Frank C. Kilcoyne, CSSC

Personal Injury Settlement Done Right


In January I wrote about a young woman who was left a large sum of money by grandparents to cover the expense of college. Unfortunately, she lacked the experience or wisdom to manage it and that story did not end well. Tales of “riches-to-rags” are all too common, unfortunately; Google that phrase and you’ll get 1,490,000 hits. But, rather than tell another sad saga, it’s high time I shared a story of things done right.

As with just about all of the stories told in our line of work, this one begins with a tragedy. “Mr. Sherman” (not his real name) was a 51-year-old male hard at work on a construction site when he was injured through no fault of his own. He required lumbar fusion surgery and placement of a spinal stimulator and morphine pump in his back. Mr. Sherman was permanently and totally disabled and it was agreed all around that he would never work again.

By the time the parties came together to discuss the potential settlement of his case, Mr. Sherman had accumulated a workers compensation lien of $218,199 and past lost wages of $366,165. Assuming a work life to age 65, his future lost earnings were estimated to be $748,261. Lost future Social Security disability benefits and household services totaled $115,511 and $110,380, respectively, creating a total economic loss of: $1,340,317.

Based on his situation, it was evident that income replacement and supplemental retirement income would be needed, along with an allocation for future medical expenses. Based on a review of the supporting documents, we crafted the following initial settlement proposal:

For: W. T. Sherman, Male, Born 9/1/1956; Life Expectancy: Age 82

1. $1,100,000 Cash at Settlement including liens and Attorney Fees

2. Immediate Supplemental Income to Age 66: $3,900.00 per month for 7 years, 2 months certain, increasing at 2.5% compounded annually.

3. Guaranteed Lifetime Income Commending at Age 66: $2,512.59 per month for life, 15 years certain.

4. Future Medical Expense Contingency Fund: $10,000.00 per year for life with 20 years certain, payments to commence one year from date of funding.

This plan produced a guaranteed payout of $2,150,426 and a total payout over Mr. Sherman’s statistical expected life of $2,204,844, at a cost of $2,000,000. Mr. Sherman was under no obligation to take or even consider a structured settlement.  But fortunately for him, he had an experienced attorney who encouraged him to explore all the possibilities available to him at this critical juncture of his life. After review and discussion, the plan was further revised and tailored until it took its final form:

For: W. T. Sherman, Male, Born 9/1/1956; Life Expectancy: Age 82

1. $600,000.00 Cash at Settlement including liens and Attorney Fees

2. Monthly Income of $5,148 per month for life, 20 years certain, payments to commence immediately.

3. For Plaintiff Counsel, Female, Born 11/4/1956; $2,792 per month for life, 20 years certain, payments commence 11/4/2022.

This final plan is actually simpler than the one we originally proposed. Mr. Sherman asked us to just craft a straight monthly payment of $5,148 per month, tax-free, for the rest of his life with the first 20 years guaranteed through to his estate whether he lived or died.

Mr. Sherman liked the security of knowing he was never more than 30 days away from a tax-free check of $5,148 and that he could never outlive the benefit. In this final plan, Mr. Sherman is guaranteed a payout of $2,505,600 and a total payout over his statistical expected life of $2,701,404, all at a total cost of $2,000,000.

You may have noticed a reduction in upfront cash in the final plan. This was the result of Mr. Sherman’s attorney deciding to structure her fees. By allocating a portion of her fee to periodic payments, she reduced her income tax liability in the current year and deferred taxes on the remaining fee, all the while guaranteeing a substantial sum to her retirement plan. As with her client’s desire, this plan guarantees that she will never outlive her tax-deferred benefit of $2,792 per month. If she continues to allocate a portion of fees on future cases to this purpose, she will have a very comfortable retirement indeed.

I started out by saying that I would tell a tale of things done right. Think about it: a 51-year-old construction worker had the intelligence and self-discipline to pass up a huge sum of cash in favor of a merely large cash sum coupled with a guaranteed tax-free lifetime income. He took the disaster of an instant - completely disabling back injury - and converted it into a secure and comfortable retirement.

His attorney also saw the value of creating a base of financial security for herself, while capturing added value through smart tax planning. No matter how you look at it, this case was done right.

Do you have a case involving complex issues involving future damages? Would you like yours done right too? Call Frank C. Kilcoyne, CSSC at 800-544-5533. I am here to help.