Beyond Structured Settlements

Structured Settlement Surveys - 2

The National Structured Settlement Trade Association (NSSTA), in partnership with CLM Advisors, has recently completed a three-part structured settlement survey project of senior claims executives (Part 1), claims professionals (Part 2) and plaintiff attorneys (Part 3) the results of which provide NSSTA members with marketing tools for discussions with the audiences surveyed.

Complementing NSSTA's surveys, NSSTA member and structured settlement provider Prudential recently published the results of its own 2013 survey of 400 claimants who had entered into a settlement of a physical injury or workers’ compensation claim of at least $100,000 from 2003 to 2013.

Considered together, these four surveys provide valuable insights into how key stakeholders currently view the structured settlement market. They also provide a point of reference for, and comparison with, other structured settlement market surveys several of which have been completed or updated since S2KM published this previous blog post in November 2008.

What follows are brief summaries of prior structured settlement surveys. In subsequent blog posts, S2KM will review and evaluate the most recent NSSTA and Prudential surveys.

• NSSTA 2006: Survey of Plaintiff Attorneys and Structured Settlement Recipients - This NSSTA-sponsored survey was titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association" and was directed by Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia. It consisted of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys). Among the reported results:
  • Only 7% of personal injury settlements between $75,000 and $100,000 include structured settlements; and only 30% of personal injury settlements above $1 million included structured settlements.
  • When asked: "Whom do you prefer to use for purposes of financial planning for your clients?" , surveyed attorneys responded: trust company/department - 30%; Financial planner - 28%; Structured settlement consultant - 23%; No response - 19%.
• American General 2007: Survey about Structured Settlement Public Awareness - Sponsored by AIG American General and conducted by Esearch.com, Inc. in September 2007, this survey included 1000 U.S. participants - 80% had no connection with any personal injury case; 20% had previously been involved directly or indirectly through a family member in a personal injury case. Respondents who had no connection to a personal injury case were asked to read two hypothetical scenarios and answer questions on how they would react.Those with a direct connection to a personal injury case were not only asked to read the hypothetical scenarios, but also to answer questions based upon their real life experience. AIG's conclusion: the structured settlement industry needs to better educate Americans about structured settlements.
• J.G. Wentworth 2008: Survey of Structured Settlement Recipients - The survey consisted of 115 structured settlement recipients who had previously sold payment rights to J.G. Wentworth. The survey questions addressed both primary and secondary market issues, focusing upon the reasons the respondents: 1) first agreed to a structured settlement; and 2) then subsequently sold (transferred) some or all of their structured settlement payment rights. S2KM's prior reporting about the survey's primary market questions, responses plus related S2KM comments appears here. S2KM's prior reporting about the survey's secondary market questions, responses plus related S2KM comments appears here.
• Jeremy Babener 2009: Dissipation Legal Research Paper - Titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements," this paper examines and challenges the myth of the squandering injury victim. In it, Babener refutes the existence of any published study supporting the statistic that "90% of lump sum recipients dissipate their recoveries within five years" and identifies 12 existing dissipation studies relevant to structured settlements that reach a contradictory conclusion: injury victims have no greater propensity to dissipate money than non-injury victims.
• Towers Watson 2011: "Update of U.S. Tort Cost Trends" - The 2011 update represents the 15th study of U.S. tort costs, and the most recently published, by Towers Watson. Note: a Tower Watson representative has informed S2KM it has no current plans to publish further updates. The 2011 study reported $264.6 billion of 2010 U.S. tort costs and excluded: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs. Tower Watson's 2002 study had previously translated overall tort costs in 2001 into these additional cost categories and percentages: 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%. Based on the 2011 study and utilizing Tower Watson's 2002 "best estimate" of payout percentages, S2KM has estimated that since 2011 more than $170 billion of United States tort costs annually have represented payments to injury victims and their attorneys.
• Claims & Litigation Management Alliance (CLM) 2011: "National Litigation Management Study" - This survey of litigation management executives analyzed 30 litigation-related service areas including structured settlements. Commissioned by CLM (formerly the Council on Litigation Management ) and conducted by Revere Advisory, it identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives. CLM membership includes: corporations, insurance companies, government agencies, defense attorneys and law firms plus individuals "who participate in litigation and the management thereof (Corporate Counsel; Risk, Claims and Litigation Managers; Adjusters and Service Providers etc.)."
• Daniel Durbin 2013: Survey of Structured Settlement Brokers - Durbin, a former NSSTA President and Senior Structured Settlement Sales Manager with Allstate Life, conducted an informal survey with a group of leading structured settlement brokers to obtain their input and evaluate their interest in representing a potential new structured settlement product provider. Durbin identified himself as part of an investor group of individuals including insurance executives who see underdeveloped opportunities in the structured settlement primary market. Although Durbin has not published the results of his survey, he has presented to several industry groups and stated that the survey showed the interest is high as long as the new firm is financially strong with competitive rates.
• Melissa Evola Price 2002-2015: Quarterly Reports of NSSTA Member Structured Settlement Annuity Provider Sales - Melissa Evola Price's quarterly structured settlement report, selectively distributed to NSSTA members, is now copyrighted by her company, Structured Financial Associates, Inc. (SFA). Price and SFA have granted S2KM permission to publish selected portions of her report on both S2KM's blog ("Beyond Structured Settlements") and the structured settlement wiki. Her reports include historical data from 1975-2001 which is sourced with permission from "Structured Settlements and Periodic Payment Judgments" (S2P2J).  Evola Price most recently reported 2015 first quarter structured settlement annuity premium of $1,332,047,252, an increase of more than $230 million (21%) compared with the 2014 first quarter structured settlement annuity premium of $1,101,839,529.

Settlement Annuities

The introduction of two non-traditional "structured settlement" products underscores the expanding role of annuities in personal injury settlement planning (settlement planning) but also raises fundamental questions about suitability, due diligence and industry education.

Pacific Life recently announced a new structured settlement product called an "Index-Linked Annuity Payment Adjustment" (ILAPA). Investment performance and annuity payments will be linked to the Standard & Poor's 500 Composite Stock Price Index, according to structured settlement brokers who participated in Pacific Life's online product introduction. Although Pacific Life hopes to launch its new product by April 1, 2014, the launch date depends on whether and when Pacific Life receives a favorable IRS Private Letter Ruling.

Havelet Assignment Company (Havelet), an independently owned company based in Barbados, is now offering non-qualified (under IRC 130) product plans for claimants or contingent fee attorneys to defer receipt of their settlement award or fee on a pre-tax basis. The plans are funded with investment portfolios, selected by the claimants or attorneys, which Havelet "wraps" with variable annuities. Havelet must issue a private placement memorandum to each prospective client. Investment performance is not guaranteed. Minimum investment funding is $500,000.

Outside of the settlement planning market, equity-indexed and variable annuities represent increasingly popular investments. A March 12, 2014 New York Times article titled "Annuities Not for Everyone, but They Have a Place" cites the following LIMRA statistics: "Variable and indexed annuities accounted for 80.8 percent of the $688.2 billion of annuities sold in the three years through 2013, compared with 74 percent in the previous seven years."

By comparison, estimated structured settlement annuity premium totaled $5.13 billion in 2013 (of which $164.9 million represented non-qualified structured settlement annuity premium) and $139.5 billion from 1975 through 2013.

Based upon the most recent Towers Watson Annual Study of United States Tort Cost Trends, and utilizing Tower Watson's 2002 "best estimate" of payout percentages, S2KM estimates more than $160 billion per year of United States tort costs have represented payments to personal injury victims and their attorneys since 2006.

Pacific Life and Havelet's new product offerings add to the growing list of settlement planning products which S2KM noted in its blog report about the AAJ 2014 Winter Meeting. Additional marketing feedback S2KM received from structured settlement brokers who exhibited at the AAJ meeting:

• Structured settlement annuities are one of several product offerings (including single premium immediate annuities (SPIAS), fixed-indexed annuities and managed money) some leading structured settlement brokers are already selling.
• At least one leading structured settlement brokerage company sold more SPIAs and fixed-indexed annuities combined during 2013 than structured settlement annuities - and uses SPIAS almost exclusively to fund Medicare Set-Aside Arrangements (MSAs).

S2KM's AAJ blog report highlights fundamental questions about these expanding product offerings, the resulting "blended products" and emerging business models.

The Pacific Life and Havelet products raise additional issues which S2KM will address in subsequent blog posts:

• Are equity-indexed and off-shore variable annuity products suitable for personal injury victims?
• What product suitability standards should apply?
• What qualifications are needed to sell these products - and/or to perform due diligence on behalf of personal injury claimants and plaintiff attorneys?
• Are structured settlement and settlement planning professional associations providing their members with appropriate educational programs to understand settlement annuities and address related suitability and due diligence issues?

Settlement Planning Market - 1

Following three 2012 settlement planning conferences, what have we learned, and what do we still need to know, before settlement planning can be recognized and analyzed as a business and professional market?

The settlement planning conferences provided:

• Definitions for Settlement Planning - Joseph Tombs, Director of the Registered Settlement Planner (RSP) certification program, defined settlement planning as "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life. Settlement planners represent a blend of several professionals: part tax lawyer, trial lawyer, special needs lawyer, financial planner, annuity specialist, social worker, and medical case worker."
• Descriptions of an Emergent Profession - Several conference speakers described settlement planning as a larger and more complex successor business and profession for structured settlements. For example, Jack Meligan stated: "SSP and its members have been promoting the practice of Settlement Planning as a more comprehensive solution for the financial issues facing personal injury victims and their families, and the profession of Settlement Planning as the next evolutionary step for members of the financial and legal communities that serve these injured Americans."
• Product Introductions and Descriptions - In addition to structured settlement annuities, conference speakers discussed multiple financial and insurance products in the context of settlement planning including: settlement trusts; blended structures; alternative asset management options; market linked CDs; long term care insurance; life insurance; and reinsurance.
• Government Benefit Updates - Integrating financial and insurance products with available government benefits represents one of the most important settlement planning priorities and requires effective interaction among multiple settlement planning participants. The conferences highlighted settlement planning roles for special needs attorneys as well as financial and insurance professionals. In addition, government benefit developments related to settlement planning were discussed including new requirements for liability Medicare Set-Asides (MSAs) and special needs pooled trusts as well as the Patients Protection and Affordable Care Act.
• Tax Law Updates and Improvements - In addition to integrating tort settlement proceeds with government benefits, settlement planning requires careful tax planning and specialized document drafting. The SSP conference featured Robert Wood and Jeremy Babener, who provided tax law tips and updates for settlement planners, as well as David Higgins, who proposed a potential tax law alternative to expand the use of structured settlement annuities in settlement planning.
• Business Standards and Practices Discussions - The SSP's "Standards of Professional Conduct for Settlement Planners" (SSP Standards) represents a significant accomplishment and valuable industry resource.  Professor Carl Pierce, who helped review and draft the SSP Standards, continued his analysis of related settlement planning issues as part of the Risk Settlement Planning Practicum. Karen Meyers, Director NSSTA's Certified Structured Settlement Consultant (CSSC) program, led a discussion about product suitability during the SSP Annual Meeting.

Unanswered Questions

Despite continuing educational progress, however, certain questions about the settlement planning market still need to be prioritized and addressed before settlement planning becomes a recognized business and profession. Among the most fundamental and important:

• What types of settlements comprise the settlement planning market?
• How large is the settlement planning market?
• Is the settlement planning market increasing or decreasing?
• What informational resources exist to help answer these questions?

Towers Watson Updates

Beginning with the last question, S2KM recommends the Towers Watson updates on "U.S. Tort Cost Trends" as a starting point for discussing the settlement planning market. Since 1985, Towers Watson (and its antecedent Towers Perrin) have published 15 such updates with the most recent 2011 update analyzing U.S. tort costs from 2010. Each study:

• Consists of three components: 1) losses paid to third parties; 2) defense costs; and 3) administrative expenses.
• Calculates tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto;
• Excludes: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs - example: tobacco litigation.

Highlights from Towers Watson's "2011 Update on U.S. Tort Cost Trends"

• The tort costs in 2010 ($264.6 billion) were the highest in U.S. history and represent a 5.1% increase from $251.8 billion in 2009. Towers Watson estimates the 2010 U.S. tort system cost approximately $857 per person, versus $820 per person in 2009.
• Towers Watson attributes the increase to the April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico. Absent the costs from this event, Towers Watson estimates 2010 tort costs would have decreased 2.4% from 2009.
• Since 1984, tort costs as a ratio of U.S. Gross Domestic Product (GDP) have ranged from a low of 1.70% to a high of 2.30% with relatively rapid increases in the ratio during the mid-1980s and early 2000s offset by intermittent and multi-year declines in the ratio.
• Since 1950, even adjusting for inflation, increases in U.S. tort costs have far exceeded U.S. population growth. However, inflation-adjusted tort costs per capita were 16% lower in 2010 than in the peak year of 2004.
• The weak U.S. economy has had a notable impact on commercial auto insurance claims. 2010 tort costs were the lowest since 2000 and 19% lower than 2004.
• Although medical malpractice costs have increased at an average annual rate of 9.7%, versus 7.5% for all other tort costs, since 1975, growth in medical malpractice costs from 2005 to 2010 averaged only 0.3% per year.
• Looking ahead, Towers Watson:
  • Anticipates employee practices litigation to be significant in the future despite the U.S. Supreme Court's 2011 ruling in favor of Wal-Mart in the sexual discrimination and civil rights class action case Wal-Mart Stores Inc. v. Betty Dukes et al.
  • Identifies "fracking" (a natural gas drilling process that extracts natural gas from shale by using water and chemicals which could result in contaminated drinking water) as a new area of litigation where defense costs are beginning to mount.

Up until its 2002 update of "U.S. Tort Cost Trends", Towers Watson also translated annual tort costs into the following cost categories (with 2001 percentages): 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%.

Note: Towers Watson discontinued this latter portion of its analysis in 2002, according to Russ Sutter, a Tillinghast principal and actuary who directs the Towers Watson study, "primarily because we lack reliable information from plaintiff attorneys". These percentages therefore represent Towers Watson's "best estimate" in 2002.

S2KM assumptions: lacking alternative estimates of tort cost payment categories and percentages, Towers Watson's "best estimate" in 2002 for 2001 U.S. tort costs continues to represent the most reliable annual analysis of U.S. tort dollars paid to claimants and their attorneys.

Applying Towers Watson's percentages for 2001 to the results of Towers Watson's analysis of 2010 U.S. tort costs ($264.6 billion total), produces the following assumptive results: 1) administrative costs - $55.6 billion; 2) defense costs - $37.0 billion; 3) plaintiff attorneys - $50.3 billion; 4) economic loss - $58.2 billion; and 5) non-economic loss - $63.5 billion.

Utilizing both Towers Watson's 2011 update of its "U.S. Tort Cost Trends" plus S2KM's assumptions based upon Towers Watson's additional 2002 "best estimate" for 2001 produces the following assumptive results for 2010:

• Economic loss of $58.2 billion plus non-economic loss of $63.5 billion (both amounts presumably paid to claimants) equals $121.7 billion of tort-related dollars paid to claimants.
• $121.7 billion plus $50.3 billion paid to plaintiff attorneys equals $172 billion of tort-related dollars paid to plaintiffs and their attorneys.

S2KM will reference and utilize these 2010 annual assumptive "tort cost results" in subsequent blog posts while continuing to discuss the settlement planning market. For additional S2KM reporting about settlement planning, see the structured settlement wiki.

Business Standards and Practices - 3

This S2KM blog post summarizes the emerging business and professional models that are competing with the traditional structured settlement models. It continues S2KM's series analyzing structured settlement business standards and practices.

• Business Standards and Practices-1 highlights historical events that helped to develop traditional structured settlement business and professional models. 
• Business Standards and Practices-2 addresses two strategic issues:
  • What are the traditional structured settlement business and professional models?
  • What problems have traditional structured settlement models created that have restricted industry growth?
• Subsequent S2KM blog posts will address differences between the new structured settlement business standards and practices and the business standards and practices associated with traditional structured settlement models.

The traditional structured settlement "claim management" business model and "annuity broker" professional model are being challenged by a more comprehensive and customer-centric "settlement planning" model. Settlement planning, sometimes referred to as "special needs settlement planning" or "settlement consulting", proposes a different set of business standards and practices than traditional structured settlements. Although structured settlement "annuity brokers" participate in the settlement planning market, other product and service providers also participate. Individually or collectively, all of these professional participants may be referred to as personal injury or special needs "settlement planners" or alternatively as "settlement consultants".

The Society of Settlement Planners (SSP) has become the preeminent architect of and advocate for the settlement planning business model. In 2008, SSP adopted and published its "Standards of Professional Conduct for Settlement Planners". The Preamble (subtitled: "A Settlement Planner's Responsibilities") to SSP's Standards of Professional Conduct incorporates the following descriptions of settlement planners:

• "A settlement planner is a representative of a person participating in the design, negotiation and implementation of a settlement or satisfaction of a judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."
• "A settlement planner may represent a plaintiff, a defendant, an insurer, a guardian ad litem, an heir of a claimant, an attorney, or another person participating in the settlement process."
• "Settlement planners may provide advice and other services to their clients concerning claim valuation, negotiation strategy, the determination of rated ages based upon impaired life expectancy, life care planning, ..., allocation of proceeds, taxable and non-taxable periodic payments, structured settlements, [Medicaid and Medicare preservation], investments, irrevocable trusts, assessment of a plan's financial risk, and estate liquidity for tax planning.
• "....[T]o the extent permitted by these rules, [settlement planners] may provide advice and assistance to payees in connection with the factoring of a structured settlement plan."
• "Settlement planners may also play other roles ...such as a lawyer representing a claimant or obligor, a financial planner, an annuity broker, or a sales agent for an issuer of an annuity or provider of trust-based investment management products."

Although the settlement planning market encompasses the structured settlement market, it is substantially larger and more complex. Based on market surveys, estimates of the total annual U.S. market for potential personal injury settlement planning products exceed $160 billion (source: Towers, Perrin Annual Updates of U.S. Tort Cost Trends) compared with a current annual primary structured settlement annuity market of less than $6 billion.

Because the settlement planning market is emerging and its definition is complex with multiple professional participants, settlement planning education, certification and business models are still evolving. Settlement planning business models are also subject to change based upon continuing legal, technology and product developments.

Among professional primary market structured settlement participants, both SSP and the National Structured Settlement Trade Association (NSSTA) offer educational programs featuring settlement planning components. SSP's annual educational conference is open to non-SSP members and SSP encourages attendance by non-SSP settlement planners. NSSTA's educational conferences are restricted to NSSTA members and focus more narrowly on structured settlement topics.

Beginning in 2007, SSP has offered the only settlement planning certification program, the Registered Settlement Planner (RSP). NSSTA's Certified Structured Settlement Consultant (CSSC) program includes settlement planning components. Associations composed of other settlement planning professionals, including special needs attorneys, Medicare set-aside professionals, life care planners and structured settlement transfer companies, offer settlement planning and structured settlement presentations as part of their educational programs.

How does the emerging "settlement planning" business model differ from the traditional structured settlement "claim management" model? From a structured settlement perspective, the settlement planning business model is more claimant-controlled and customer-centric and subject to greater supervision than the traditional structured settlement claim management business model. Here are some of the developing characteristics:

• IRC 468B Qualified Settlement Funds represent the standard funding model for complex cases;
• Multiple settlement funding product alternatives exist including structured settlement annuities;
• Funding product selection and court approval are determined by "best interest", "suitability" and/or "prudent man" standards;
• Settlement planners offer insurance and non-insurance products and services, requiring additional licenses, training and credentials, to satisfy legal requirements and to meet competitive qualification standards;
• Structured settlements are increasingly:
  • Integrated with other government benefits;
  • Payable into trusts or custodial accounts which include other financial products; and
  • Construed as a separate asset class when measuring their interactive effects on an integrated, comprehensive settlement plan;
• Personal injury claimants have the right to:
  • Select their own structured settlement and/or settlement planning consultants, agents, brokers and product providers;
  • Full disclosure and written informed consent concerning:
    • Product and service provider compensation, fees and conflicts of interest;
    • Structured settlement laws including case-specific state protection statutes.

For comparable characteristics of the traditional structured settlement business model, see Business Standards and Practices-2.

For S2KM's continuing analysis of structured settlement business standards and practices, see 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

S2P2J Release 47

Release 47 of "Structured Settlements and Periodic Payment Judgments" (S2P2J), co-authored by Daniel Hindert, Joseph Dehner and Patrick Hindert, and published by Incisive Media, features extended discussions about structured settlement public policy and structured settlement business models, standards and practices.

Public policy issues addressed in Release 47:

• Does structured settlement public policy support:
  • Single claimant IRC section 468B qualified settlement funds?
  • Court-approved structured settlement factoring transactions pursuant to IRC 5891 and state structured settlement protection statutes?
• Do personal injury victims have a greater propensity to dissipate their financial resources than non-personal injury victims?
• Should the existence of the secondary market disqualify annuities as a funding option for special needs trusts?
• Does the Deficit Reduction Act of 2005 apply to structured settlement annuities?
• Why should structured settlement annuities cost less than lump sum alternatives to fund Medicare set-aside arrangements (MSAs)?

Business standards and practice issues addressed in Release 47:

• Traditional structured settlement business models;
• Spencer v. Hartford class action lawsuit;
• Fresno County factoring cases;
• The J.G. Wentworth bankruptcy and related credit crunch;
• New "best interest" test in California's revised protection statute;
• SSP's Standards of Professional Conduct.

S2P2J Release 47 also tightens S2P2J's existing analysis (Chapter 15) about the interaction of structured settlement annuities with Social Security, Medicare and Medicaid and updates industry developments generally.

S2P2J Release 48 will analyze how health care reform impacts structured settlements and also will feature a new chapter about IRC section 468B qualified settlement funds.

For prior S2KM analysis of related issues see S2KM's:

• structured settlement wiki; and
• structured settlement public policy wiki;
• web 2.0 for lawyers wiki;
• as well as prior S2KM blog posts.

NAELA's Special Needs Summit - 2

This S2KM blog post strategically analyzes the National Academy of Elder Law Attorneys (NAELA) 2010 Special Needs Summit from a structured settlement perspective. A prior S2KM post summarized the NAELA Special Needs Summit. A subsequent S2KM post will strategically analyze the NAELA Special Needs Summit from the perspective of Internet-based knowledge management.

For related S2KM learning resources, see S2KM's public read-only wikis:

• Structured settlement
• Structured settlement public policy
• Web 2.0 for lawyers

From a structured settlement perspective, the strategic business overlap with special needs attorneys encompasses disabled personal injury victims, their families and trial attorneys. Various knowledge leaders, knowledge networks and communities of practice within this strategic business and public domain utilize alternative terminology to describe their businesses without comparative analysis of the terminology itself. Here are some recommended resources to help special needs attorneys understand this growing legal market segment:

• Settlement law - hardcopy textbooks:
  • Robert W. Wood
    • "Taxation of Damage Awards and Settlement Payments"
    • "Qualified Settlement Funds and 468B"
  • Matt Garretson: "Negotiating and Settling Tort Cases"
  • Stuart Zimring, Rebecca Morgan and Bradley Frigon: "Fundamentals of Special Needs Trusts"
• Structured settlement law - Daniel Hindert, Joseph Dehner and Patrick Hindert: "Structured Settlements and Periodic Payment Judgments"
• Settlement consulting - see S2KM's report and analysis of Joseph DiGangi's presentation at the 2009 NSSTA winter meeting.
• Settlement planning - see S2KM's report about the SSP 2009 conference.
• Special needs settlement planning - see S2KM's report about the ASNP 2009 conference and Tim Nay interview.

S2KM regularly attends and publishes reports summarizing and analyzing national educational conferences sponsored by selected professional associations and universities whose speakers and attendees participate within the strategic business overlap of structured settlements and special needs law:

• National Structured Settlement Trade Association (NSSTA)
• Society of Settlement Planners (SSP)
• National Association of Settlement Purchasers (NASP)
• American Association for Justice (AAJ)
• National Academy of Elder Law Attorneys (NAELA)
• Academy of Special Needs Planners (ASNP)
• National Alliance of Medicare Set-Aside Professionals (NAMSAP)
• Stetson Law School - Special Needs Trust conference

Strategic question: from a structured settlement perspective, what was most important about NAELA's first-ever Special Needs Summit? 

Strategic answer: None of the NAELA speakers or unprograms:

• Attempted to define "special needs law" or any of its ancillary legal and business domains.
• Addressed any of the following structured settlement legal priorities and developments - all of which are strategically important for special needs attorneys:
  • IRC sections 104(a), 130, 468B or 5891;
  • Treasury Hearings for IRC 104(a)(2) regulations
  • Treasury 2009-10 Priority Guidance Plan - dropping single claimant 468B.
  • Spencer v. Hartford class action lawsuit - alleging civil RICO violations.
  • Unauthorized practice of law
  • Dissipation studies
  • Single claimant 468B funds
  • Executive Life of New York
  • Secondary structured settlement annuity market:
    • State structured settlement protection statutes.
    • J.G. Wentworth bankruptcy
    • Fresno County factoring cases
    • Rapid Settlements arbitration model
    • California protection statute amendments - including "best interest" definition

Why should special needs attorneys be interested in structured settlement law? This S2KM structured settlement diagram summarizes a complex legal and financial transaction that requires special needs legal knowledge, documentation and representation and also presents business and career opportunities for special needs attorneys:

• IRC 468B qualified settlement funds
• IRC 130 qualified and non-qualified assignments
• Special needs trusts
• Medicare set-aside arrangements
• Structured settlement transfers

Additional S2KM structured settlement resources for special needs attorneys interested in learning more about structured settlement law:

• Market surveys
• Growing the market
• Structured settlements in 2009
• structured settlement wiki
• structured settlement public policy wiki.

S2KM's next blog post will analyze NAELA's Special Needs Summit from an Internet-based knowledge management perspective.

Settlement Consulting - 3

In prior posts about settlement consulting, S2KM:

• Reviewed Joseph DiGangi's discussion at the NSSTA 2009 Winter Meeting titled: "Comprehensive Settlement Consulting in the 21st Century". See: "Settlement Consulting".
• Continued DiGangi's discussion by asking questions and offering comments about "settlement consulting" definitions and scope. See: "Settlement Consulting - 2".

This S2KM post outlines settlement consulting history - from a structured settlement perspective.

S2KM's structured settlement history diagram (developed with graphic artist Keith Burtoft) concludes with the founding of the National Association of Medicare Set-Aside Professionals (NAMSAP) in 2005.

Beginning in 2005, S2KM has continued to monitor structured settlement history by attending and reporting about settlement consulting conferences addressing structured settlements.

For the past three years, S2KM has also published annual reports about structured settlement developments:

• Structured Settlements in 2008;
  
• Structured Settlements in 2007;
• Structured Settlements in 2006.

Using the same categories as S2KM's structured settlement history diagram, here are some of the more recent settlement consulting highlights:

Social Security

• Deficit Reduction Act of 2005 (DRA);
• The Ahlborn Case (2006) - see John Campbell's analysis of the Eighth Circuit's decision which the U.S. Supreme Court unanimously affirmed.
• Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA);
• Additional MSA rules for structured settlements (2008);
• New POMS for Special Needs Trusts (2009) - see David Lillesand's report;

Taxation - see related articles on the Wood & Porter website:

• Banks and Banaitis cases (2005) - attorney fees;
• Murphy case (2007);
• IRS Letter Ruling 200836019 (2008) - Non-qualified 130 assignments and attorney fees.

State Legislation (2005-2008) - see Release 45 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

• Structured settlement protection statutes;
• Uniform Trust Code;
• UCC Article 9 anti-assignment provisions;
• Medicaid annuity rules.

Other Developments

• Academy of Special Needs Planners (ASNP) founded (2007);
• AIG receives $150 billion U.S. Government bailout (2008);
• Joseph Ricci replaces Randy Dyer as NSSTA Executive Director (2008);
• SSP publishes its "Standards of Professional Conduct" (2008) and begins its Registered Settlement Planner (RSP) certification (2008);
• American Association of Nurse Life Care Planners (AANLCP) founded (2008);
• Several annuity providers depart the structured settlement market (2005-2008);
• Structured settlement annuity premium remains level at $6 billion per year (2001-2008);
  
• Structured settlement surveys identify a larger market (2006-2008);
• Settlement consulting bloggers and podcast providers emerge (2004-2009).

For reasons why S2KM views 1982, 2001 and 2008 as strategically important for structured settlements, see "Structured Settlements in 2008 - 1".

J.G. Wentworth Survey - 3

Two prior S2KM blog posts:

• Introduced the J.G. Wentworth (JGW) 2008 structured settlement survey; and
• Summarized other related and recent structured settlement reports and surveys.

This S2KM blog post publishes the nine (9) JGW survey questions JGW has given S2KM permission to publish. These JGW survey questions address structured settlement industry issues - for both the primary and secondary markets.

S2KM has reviewed the results of additional JGW structured settlement survey questions (14 questions out of 23 total). These JGW survey questions address J.G. Wentworth's products and services. S2KM has neither requested nor received permission from JGW to publish these additional survey questions and results.

S2KM introductory comments:

• In publishing JGW survey questions and results, S2KM has altered the order of JGW's survey questions and responses as reported to S2KM - but not the questions or responses themselves. S2KM's purpose: to better present and highlight those JGW survey questions and results S2KM believes are most important for the structured settlement and settlement planning industries.
• 115 persons participated in the JGW survey. Not all participants answered every question.
• All JGW survey participants were structured settlement recipients who have sold some or all of their payment rights to JGW through state court approved structured settlement transfers pursuant to IRC section 5891 and one of the 46 state structured settlement protection statutes.

JGW Primary Market Survey Questions

• How many years ago did you settle your original lawsuit?
• When you settled your original lawsuit, why did you accept payments over time rather than a single lump sum of cash?
• How satisfied are you that you accepted a structured settlement?
• Do you wish you and your attorney had negotiated for a single lump sum settlement?
• When you settled your original lawsuit, how well informed were you about structured settlements?

JGW Secondary Market Survey Questions

• Why did you sell all or part of your structured settlement?
• Did selling your structured settlement help solve your financial problem?
• Would you sell payments again?
• If you sold only part of your settlement, do you plan to keep the rest of your payments as a structured settlement?

Additional S2KM comments about the JGW survey:

• The JGW structured settlement survey differs significantly from other recent structured settlement surveys sponsored by NSSTA and AIG. For S2KM summaries of these other structured settlement surveys, see S2KM's earlier blog post titled "Structured Settlement Surveys".
• As of November 28, 2008, neither JGW nor NSSTA have published their structured settlement survey results online. AIG has reported the results of the AIG sponsored survey on the AIG website.
• Towers Perrin has recently reported updated results (2008 update) for Tower Perrin's continuing study of U.S. tort costs on the Towers Perrin website. S2KM has summarized the results of Tower Perrin's 2007 update in this S2KM blog post.
• JGW conducted its own survey. NSSTA and AIG retained outside resources to conduct their surveys.
• JGW, NSSTA and AIG each appear to have utilized Internet communications as part of their surveys.
• JGW's survey participants are all structured settlement recipients who have sold structure settlement payment rights to JGW.
• JGW's survey does not include attorneys for structured settlement recipients or lump sum recipients.
• By comparison, NSSTA's survey includes some attorneys and structured settlement recipients as well as lump sum settlement recipients. NSSTA has not indicated whether any of its survey participants have sold structured settlement payment rights.
• AIG's survey is more hypothetical and does not confirm whether any respondents have sold structured settlement payment rights.

S2KM comments about the JGW survey questions:

• JGW's survey includes questions related to both primary structured settlements and secondary market transfers.
• By comparison, neither the NSSTA survey nor the AIG survey ask any questions about structured settlement liquidity features or secondary market transfers.
• JGW's survey focuses upon the reasons 115 structured settlement recipients: 1) agreed to a structured settlement; and 2) subsequently sold (transferred) some or all of their structured settlement payment rights.
• In addition, JGW's survey asks these 115 structured settlement recipients to evaluate retrospectively the results of both transactions.

S2KM will publish and analyze responses to JGW's 2008 structured settlement survey in subsequent blog posts.