by Structured Settlement Watchdog
Speaking of structured settlements, The National Law Journal's Amanda Bronstad reports "in a sign of the economic times, value of structured settlements jumps 25%". Citing Structured Financial Associates stats, Bronstad refers to the total value of structured settlements and a "total dollar value" of nearly $1.8 billion.
Bronstad's use of the words "value" and "total dollar value" in this context is highly misleading. Is "value" meant to refer to the cost, the present value, or the total amount of the future benefits?
We know that something has increased but what? These days people are free and loose with financial terms and must be more careful as each of the alternatives could mean something entirely different. As a reminder…National Financial Literacy Month begins next week.
The number cited by NLJ's Amanda Bronstad does not relate to credible industry sources for premium.
Structured settlement annuity production
2008 $6.23B
2009 $5.32B
2010 $5.52B Source: Patrick J. Hindert
Structured annuity premium DOES NOT represent the value to the consumer. However, the amount of premium DOES tell an industry whether it is a growing or not by that measure.
Structured settlements come with a tax benefit for plaintiffs
In a structured settlement resolving a legal dispute involving damages for personal physical injury or sickness (as specified in IRC 104(a)(2)), the settlement is funded using a qualified funding asset (defined in IRC 130(d)), such as a structured settlement annuity or a U.S. Treasury obligation. The periodic payments from this asset supply the plaintiff or payee with income that is entirely tax-free.
Isn't a Cash Settlement Also Income Tax-Free?
Although a cash settlement resolving a legal dispute involving damages for personal physical injury or sickness (as specified in IRC 104(a)(2)), is also tax free, the earnings on that income, once invested, may be taxed. There is a value assigned to that tax benefit. The spendthrift protection may also be assigned a value.
Randy Dyer, former Executive Director of the NSSTA told the National Law Journal "The largest growth always occurs in a time of economic turmoil and sees "a real growth in the use of structures in 2009."
"Most plaintiffs do not have the ability or time to manage investments, and the events of the last 6 months prove that professional money managers are not immune from losses in the market". Tennessee lawyer
A bit skeptical about the aforementioned data in "Day on Torts", attorney John A. Day of Law Office of John A. Day P.C. Brentwood, Tennessee* "would expect that structures are usually up some percentage in every 4th quarter because there tends to be more settlements in the 4th quarter than during other times during the year". Yet he concedes that he " would not be surprised to see plaintiffs tend to gravitate to structured settlements during these times. Most plaintiffs do not have the ability or time to manage investments, and the events of the last 6 months prove that professional money managers are not immune from losses in the market".
* at the time of original publication in 2009, attorney John A. Day was listed at another Brentwood firm.
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