Structured Settlements. February 10, 2014 Noah S. A. Schwartz, CSSC J. Douglas Merritt, CSSC Richard Montarbo (Legal) Jack Blyskal (Moderator)

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1 Structured Settlements Application in Liability and Workers Compensation February 10, 2014 Noah S. A. Schwartz, CSSC J. Douglas Merritt, CSSC Richard Montarbo (Legal) Jack Blyskal (Moderator)

2 Today Review and Concepts (Power Point) Open Discussion On Legal Issues, Work flow Implementation and Overcoming Objections

3 Agenda What is a structured settlement? When to use a structured settlement Funding a structured settlement Annuity Overview Putting theory into practice Creative claimant (applicant) solutions Required documentation A win-win solution How to work with your broker. Why become involved with structured settlements?

Overview Putting theory into practice Creative claimant (applicant) solutions

4 What is a Structured Settlement? Payment of benefits over time Designed to meet claimant needs Provides claimants with a secure, predictable tax-free income IRC 104(a)(2) provides for all future payments, even for the life of the claimant, to be received completely income tax-free Structured settlement payments are highly versatile and flexible

a secure, predictable tax-free income IRC 104(a)(2) provides for all future payments,

5 When to Use a Structured Settlement Severe injuries with shortened life expectancy Minor or mentally incompetent person Wrongful death especially if spouse or children need income Funding a Medicare Set-Aside arrangement. Claimants with limited investment or financial skills Plaintiff (applicant) demand and offer are far apart

spouse or children need income Funding a Medicare Set-Aside arrangement.

6 Small Cases 17% 8% 4% 2% M+ 52% 17%

7 Basic Components Periodic income Current and future expenses Long-term income replacement Lump sum payments at a future date Home purchase College education Retirement Future medical needs

8 Annuity Provisions Payment frequency: Weekly, Monthly, Quarterly, Annually etc. Inflation adjustment Cost of Living Adjustment (COLA) Forms Life only Life with period certain Period certain Lump sum Joint & survivor Cash or Installment Refunds.

9 Medical Rated Ages Used when severe injury shortens life expectancy Reduces benefit costs for targeted benefit(s) Increases benefit payment for specific cost

10 Factors Affecting the Cost of Future Care Morbidity factors Age of the claimant The future treatment plan of the treating physician Pricing of treatment plans & prescription drugs Structured Settlements

11 Putting Theory into Practice Identify case as a structure candidate Allow for up-front cash Gather claimant information Contact a local broker to assist you

12 Creative Claimant Solutions College fund for a minor, payable at ages 18, 19, 20 and 21. Future medical consideration (for life) and funding of Medicare Set-Asides to protect all parties. Monthly mortgage payments Replace lost current and future income Supplemental retirement plan / Deferred Attorney Fees. Reversionary Trust

Future medical consideration (for life) and funding of Medicare Set-Asides to

16 Medicare Set Aside

17 Why Consider Medicare s Interest Ramifications for non-compliance with The Medicare Secondary Payer Statute can be severe and may include the following: 1. A denial of an individual s future medical care 2. CMS may designate its own allocation of settlement proceeds if an original allocation is unreasonable or non-existent at the time of the settlement 3. CMS may sue the claimant/plaintiff, counsel and/or insurance carriers for payment 4. CMS may be awarded double damages 5. A claimant/plaintiff may file a malpractice suit against his or her counsel after the case has been settled.

CMS may designate its own allocation of settlement proceeds if an original allocation is unreasonable or non-existent at the time of the

18 A Win-Win Solution Claims resolution tool beneficial to all Recognized and encouraged by IRS since mid-1970 s Enhances best case outcomes Preserves assets for claimant

19 Insurer Advantages Reduces expense of trial and appeal Bridges gap between offer and demand Eliminates potential bad faith failure Offers more negotiating points

20 Claimant Advantages Tailored income stream to meet specific financial needs Guaranteed money for claimant and family Investment advantages Competitive after-tax return Payments are income-tax free Can integrate the structured settlement program with asset management solutions and/or trust

Competitive after-tax return Payments are income-tax free Can integrate

21 Plaintiff Attorney Advantages Avoids hazards of litigation, expenses of discovery and trial Bridges gap between client demand and settlement value Eliminates liability for investment management Fulfills professional duty to obtain best settlement Provides opportunity to structure fees

22 Defense Attorney Advantages Settles case without risk of adverse trial results Avoids liability for failure to pursue reasonable settlement Can break a negotiation impasse Provides best settlement result for defense client

23 Court Advantages Reduces docket backlog Eliminates obligation to oversee fund management Eases burden in friendly judgments Overall benefits to society

24 How your Broker Can Help Partner with local adjuster Early identification of structured settlement opportunities Manage 100% of annuity quoting Provide on-going training Develop settlement asset allocation with adjuster Assist with plaintiff lawyer discussions Support business development to penetrate litigation marketplace Coordinates structured settlement payments with Special Needs Trusts (SNT)

25 How Your Broker Can Help Train in-house counsel and retained defense counsel Discuss/develop settlement strategy Provide expertise at pre-trials, mediations and trials Participate in settlement conferences Prepare settlement documents Deal with opposing broker(s) Answer technical questions related to the structure Seminars with adjusters for trade and legal associations

26 Required Documentation Premium check Annuity quote Request for direction of payment Settlement Agreement and Release & Qualified Assignment Miscellaneous court documents Friendly papers (for minors) Guardianship papers Trust documents

27 Required Documentation

28 Sample MSA/Annuity Type Ex.

29 EXAMPLE MSA Funding Proposal Claimant: Chipper Coleman DOB: 01/01/1965 (48) GUARANTEED LIFETIME BENEFIT YIELD YIELD COST MSA Seed (Cash) $38, $38, $38, MSA Allocation Payments Life Only $0.00 $506, $307, $16, per year for life starting on 04/18/2014 Totals $545, $345,895.75

30 EXAMPLE MSA & Indemnity Funding Proposal Claimant: Chipper Coleman DOB: 01/01/1965 (48) GUARANTEED LIFETIME BENEFIT YIELD YIELD COST MSA Seed (Cash) $38, $38, $38, MSA Allocation $0.00 $506, $307, To begin one year from funding date $16, per year for life Indemnity $122, $122, $112, $ per month guaranteed for 12 years starting on 05/18/13, ending on 04/18/25 Pension $0.00 $123, $56, $540 per month for life starting on 05/18/25 Totals $161, $791, $514,833.50

31 EXAMPLE MSA & Indemnity Funding Proposal (Using Rated Age 57) Claimant: Chipper Coleman DOB: 01/01/1965 (48) GUARANTEED LIFETIME BENEFIT YIELD YIELD COST MSA Seed (Cash) $38, $38, $38, MSA Allocation $0.00 $506, $259, To begin one year from funding date $16, per year for life Indemnity $122, $122, $112, $ per month guaranteed for 12 years starting on 05/18/13, ending on 04/18/25 Pension $0.00 $123, $39, $540 per month for life starting on 05/18/25 Totals $161, $791, $450,416.73

32 EXAMPLE MSA Funding Options for Negotiating Claimant: Chipper Coleman DOB: 01/01/1965 (47) GUARANTEED LIFETIME BENEFIT YIELD YIELD COST MSA Seed $38, $38, $38, Plus MSA Allocation Payments (Options to Negotiate) Temporary Life $0.00 $506, $286, $16, per year guaranteed 31 years only if living starting on 04/18/2014 (ends after 31 years) -OR- Life Only $0.00 $506, $307, $16, per year for life starting on 04/18/2014 -OR- Period Certain $506, $506, $321, $16, per year guaranteed 31 years starting on 04/18/2014 -OR- Life with Guarantee $506, $506, $341, $16, per year for life guaranteed 31 years starting on 04/18/2014

STRUCTURED SETTLEMENTS. Presented by Kerri Morin Atlas Settlement Group, Inc.

STRUCTURED SETTLEMENTS. Presented by Kerri Morin Atlas Settlement Group, Inc. STRUCTURED SETTLEMENTS Presented by Kerri Morin Atlas Settlement Group, Inc. What is a Structured Settlement? A stream of tax-free, secure periodic payments designed to meet the claimant s financial and