Factoring Beginning in the late 1980s, a new wrinkle emerged in structured settlements. Entities known as factoring companies targeted individuals who had structured settlements, buying the future structured settlement payment rights for a discounted lump sum, usually a fraction of the overall settlement figure.
Most plaintiff attorneys are aware that their fees can be structured in personal injury cases. Less known is that structured fees, using a life insurance annuity, can also be created in non-injury (non-qualifying) cases.
Structured settlement broker services are client driven. Brokers should be available whenever attorneys or their clients need them, even if it is after hours and on weekends. There is no cost to either side--plaintiff or defense. This works to the advantage of all parties. Attorneys should use brokers to the fullest and expect them to work as hard on a case settlement as they do.
Clients choosing cash settlements assume the risks associated with their investments during both stable and volatile economic times. Clients requiring lifetime care and support usually do not have the luxury of being able to weather market ups and downs and fluctuating incomes, especially when unforeseen medical emergencies are part of life.
Structuring attorney fees is increasingly becoming part of a law firm or sole practitioner’s financial planning strategy. Not every fee is eligible and certain initial steps must be taken so the fee qualifies for its preferred tax status. Patrick Farber, a structured settlements broker at Ringler Associates in Southern California, talked with Mark Simurda, a CPA and tax partner with Lesley, Thomas, Schwarz & Postma, Inc., in Newport Beach about structuring settlement fees.
After passage by the California State Assembly and Senate, California Gov. Arnold Schwarzenegger on October 11 signed into law Senate Bill 510, which gives greater judicial oversight to prevent predatory practices involving structured settlement annuity buyouts. The new law is much needed and will help stop companies from preying on a very vulnerable segment of the population, says Patrick Farber, a structured settlement broker with Ringler Associates.
Instead of receiving lump sum payments for defendants after a usually life-altering injury, injured parties, under legal and financial counsel, often opt for structured settlements--where payments are spread over time through the purchase of insurance annuities. These annuities are designed to provide long-term financial security and stability to the injured or disabled party and their families. When payments are set up within a structured settlement, payments are tax-free for the life of the annuity. In addition, the settlement is designed so that the injured party or "well meaning" friends and relatives are not tempted to spend the settlement in a reckless manner. Studies show that up to 90 percent of lump sum payments are spent within five years or receipt.
When most people hear "structured settlement," they assume the dollar amount of the injury settlement is for hundreds of thousands of dollars or more. Surprisingly, that's not always true. Over the past 20 years, more than 50 percent of the structured settlements facilitated by Ringler Associates, the world's oldest and largest settlement annuity firm, were less than $50,000. Another approximately 17 percent were between $50,000 and $100,000. These figures are typical in most annuity firms.
Most attorneys are familiar with creating structured settlements for their fees whenever their personal injury clients agree to their own structured settlement. Many attorneys, however, are unaware that these same fee structures can be arranged on a stand-alone basis--even when the client chooses to accept a lump sum payment or in certain non-injury, contingency fee cases.
With all the negative news surrounding AIG, many attorneys may be wondering whether the structured settlement insurance annuities they arranged for an injured party or for themselves (to pay attorney fees) may be in fiscal danger. Fortunately, unlike other financial entities, insurance companies must adhere to some of the most rigorous regulations found in any industry.
