Special Needs Alliance Spring 2012 Meeting Addressing Personal Injury Cases for Minor Plaintiffs – Creating a Team Approach to Planning

Define The Players – An Acronym Reference Guide CTFA – Certified Trust and Financial Advisor – A designation typically held by someone at the trust company. CSSC – Certified Structured Settlement Consultant – A designation in the structured settlement industry created by NSSTA (National Structured Settlement Trade Association) CFP – A certification for financial advisors conferred through the Certified Financial Planners Board of Standards, Inc. Structure Broker – A term used to describe insurance licensed brokers that sell structured settlements. They can work for the Plaintiff (PSS) or Defendant (DSS). SSP – Society of Settlement Planners – This association has developed Settlement Planners who specialize in helping claimants create financial plans for their legal recoveries.

What is the difference between structured settlement experts that are involved in a case? Defense Structured Settlement Broker (DSS): The insurance company typically hires an expert to represent their interest and ultimately help settle the claim with the use of a structured settlement. Often times, the defendant tries to place the structured settlement with a sister insurance company. For example, AIG is the defendant and places the structure with American General. Plaintiff Structured Settlement Broker (PSS): The trial attorney will typically consult his own expert prior to the first mediation. He has no relation to the defendant or insurance company. Settlement Planners (SP): The trial attorney may work with a settlement planner. A planner is a fully licensed insurance and securities advisor. They work exclusively in the settlement industry and are often Attorneys and CFPs.

What Happens Before the Case Gets to the Special Needs Attorney? A typical medical malpractice case takes from 3 to 7 years to settle through an agreement or verdict. A structure broker is usually involved from the beginning of the real negotiation process for the defendant. A structure broker for the plaintiff is usually brought into the case before the first mediation conference. The structure broker for the plaintiff has worked with the family for 2 to 3 years to help them develop a plan that will allow them to settle the case in the event that an adequate offer is received. The special needs attorney is usually brought in after the settlement, even though this is not the best of all worlds.

Case Facts John (Age 4 ) receives a net settlement from a medical malpractice law suit. John was born with Cerebral Palsy. John is receiving SSI, Medicaid, SNAP and lives in federally assisted housing. John lives with his mother Joan. His father, Bill, abandoned the family after his birth. John and Joan live in a poor neighborhood in Minneapolis. Joan has incurred some debt ($20,000) during the course of litigation. Approximately half the debt, was for the benefit of her son John. Joan receives SNAP and Federal Housing Assistance.

Family Goals Joan would like to move into a better house that is more suitable to John’s needs. Joan would like to pay off the debt. Joan would like a handicap accessible van. Joan would like to preserve the public benefits they currently receive. Joan would like to improve the quality of care that John receives to insure that he reaches his maximum potential. Joan would like to protect the funds from Bill. Joan would like to create a plan that protects John for the remainder of his life.

How does the type of broker affect John How does the type of broker affect John? Defense Structured Settlement (DSS) Example The DSS is working for the insurance company and not the plaintiff. They only earn money if a structured settlement is used. In the case study, let’s assume the insurance company is an Allstate subsidiary. The DSS would try to steer the premium to Allstate. DSS would also try to place as much money in the structure as possible to maximize their income. The following slide is an example of what might come across your desk when the attorney calls you to set up the SNT for John.

What is wrong with this plan? This plan is a common nightmare for Special Needs Attorneys and Trust Administrators. The plan does not have enough funds allocated for the house, van, debt and emergency funds. The plan maximizes the monthly income without taking into consideration the best interest of the family. A very large premium was placed with one company. There appears to be no age rating to adjust the life expectancy of John. The real problem with the plan is we may be stuck with it! Often times, the plan is part of the mediation agreement which ultimately becomes the driving force behind the settlement. Allstate might have agreed to settle for the higher amount based on the knowledge that a structure was being placed with it’s life company.

How does the type of broker affect John How does the type of broker affect John? Plaintiff Structured Settlement Broker (PSS) Example The PSS is brought into the case and works for the victim. They are independent of all insurance companies. The PSS will typically use age ratings and open market competition to generate a higher return for the plaintiff. The PSS can also be tempted to place as much money into a traditional structured settlement as possible. The following slide is an example of what might come across your desk when the attorney calls you to set up the SNT for John. THERE IS NO ADDITIONAL COST IF TWO BROKERS ARE ON A CASE. THE PLAINTIFF SHOULD ALWAYS HAVE SEPARATE REPRESENTATION.

What is wrong with this plan? The Good This plan is better for the family. It allocates funds for the house, debt and establishes a cash reserve. The underlying structured settlement has a higher rate of return. The structured settlement includes an annual cost of living adjustment of 3%. It places $120,000 less into the structured settlement. The Bad The underlying structure is with one company. The short term payments inside the structure do not provide good rates of return.

How does the type of broker affect John How does the type of broker affect John? Settlement Planner (SP) Example The SP is currently the best alternative to the plaintiff in this space. They have done a comprehensive financial plan that includes public benefit analysis. They have reviewed all possible scenarios in the marketplace to create the most guarantees and highest possible rates of returns. The following slides are an example of what might come across your desk when the attorney calls you to set up the SNT for John.

What is wrong with this plan? Nothing because I created it!

Why use a structured settlement? This question is posed to me in a lot of different interactions with Special Needs and Elder Law Attorneys. There are a couple of areas where a structure is the best fit for clients. It is the only way for me to guarantee tax free lifetime income to clients. It protects a client from themselves. It is a creditor proof investment. The only attachment to a structure in the history of the industry is child support.

How would I interact with you as the Special Needs Attorney? In this case example, I would contact Laurie after the initial mediation. In that mediation, I would identify the need for a Special Needs Attorney. I would brief her on the case details to see if this is something she would like to handle. What are some of the questions she would ask before she could take the case/begin drafting?

Initial questions by SNT lawyer regarding John’s case? In what state is the litigation? In what court will the settlement be approved? If the Court is not in Minnesota, do we need approval from a Minnesota Court a because John is a minor? Who is the personal injury attorney? Has a Trustee been identified by the family? Has a structure been determined and accepted by the family already? What are you (Anthony) looking for from the SNA attorney?

Who is my client? John is a Minor. The PI Attorney? Joan? The Trustee? Can Joan act alone? Does Bill have parental rights? Does he have to be notified in any settlement proceeding? In Minnesota, Minnesota law and the Rules of Civil Procedure and District Court Rules provide that a parent may maintain an action for the injury of a minor son or daughter the rules do not require notice to the other parent. Will I be representing Joan to establish the trust? If not, what is my responsibility to the beneficiary and the beneficiary’s family? Has anyone talked to the beneficiary/family about a SNT? Determine Fees and Representation Agreement

I would like to see the award letter from What Additional Information does Laurie need to prepare the special needs trust? I would like to see the award letter from the Social Security Administration the Medicaid agency The SNAP agency The public housing lease – is John’s SSI is part of the rent calculation for the public housing authority. See the Life Care Plan developed for litigation and any other care plans. John’s birth certificate.

Will the SNT help achieve the family’s goals? Can Joan get part of the settlement in her own right to pay off the bills? How will John’s settlement affect his mom’s benefits? House issues: Should the SNT own the home? A trust just for the house? Payback issues must be explored. Should the trust own the van? Does mom have a driver’s license? Is there any specific language needed for a child with CP?

SNT DRAFTING ISSUES Should court establish trust or should mom? Will the court require a bond or court supervision – should there be supervision and a bond? Should trust include language that Bill may never be a trustee, that Bill may never be paid as a caregiver, that Bill cannot be a contingent beneficiary? Should we have a local trustee? What kind of issues will this family be facing?

Things to Consider with a Corporate Trustee First Capital Surety & Trust Company SNT Fees and Guidelines Account Minimum - $50,000.00 plus first 2 years cash expenditures Annual Trustee Fee - 0.95% on first $3,000,000 0.75% on next $2,000,000 0.55% over $5,000,000 Minimum Annual Trustee Fee $950 Real Estate – No more than 35% of the trust corpus The amount structured should take into consideration the value of the home purchased. We recommend that the Settlement Planner work with a Special Needs Trust Attorney that is familiar with local regulations for the state that the SNT resides.

What happens if the facts change slightly? What if………. Laurie Hanson is retained first and receives the DSS structured settlement? Bill was killed in an auto accident and John’s injuries (not Cerebral Palsy) were sustained in that wreck as well? Joan was receiving the same public benefits as John? Bill and Joan were still married. All three were hurt in a motor vehicle accident and have claims? The net settlement proceeds were $250,000? Or $50,000?