There’s been a lack of new life insurers entering the industry due to it being run by large incumbents, but those that are popping up are attempting to thrive in niche markets, according to a Life Annuity Specialist report. The article says only four life insurers launched last year - Employers Protective, Independent Life, Lumico Life Insurance Company of New York and Imperial Insurance.
A senior research analyst at S&P Global told Life Annuity Specialist that, “startup life insurance companies without an affiliation with an existing life insurance group or distribution partner haven’t had a lot of staying power.” For example, one of the insurers that started last year, Independent Life, is targeting the structured settlement market. Structured settlement broker, Mark Wahlstrom, said having an insurer that can write structured settlements qualifying for income tax-free treatment and for monies subject to taxation, non-qualified structures is “an important step forward for the industry...it is only a matter of time before other life insurers recognize this ‘niche market’ is potentially worth three to four times its current premium written and that we will see other major players enter with innovative products.”
There are important reasons for personal injury attorneys to work closely with special needs attorneys. Most personal injury attorneys want to ensure that the money their clients receive lasts well into the future, especially if serious injuries will affect earning potential. Courts in Texas and Connecticut have held attorneys and fiduciaries accountable for failing to consider or plan for means-tested benefits such as Supplemental Social Security (SSI) and Medicaid.
Special needs attorneys can help by assessing what benefits a client is currently receiving, what options may be available to them, and whether any planning may be needed in order to preserve eligibility. With Medicaid expansion, the assessment is even more complex, because eligibility is based on income rather than assets. If a client is on Social Security Disability and/or Medicare, additional planning may be needed to protect future Medicare eligibility. If a client has not yet applied for benefits or needs help understanding their options, special needs attorneys can often help navigate that process.
Special needs attorneys also assist with surrogate decision-making. Often a client doesn’t have the appropriate documents in place to grant such authority. If the client has capacity, we can help develop strong powers of attorney and advance directives. This often aids the personal injury attorney by ensuring that there’s someone available to assist with litigation decisions. Not all documents are created equal. Ensuring that there is adequate authority, for instance, to set up and fund trusts and to manage spenddown can be very important, particularly if the client is medically volatile. If the client is incapacitated, we can help file for a guardianship or conservatorship.
Special needs attorneys also assist with asset protection. Even if the client is not receiving means-tested benefits, we can help develop trusts—mainly a settlement protection or asset protection trust—to protect the assets. In addition to protecting assets from creditors, which varies by state, the client is protected from “sudden wealth” or “windfall” syndrome. The funds are professionally managed and protected so that the funds are not rapidly depleted.
When a client is receiving means-tested benefits, a special needs attorney needs to look at a variety of factors to determine if they should develop a spenddown plan, fund a special needs trust or establish an ABLE account. They also look at funding tools such as structured settlement annuities that take into account the client’s financial needs and requirement for liquidity.
If a client is receiving Social Security Disability benefits or Medicare, special needs attorneys can also help create a Medicare set-aside, which we anticipate will become more important in the future as the Centers for Medicare and Medicaid Services continues to focus on third party liability Medicare set-asides.
Lastly, if the defense is ready to settle but there remain issues for the plaintiff(s) to resolve, special needs attorneys can help set up a qualified settlement fund. Such a tool is often used in mass tort cases, and essentially allows the defendant to settle claims against them, with the qualified settlement fund assuming the defendant’s liability. On the plaintiff’s side, the qualified settlement fund allows for a settlement that avoids constructive receipt by the plaintiff. Because there is no constructive receipt, you can still utilize structures and there’s no effect on benefits. This gives the client time to assess options without a backend rush. They have time to resolve lien issues and Medicare set-asides. It allows for apportionment when there’s more than one plaintiff, and the personal injury attorney can get paid.
A word of caution concerning qualified settlement funds, though, is that while many structure companies have determined that a qualified settlement fund can only be used when there are multiple claimants, the law actually applies to one or more claimants. Special needs attorneys can assess whether or not this will be an issue.
Special needs attorneys should be brought into personal injury cases as early as possible. Many issues can be addressed in the early stages of a case. Also, when options and issues are brought to light before a settlement is reached, the client is prepared. It is sometimes hard for a client to accept a lack of control or the existence of a large lien that must be repaid if the money is already on the table.