1. Personal Injury Awards: Structured Settlement and/or Trust?

2. What is A Structured Settlement? According to Structured Settlements Group Inc.: “ In a Structured Settlement in Canada the defendant or Casualty Insurance Company purchases an annuity from a major Canadian Life Insurance Company and the payments from that annuity are irrevocably directed to the injured party or claimant……… The defendant Casualty Insurer must purchase and own an annuity that is non- assignable, non-commutable and non-transferable. The Casualty Insurer must irrevocably direct that the annuity payments be made out to the claimant and sent directly to them. The defendant or Casualty Insurer and the Plaintiff must both agree to the use of a structured settlement. If either party disagrees a structured settlement cannot be used……” Periodic payments in respect of personal injury awards governed by Judicature Act in N.S. (see sections 35A to 35H) The requirements to be considered tax free- are reviewed in IT-365R2, Section 5.

3. What is a Trust ? A trust is a relationship which arises whenever a person (the trustee) is compelled in equity to hold property (real or personal) for the benefit of some persons (beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries………. In order to constitute a trust under general principles, the “trust” must possess three essential attributes: certainty of intention, certainty of subject matter, and certainty of objects

4. Structured Settlement vs. Trust Structured Settlement PAYMENT METHOD –Set periodic payments negotiated at set up INCOME TAX IMPLICATIONS –Tax free award –Tax free payments to recipient Trust PAYMENT METHOD –Discretionary payments INCOME TAX IMPLICATIONS –Tax free award –Tax free payments to age 21 –After age 21, some ability to structure portfolio to minimize tax impact –Gross up of award to cover future taxes can be negotiated as part of award

5. Structured Settlement vs. Trust cont. Structured Settlement FLEXIBILITY (limited ?) –Determine form at outset (e.g. set lump sum or “balloon” payments in advance, set impairment rates, guarantee periods etc. ) –Once form in place, cannot be changed or cashed in Trust FLEXIBILITY (unlimited ?) –Determine trust terms (e.g. establish flexible income and capital payment terms) –Respond to change in circumstances at any time –Trust administrative terms may even be amended if in best interests of beneficiary

6. Structured Settlement vs. Trust cont. Structured Settlement PROTECTION –Capital No access but lump sum/balloon payments may be part of set up –Inflation Indexation if negotiated at set up (extra cost) –Estate Outstanding payments to estate during guaranteed period if negotiated at set up (extra cost) Trust PROTECTION –Capital and/or Income Controlled access Benefit from trust and maintain government benefits at same time (Henson trust terms) –Inflation Indexation partially addressed by ability to change asset mix –Estate Residual interest in trust to estate (by Will or intestacy) Planning opportunities

7. Structured Settlement vs. Trust cont. Structured Settlement SECURITY –Fully guaranteed payment FEES –Commissioned brokerage –Reflected in reduced payments Trust SECURITY –Capital encroachment –Professional investment management –Corporate trustee (e.g. expertise, impartiality, continuity) FEES –Visible and negotiable –Corporate trustee fees usually include professional investment management –If a corporate trustee is appointed there is no bonding requirement –Include costs of future administration as part of damage award

8. Corporate trustees TRUST SERVICES –High service standards –Permanent & provide continuity –Deep pockets –Most have local operations and the ability to represent themselves “face to face” –Trained trust specialists Experienced Objective Empathetic –Specialized processes and systems Group decision making through discretionary committees with access to other specialists Detailed statements and reporting PART OF LARGE FINANCIAL INSTITUIONS -- Able to refer to internal group partners/specialists to address other service requirements/needs

9. Scotiatrust as Trustee – A Certain Trust Infant resident of B.C. injured at birth Medical malpractice claim settled –Structured settlement annuity purchased, and –$900,000 settlement proceeds balance Court ordered balance be settled to discretionary trust –Trust created to enhance and improve Plaintiff’s life Scotiatrust and Plaintiff’s parents Co-Trustees ST fees less than PGT fees –$36,000 savings over life of Trust Trust amended to address PGT concerns –Consistent with Estate Administration Act

10. Scotiatrust as Trustee – A Certain Trust cont. Trust tax free until Plaintiff 21 years old Trust continues after Plaintiff reaches age of majority –Presumed mentally incompetent –If deemed competent, limited to power to terminate trust Capital encroachments

11. Scotiatrust as Trustee – Another Certain Trust 29 year old injured in MVA Disability benefits pre-MVA Settlement Agreement –ICBC party to Agreement –Trust Schedule to Agreement Scotiatrust and Plaintiff’s father Co-Trustees Co-Trustees to maximize benefits from other sources Income taxable to Plaintiff or Trust Trust irrevocable Power to amend Trust Plaintiff has power of appointment on death

12. Scotiatrust as Committee – 26 year old Saskatchewan resident misdiagnosed with terminal brain cancer –Invasive treatment Severe neuro-cognitive difficulties Court awarded $2,368,278 in damages – Lump Sum Trial judge indicated trustee required to handle Plaintiff’s affairs –Committee or PGT Scotiatrust appointed Committee of Estate –ST not required to post bond ST consults with Patient’s sister and case workers –ensure proper care and quality of life maintained

13. And another – ST as Guardian 2 year old child fell from a 5 th floor apartment window in Ontario in 1997 sustaining significant and permanent injuries including a frontal lobe injury so severe that he will never be gainfully employed and will require constant 24 hour supervision and care One of the largest awards in Canada (if not the largest) with a total award of close to $17 million dollars Approx. $11,000,000 was used to fund a Structured Settlement to cover future care costs while a capital fund of approx. $3,000,000 was established to cover contingencies. This fund included an amount calculated to cover future guardianship costs ST was named as the corporate guardian after being brought in by plaintiff’s counsel early in the proceedings to assist in quantifying costs associated with the guardianship itself including fees, court passing costs (incl. both the Children’s Lawyer and the Public Guardian & Trustee) etc.

14. DISCUSSION ?