their well-qualified attendees and informative exhibitors with whom ASNP provides substantial opportunities for interaction.

Prior S2KM blog posts about the Academy of Special Needs Planners (ASNP) - which are also accessible on S2KM's structured settlement wiki:

• 2009 ASNP Annual Meeting
• 2008 ASNP Annual Meeting
• 2007 ASNP Annual Meeting