This week I was contacted by the father of a young man, let’s call the young man Joe who is age 20. Joe had suffered a traumatic brain injury as the result of an auto accident and had received a settlement of $50,000. Joe’s father was concerned because Joe had already blown through half his settlement in a month due to his discovery of cocaine, which some new “friends” he was spending a lot of time with introduced him to.
Joe’s father had heard of something called a Structured Settlement, which he thought may help preserve the remainder of Joe’s settlement from being squandered. Structured Settlements are a financial vehicle which have been around since the 1980’s that facilitate receiving a legal settlement with interest income tax free over time and can sometimes have benefits over receiving the settlement all at once in a lump sum, as in this case.
Joe’s father contacted me because my firm, White House Settlement Consulting that I founded in 2001, has been helping injury victims achieve their goals using Structured Settlements for almost 20 years. I had to unfortunately inform him that due to the laws governing Structured Settlements, once the funds have been received by the claimant it was too late to set one up after the fact and his only option to gain some control over what was left of Joe’s settlement was to become Joe’s conservator through the courts, which was unfortunately a potentially long and expensive process.
I asked Joe’s father if Structured Settlements were considered during the settlement process, and he said that he thought they were, however, they were not correctly explained to Joe, who thought that they were bad because only someone representing the defendant auto insurer, who he was suing, tried to explain them to him. Joe’s attorney also told him that because “interest rates are too low”, and his settlement was on the “small side” he’d be better suited taking his entire settlement as a lump sum! I ask you which is better: a higher interest rate on ZERO or a lower interest rate on SOMETHING? In addition, we have done hundreds of Structured Settlements for as little as $5,000 to $10,000 as long as it makes sense for the client.
Unfortunately, after doing this for almost 20 years this is not the first time that I have heard this sad story! This is why if you are an attorney representing injured clients, an injured client, or know someone who has been injured PLEASE obtain your OWN Structured Settlement consultant who represents YOU and the CLIENT’S interests and can explain the advantage and disadvantages of a Structured Settlements AT NO COST TO THE CLAIMANT OR THEIR ATTORNEY! We are trained to properly explain not only Structured Settlements but all financial instruments to clients and to design financial plans that will help them achieve their goals. Also, if you are the parent of an injury victim it gives you more control over the distribution of the settlement than a lump sum.
Lastly, please make sure that all the financial options for the settlement are explored PRIOR TO SETTLEMENT so that options like the Structured Settlement are still available! If the client still chooses a lump sum, at least you have done your due diligence and presented them with all their options using a qualified representative that represents their interests and not the insurance company’s.