Frank C. Kilcoyne, CSSC

Shakespearean Settlement Planning Advice

“To thine own self be true” is one of the most memorable lines from Shakespeare’s Hamlet. It certainly is an appropriate mantra for anyone involved in a lawsuit because, before the thing is over, his or her resolve will almost surely be tested.

It's also astonishing just how fast that wisdom can spread once word of a settlement gets out. Family and “friends” can become truer to themselves than one might ordinarily believe, bringing all manner of problems to the claimant’s front door.

Shakespeare to the rescue again, because it was in Hamlet also that Lord Polonius declared: “Neither a borrower nor a lender be; For loan oft loses both itself and friend…”

This is an all-too-familiar theme in claim settlements, jury awards, and any situation where a person finds themselves the recipient of “sudden money.” In her book of the same name, Susan Bradley states that people who come into new cash either: keep the money and lose family; or…lose the money and keep family; or…lose both.(1) Clearly, the Bard knew a thing or two about human nature. Acknowledging the risks, there may still be times when we want to lend to family or friends, and when we do, the experts recommend sticking to the following:

1. Set a Fair Interest Rate

This can work in everyone’s favor because the interest rate you charge can still be competitive with the rate your borrower might get from a traditional lender, but is still higher than what you would have earned parking it in a (much safer) bank account.

2. Create an Agreement in Writing

If you think it is “uncomfortable” insisting on a written loan agreement, think about how uncomfortable you will be trying to collect if your borrower falls behind. If you have to, blame it on your spouse, accountant, or someone else who “insists you get it in writing.” You can find sample promissory notes easily enough online or, if the amount is large enough, you can ask an attorney to draft it for you. Spell out the terms, including how much is being borrowed, the interest rate, late payments and when they will be assessed, and how/where payments will be made.

3. Set up a Formal Payment Schedule

Let’s face it: it will be easier for your borrower to make a late payment to you than to his or her other creditors so, if money becomes tight, that is exactly what they will do – pay you last, if at all. At least for clarity’s sake, include in your agreement the details of when payments are past due and what the late fees will be.

4. Be Prepared to Lose the Money

Accept the fact that it is entirely possible your friend or family member will default on the loan. If such a default will create such a rift in your relationship that you cannot forgive or recover from, you might as well refuse the loan, lose the friend now -and keep the money! Remember Polonius’ words...

But what if you actually don’t want to lend the money? In claim settlements there is something else we can do to protect the recovery, something which allows the claimant to honestly and diplomatically sidestep these awkward and risky proposals: craft the settlement into an enduring and secure stream of payments, rather than invite disaster by dropping a huge lump sum in their laps.

“A pizza parlor? Wow that really is something this town needs one more of - and I am sure you are just the right guy to finally teach those Domino’s people how it’s done. I’m honored you thought of me, but I don’t actually have all that settlement money in my bank account. I’m paid over time, so I couldn’t write you such a check even if I wanted to. Have you considered the Small Business Administration? This is exactly what they are set up to do.”

“Buying distressed properties? Man, that really does sound like the thing to be doing. There must be some great investments out there, but I think you need to know that I don’t have that settlement money just sitting in the bank. I receive payments over time. They didn’t give it to me all at once. I couldn’t possibly just stroke you a check even if I wanted to. So sorry, but I’m honored you would think of me as a potential business partner!”

Some might probe further and ask how much money is being paid and when:

“Oh, that. Well you know, they make you sign a Confidentiality Agreement as part of the settlement. I’m not allowed to discuss the details. So sorry I couldn’t be more helpful!”

The security of guaranteed, tax-free income for life? Incredibly valuable. Freedom from aggressive and needy friends and family members? Priceless.

Do you have a case where the claimant’s family is circling? Want to help build a settlement that truly protects the person for whom the recovery was meant? Contact Frank C. Kilcoyne, CSSC at 800.544.5533 or reach me by email at frank.kilcoyne@jmwsettlements.com. I am here to help.


(1) Susan Bradley with Mary Martin, Sudden Money: Managing a Financial Windfall (John Wiley & Sons), 2000