Litigation

Structured Settlement Sales Jump 25% Say SFA Statistics

By John Darer

Speaking of structured settlements, The National Law Journal's Amanda Bronstad reports "in a sign of the economic times, value of structured settlements jumps 25%". Citing Structured Financial Associates stats, Bronstad refers to the total value of structured settlements and a "total dollar value" of nearly $1.8 billion.

The use of the words "value" and "total dollar value" in this context is highly misleading. Is value mean to refer to the cost, or the present value, or the total amount of the future benefits.  We know that something has increased but what? These days people are free and loose with financial terms and must be more careful as each of the alternatives could mean something different. As a reminder...National Financial Literacy Month begins next week.

If I had to take a stab at it I'd say the figures cited in the article refer to structured annuity premium. Structured annuity premium DOES NOT represent the value to the consumer. The amount of premium however DOES tell an industry whether or not it is a growing or not.

Structured settlements come with a tax benefit for plaintiffs. In a structured settlement a qualified funding asset, such as an annuity or United States Treasury obligation, to provide a plaintiff with periodic payments that are tax free, he said. Although a cash settlement also is tax free, the earnings on that income, once invested, are taxed There is a value assigned to that tax benefit. The spendthrift protection is also assigned a value.

Randy Dyer, former Executive Director of the NSSTA told the National Law Journal "The largest growth always occurs in a time of economic turmoil and  sees "a real growth in the use of structures in 2009."

A bit skeptical about the data in "Day on Torts", attorney John A. Day Brentwood, Tennessee's Day & Blair, P.C. " would expect that structures are usually up some percentage in every 4th quarter because there tends to be more settlements in the 4th quarter than during other times during the year".  Yet he concedes that he " would not be surprised to see plaintiffs tend to gravitate to structured settlements during these times.   Most plaintiffs do not have the ability or time to manage investments, and the events of the last 6 months prove  that professional money managers are not immune from losses in the market".

Full post as published by Structured Settlements 4Real on March 27, 2009 (boomark / email).