Managing Family Expectations for Personal Injury Settlements

Beneficiaries and their families often have high expectations concerning personal injury settlements. Edward V. Wilcenski, Esq., of Wilcenski & Pleat, provides information about the settlement process which will help families set realistic expectations about the use of settlement funds.

Personal injury settlements are often preceded by years of litigation.  As a case approaches its conclusion, there’s usually a sudden rush of activity, as families are pressed to meet deadlines set by attorneys, insurance companies, courts and other professionals.  On the one hand, families are relieved to be at the end of a long and difficult road, but on the other, they’re often asked to make some very important, long-term life decisions in a short period of time.  One of the first things that special needs planning attorneys try to do is slow the pace and help the families understand their choices.   

As a preliminary matter, it is important for families to understand that when a lawsuit settles, there may be certain obligations that need to be paid before funds are available to the plaintiff.  If private health insurance, Medicaid or Medicare have previously paid costs associated with the plaintiff’s injury, those entities will typically have “liens” which will need to be repaid from the proceeds of settlement before funds are available to the plaintiff.  

Once all liens and litigation expenses have been identified and paid, the plaintiff is left with the “net settlement” amount.  The question then becomes whether the plaintiff should receive the net settlement in a lump sum, or whether some part of the net settlement should be “structured.”  With a structured settlement, a portion of the net settlement is paid to an insurance company in exchange for fixed and ongoing income payments in the future.  Those income payments can be made in monthly installments, annual installments or some other combination based on the plaintiff’s expected needs.   

The primary benefit of structuring a portion of a settlement is that these future payments are guaranteed, regardless of what may happen with the stock market or interest rates in the future.  The downside of a structure is that the plaintiff must forego liquidity in exchange for the guaranteed income stream.  Once a payment schedule is established, it becomes permanent, meaning that the plaintiff will not have access to the underlying value of the structure if there are large and unanticipated expenses in the future. As a result, with larger settlements, it is often beneficial for a plaintiff to take a portion of the settlement in a lump sum and use a portion of the settlement to purchase a structure.

Regardless of how a settlement is paid, rarely will settlement proceeds be sufficient to allow a plaintiff with a permanent disability to support herself for the rest of her life.  In almost all cases, the plaintiff will need the ongoing support of various means-tested government benefit programs, including Supplemental Security Income (SSI) and Medicaid. These programs establish a “floor” of support.  If settlement proceeds (taken as a lump sum, a structured settlement or some combination) are placed in a properly drafted supplemental (special) needs trust (SNT), they will not impact the plaintiff’s eligibility for ongoing support from government funded programs.  The trustee of the SNT will then be able to use the settlement to pay for other goods and services to enhance the life of the plaintiff with the disability.   

There are many other important decisions that a family must make during the settlement process, including the selection of a qualified trustee and the identification of significant expenditures like housing and transportation which may need to be made in short order.  Given the importance of these decisions, a plaintiff and her family are best served when the personal injury attorney, the special needs planning attorney and the structured settlement professional work together to develop a tailored solution.

Edward V. Wilcenski, Esq., practices in the areas of special needs planning, litigation settlement consulting, trust and estate administration, elder law and long-term care planning.  His firm, Wilcenski & Pleat PLLC, has offices in Clifton Park and Glens Falls, New York. He is a past president of the Special Needs Alliance, and works extensively with litigation attorneys, structured settlement professionals, corporate trustees and families who are negotiating the settlement process. The Settlement Channel is a featured network of Sequence Media Group.

Posted on January 29, 2018 .

Lawyers: Consider Government Benefits in Personal Injury Settlement Negotiations

Plaintiffs in personal injury lawsuits are more likely to settle their cases than pursue the cases to jury verdicts. One thing that should be kept in mind during the negotiation of a settlement is the availability of government benefits and the possibility that a plaintiff may someday need one or more of them. However, a plaintiff’s lawyer may not have government benefits in mind during the negotiation. California lawyer Jennifer Steneberg of the Dale Law Firm, PC explains why plaintiff’s lawyers need to be thinking of government benefits.

Jennifer Steneberg

Jennifer Steneberg

There are several reasons, Steneberg explains, why government benefits should be kept in mind during a settlement negotiation. The obvious one is that a plaintiff might already be a public benefits recipient. If that is the case, the plaintiff’s lawyer needs to assess the situation to determine the value of government benefits in light of the settlement. It is necessary to look at the plaintiff’s household and family and think about the long-term situation of the plaintiff.

Another possibility is that a plaintiff is newly disabled and is not yet receiving government benefits. In that situation, Steneberg says, the plaintiff’s lawyer needs to make an assessment of whether government benefits will be a needed part of a plaintiff’s financial and personal well-being.

Steneberg says that there are two areas of benefits to consider. First, there are cash assistance programs—such things as Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), both administered by the Social Security Administration. There are also health coverage programs. These include Medicare and Medicaid. Beyond the health care benefits, Medicaid also provides some other support benefits, including in-home support. Some of these services could be very expensive if one had to purchase them privately. Protecting a plaintiff’s financial eligibility using a special needs trust, perhaps, can be very important, as settlement benefits sometimes become exhausted rather quickly.

Eligibility to receive government benefits will depend on the specific benefit in question. For example, a person with a good work history may well become eligible for SSDI or some other disability insurance. As to those benefits, Steneberg notes, there is no eligibility requirement other than the disability itself. If those benefits are not available, the plaintiff might have to apply for SSI. Another need might be Medicaid benefits. Those benefits have a financial eligibility test that requires a low income in order to qualify. Also, an individual is often not allowed to have personal resources in excess of $2,000.

A smart strategy for a plaintiff’s attorney in such a situation is to team up with a special needs attorney early on in the settlement negotiation. The earlier, the better, Steneberg says, and certainly prior to the settlement conference. In this approach, the client’s long-term needs can be taken into consideration, including reviewing a life care plan, if one has been prepared. The special needs attorney can help make everyone involved aware of benefits that might be available in the community that will be of benefit to the plaintiff. Also, it is important to structure the settlement so that adequate funds are available to cover immediate needs that a plaintiff and family might encounter. These might include home modification, adapted equipment, vehicles, and similar kinds of needs. The other issue is to be sure that an adequate cash flow is provided long-term for continuing needs.

Jennifer L. Steneberg is associated with the Dale Law Firm, PC in Pacheco, California. She is committed to advocating for persons with special needs, and she has spent much of her adult life working in the area of disability rights. She is also a member of the Special Needs Alliance. The Settlement Channel is a featured network of Sequence Media Group

Posted on December 12, 2017 .

New Structured Settlement Annuity Provider, Independent Life

2011-01-10-TheSettlementChannel-Header-Logo-V2.png

Today a new Structured Settlement Annuity Provider was announced and is entering the market for underwriting structured settlement annuities. Independent Life is announcing at the Fall NSSTA meeting and beginning the roll out and pre-launch phase ahead of their commencement of business. Per the press release provided to The Settlement Channel:

"After four years of designing and creating a new annuity provider with valuable input from industry leaders, Independent Life is weeks away from entering the structured settlement market. We will make a formal announcement at the NSSTA Fall Meeting in San Antonio where industry experts will have an opportunity to meet and greet the executive team."

The main features of this new company are:

  • Annuities only for the structured settlement market
  • Comprehensive medical underwriting for qualifying cases
  • Competitive upper-tier pricing
  • Ongoing financial support for broker and planner initiatives that promote the growth of the settlement industry for the benefit of all stakeholders
  • An executive team with over 100 years of previous structured settlement experience. 
  • Domiciled in a major state with excellent regulatory reputation for oversight. 

It is expected that over the next month more details on the new company and it's approach will become known. This is the first new life market to enter the structured settlement market since Mutual of Omaha several years ago and represents the first special purpose life market specifically designed to underwrite structured settlement annuities. 

It will be interesting to see what supporting business lines will be included in this venture as it expands, such as structured legal fees, non-qualified immediate annuities or possibly taxable damage annuity options as well. Either way it's good to see a new entrant into a stale market and hopefully this portends further interest in the market by life companies and investors in the coming years. Members of the executive team include long time industry experts Dan Durbin as VP of Marketing and Sales and Patrick Hindert, VP of Business Development. 

Posted on October 14, 2017 and filed under Settlement Expert.