by John Darer® CLU ChFC MSSC RSP CLTC
The Use of a Qualified Settlement Fund may offer advantages as a settlement tool in select cases
A Qualified Settlement Fund is not suitable for every situation
- There should be concern regarding the promotion of the so-called “QSF” by certain settlement planners, portraying it as a universal solution akin to the latest gadget, tooth whitener, miracle hair stumulant or “The Magic Bullet” for achieving improved structured settlement rates.
- Such an approach is irresponsible and, in some cases, may ultimately prove to be self-serving.
A New York lawyer shared with us that he was recently told by a colleague to use qualified settlement funds in order to:
- Get to use your own structured settlement broker
- Get better rates
Not withstanding if New York Senate bill S8027A passes, both of these points are possible today (and have been for many years) WITHOUT having to subject the plaintiff to the expense of a qualified settlement fund.
Certain costs tied to a qualified settlement fund cannot be covered by the plaintiff/claimant structured settlement consultant or settlement planner who recommends it.
This opinion letter, OGC Op. No. 07-09-24, a copy of which was obtained by this author from the New York Department of Financial Services (then known as the New York State Insurance Department) Office of General Counsel on September 24, 2007, followed an attempt by a Buffalo New York structured settlement broker to “stand out” in a legal journal by promoting “cost-free qualified settlement funds.”
As to “Better Rates”
- Some liability insurers restrict the annuity issuers it will agree to fund a structured settlement. Most of the time this can be worked around by simply doing a full market shop and then getting the approved markets to match.
- Isn’t there extra work involved and can it be a pain in the butt? Yes, but that’s what your broker or settlement planner gets paid “the big bucks” for. If they are not willing to do this for you then please contact me. I’d be happy to perform this service and write the case.
- If a rate gap cannot be filled, it is important to evaluate the associated costs before pursuing the QSF route. The expense of the QSF may eliminate or significantly diminish any potential rate differential.
- Annuity rates are not the sole consideration in structured settlement planning. See an example of why. ELNY Liquidation News and Commentary Archives – Structured Settlements 4Real®Blog
As to it means “Your Own Structured Settlement Broker, Consultant or Planner“
- There is no restriction on plaintiffs having their own structured settlement consultant. The only issue is who pays for the services- (1) the plaintiff out of his/her pocket or (2) via commissions or fees paid by the annuity issuer(s), or Treasury bond structured settlement trust provider, or market based stuctured settlement provider.
- The structured settlement community is generally civil and there should be no problem splitting fees. There are few circumstances where there is a defense restriction on their brokers splitting compensation.
- Part of S8072A deals with the compensation of the claimant’s structured settlement consultant and if it passes, there will be little need for the wholesale use of a qualified settlement fund simply for the reason to have your own structured settlement broker, planner or consultant.
In conclusion, one should recognize the utility of a qualified settlement fund as a settlement planning tool when appropriate, but not use it on a wholesale basis when being solicited to for the reasons outline above.
Lawyers should contact a credentialed settlement planner or settlement consultant early enough during the course of a case to discuss potential financial planning issues for their clients as these may later have a bearing on settlement discussions.
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