Frank C. Kilcoyne, CSSC

The Clarks

Let me introduce you to the “Clarks.” These nice people came to meet me in the usual way: close on the heels of catastrophe.

Mrs. Clark had suffered a debilitating injury through no fault of her own and was in position to receive a considerable settlement. Her husband was a successful businessman and they were fortunate enough to be a family of means. Their children were ages 12 and 19.

As with many people in their situation, the Clarks had received no shortage of advice on what they should do with their money - most of it well-intended but also not very well informed. Fortunately, the Clark’s attorney understands the unique situation seriously injured people find themselves in and he knew that specialized planning was called for.

My role in these circumstances is to help the claimants understand what planning options are available to them before final terms are set. In order to do this right, I have to ask a lot of questions: how would they be paying for Mrs. Clark’s future medical care and were there any programs or policies that we needed to consider? The answers to these questions are imperative in designing a plan for future security.

I explained how the funds allocated to her structure would be paid monthly, with payments either beginning immediately or at some date in the future. The payments would be guaranteed in the amounts and dates specified and would be completely exempt from income taxation. Mrs. Clark liked the idea of a dependable stream of payments to help pay for her care, but she was concerned about the possibility of an unexpected and large expense. How would she deal with such things under this kind of plan?

I explained that we don’t allocate all funds to the future income; a large portion of the settlement proceeds would be allocated to an upfront cash payment. These funds could be held in a trust, if need be, or invested as recommended by her financial advisor. With very few exceptions, such accounts are subject to taxation and incur annual management and custodial fees, but that’s just the way they work and most people need such an arrangement to balance out their situation.

With Mrs. Clark’s questions answered, we moved on to Mr. Clark and the children. As I said earlier, Mr. Clark is a successful business man but he now wishes to work less and spend more time with his wife. I showed him how we could replace his current lost income with the tax-free benefits of a structure and how a well-designed plan would provide a guaranteed stream of income for his retirement.

Mr. Clark also asked: “What happens if I find myself in an emergency and I need money?” What he was driving at was would he have to call the loud guy in the Viking hat on late-night TV or someone of that ilk?

Thankfully, the answer to that question is finally “no.” I reviewed with him how the value of his structure can be accessed in an emergency by simply talking to a bank and submitting an application for a loan. Rather than permanently “selling” their valuable future benefits, people with a structure can borrow against the value of those payments, just as they might borrow against the equity in their home. But now they can now deal with a federally regulated financial institution which charges regular interest rates, rather than dealing with an unregulated factoring company whose pricing policy is: “whatever we can get away with.” His loan repayments would be automatically deducted from his structure payments for the duration of the loan, and then click back up to their originally-scheduled amount once it is paid off.

Discussion then moved to their children. Here we discussed the merits of an education fund for the younger child and some immediate cash for the older one who was already in college. We then drew up a plan which provided periodic lump sums at certain milestones of their lives under the theme of giving them support starting out in life after college: down payment for a house and funds to start a family of their own, if that was their desire.

In short, the Clarks and I designed a settlement plan which considered all the financial needs they could foresee. Then Mr. Clark asked the most difficult question of all: what if the worst were to happen and a family member perished? Not a comfortable subject, but a valid and important one. I explained that the settlement annuity could either continue as scheduled, paid to a named secondary beneficiary, or it could be reduced to present value and paid in a single lump sum so long as this preference was articulated in the language of the Settlement Agreement and Release.

The Clarks thanked me for my time and took all this information home for a few days of thought and consideration. Then they called back to tell me they had decided to structure a portion of their settlement as we had discussed, keeping a reasonable amount of the settlement in cash for unforeseen events. With that decision made, we began working on the settlement documents and worked the case through to a smooth closing.

I genuinely enjoyed meeting the Clarks. They are warm and pleasant people who asked penetrating and relevant questions. The ultimate payoff for their diligent work was that they were able to convert the catastrophe which brought us together into the most positive outcome possible.

Do you have a case involving plaintiffs with big decisions to make like the Clarks? Would you like some help in showing them what options and opportunities are available? Contact Frank C. Kilcoyne, CSSC, via e mail frank.kilcoyne@jmwsettlements.com or 800-544-5533. I am here to help.