Litigation

The Michigan Lawyers Weekly article referred to in the immediately prior post is full of eyebrow raising holes.

Here is how the author of that article, a plaintiff only structured settlement consultant, falls short of the mark when attempting to explain the structured settlement process:

"The basic idea behind this tool (structured settlement) is that, in a lawsuit, it is determined that the defendant has the obligation to pay the plaintiff. The concept of obligation is critical. The defendant funds that obligation ? or any part of it ? via the structured settlement annuity.

"When the structured settlement annuity is purchased on behalf of the plaintiff, it must be purchased by the defendant. The defendant then assigns the obligation to the assignment company, which in turn purchases the structured settlement annuity from the life insurance company"

  Comments

1.  Is a defendant obligated to pay anything until It is decided upon by a jury, a judge, or such obligation is established in a settlement agreement that memorializes the compromise between plaintiff and defendant?  How about where there is a defense verdict? Ironically one of the industry's major structured annuity issuers has the tagline  { for the "if" in life].

2. Is a non qualified structured settlement always funded with a structured settlement annuity? How about a funding agreement?

3.  Does the defendant fund the structured settlement annuity or does the assignment company? The reason I ask because if read literally, the author of Michigan Lawyers Weekly article is stating two entirely different things:

A. When the structured settlement annuity is purchased on behalf of the plaintiff, it must be purchased by the defendant.

B. The Defendant assigns the obligation to the assignment company which in turn purchases the structured settlement annuity from the life insurance company

3. Funds ARE NOT "parked" in the structure. As previously stated (and as the author of that article was circling around the rim about) there must be a periodic payment obligation. The structured settlement payment rights created when the structure is created include any growth and interest. With a structured settlement (other than a T Bond structure funded with TIPS, or  a rare variable structured settlement- which are not used in non qualified structured settlements) you know now what you will get then. There is no guess work.

4. The idea behind a non qualified structured settlement is that payments are tax deferred and that such payments  are taxable in the year received. Thus funds "parked" in the annuity  DO NOT grow tax-deferred until they are FULLY paid out!

5. While this author respects the personal choice to work with one class of prospects to the exclusion of an another, he emphasizes that the propensity to use of such label as a "marketing gimmick" by certain structured settlement consultants does not have any bearing on the level of financial literacy of any individual making the claim. One should be guided accordingly.