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Are ABLE accounts, used to provide for people with severe disabilities, a replacement for structured settlements?

January 13, 2015 by Randy Levine Leave a Comment

ABLE Act 2014There is a valuable new tool for settlement recipients with severe disabilities: an ABLE account. With the passage of the “Achieving a Better Life Experience Act of 2014” or the ABLE Act on December 3, 2014, individuals with special needs or disabilities can now own tax-free savings accounts with up to $100,000 in funds without losing needs-based government benefits, such as Medicaid and Supplemental Security Income, or SSI.

The Act’s stated purpose is “to encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence and quality of life.”

The ABLE Act amends Section 529 of the Internal Revenue Code, which formerly only made college savings plans tax exempt. ABLE accounts are intended to provide for disability-related expenses for the individual such as education, housing and transportation so that people with severe disabilities can live and work independently. ABLE accounts are strictly for people with severe doctor-certified disabilities incurred prior to age 26 who qualify for needs-based benefits. Individuals over age 26 are eligible as long as there is documentation proving they’ve had the disability since before their 26th birthday. [Read more…]

Filed Under: ABLE Act, Randy, structured settlements Tagged With: ABLE ACT 2014, Disabilities, Medicaid, Section 529 Internal Revenue Code, structured settlements

What Are The Benefits of Life Insurance for Structured Settlements?

December 22, 2014 by Randy Levine Leave a Comment

life insurance benefitsStructured settlements are great for personal injury clients who will need care for years to come — maybe for the rest of their lives — but sometimes even that is not enough. What if this client is completely reliant on someone else, a parent or child, who provides care almost 100 percent of the time? What if something were to happen to that person? What will happen to the client then? Who will take care of them and how will they pay for that care?

A child with a terrible birth defect who was going to need care for her entire life received a settlement for her birth injury. We established a settlement preservation trust, into which a structured monthly payment would cover all of her needs. Fortunately her parents were able to take care of her. We wanted to make sure that she would be taken care of in the worst case scenario: if something were to happen to her parents and one or both of them were no longer able to care for her.

Through her trust we purchased a life insurance policy for each of her parents. The premiums were paid over the course of five years with five structured payments. If something were to happen, the trust would receive a $2 million cash influx to cover the costs of professional care, school and any other needs that could arise. Obviously, we hope that her parents will be around for a long time, but now we know we’ve gone above and beyond to plan for the worst curve ball life can throw. And if nothing happens, there will be tax-free income from the cash value of the policy waiting for her when she’s older.

We recommend adding life insurance for caregivers to structured settlements for clients with a catastrophic chronic or permanent condition, such as a brain injury. Each case has its own needs, whether they are medical, home care or special education; but life insurance should always be considered. This is a great way to be prepared for unforeseen circumstances while providing maximum flexibility.

Life insurance policies provide an additional source of tax-free income that can always be liquidated. They diversify the income sources for a client as well. Life insurance is also an investment that provides the potential for growth to supplement the fixed income from the structured settlement.

They say that nothing can prepare you for the grief of losing a parent or child, but you can be prepared financially for the ultimate worst-case scenario.

How are you accounting for worst-case scenarios? Do you have any examples of how life insurance was helpful in a structured settlements situation? Please share your thoughts and ideas with us.

Filed Under: Life Insurance, structured settlements Tagged With: chronic condition, Life Insurance Benefits, structured settlements, tax free income

The Affordable Care Act and its Impact on Settlements

December 19, 2014 by Brian Schachter Leave a Comment

ACA and its effect on SettlementsIt’s a crazy world and people get hurt constantly. Car accidents, assaults and other catastrophes hurt people physically and emotionally but they don’t have to hurt financially on top of everything else.. The Affordable Care Act has removed lifetime limits on benefits and makes it illegal to deny people based on a pre-existing condition, like disabilities. As such, we are advising our colleagues and other lawyers to brush up on some of the specifics, especially now since the current enrollment period ends in February, and how the Act may impact their clients.

For example, our client Mr. Williams was a promising high school football player until his football career came to a devastating halt when he was shot nine times in his right leg. His 13-year-old sister called to tell him that a group of men were harassing her so he came to protect her. The men dispersed but one of the assailants shot Williams as he turned into a hallway in his building. He lost 40 lbs of blood, but he survived the encounter.

Williams woke up in the hospital 11 days later, happy to be alive but distraught by the realization that his leg was amputated and he would never walk again, much less play football. He was paralyzed from the waist down and spent several months in the hospital recuperating and receiving physical therapy.

In 2007, he was enrolled in New York State Medicaid, a “needs based” program that insures anyone below a certain income and asset threshold. However, his seven-figure settlement from his assault would have disqualified him from Medicaid, so we would have had to create a Special Needs Trust to oversee the funds. A Special Needs Trust allows a personal injury victim to receive a settlement without losing out on public benefits. The settlement money can also be used to pay for things that Medicaid does not cover, like extra therapy or rehabilitation.

Using the Affordable Care Act exchange, we were able to enroll Mr. Williams in a private plan health insurance plan from United Healthcare with no deductible, which provided for better health care and means that Williams no longer needs the Special Needs Trust which had a number of drawbacks in addition to adding an extra barrier to his money.

Federal law mandates that after the death of the beneficiary, any funds remaining in the trust must be used to repay Medicaid for all costs incurred while the trust was active. After Medicaid is reimbursed, the remaining funds can be passed on to the family of the beneficiary. Private insurance does not have this stipulation so the entirety of the settlement can go to the beneficiary’s family in the event of his or her death.

At ESS we help our clients assess their needs and figure out how to best deal with their situation. Many people are often caught between a rock and a hard place when it comes to dealing with settlements and insurance. We help our clients figure out how to receive the care they need to sustain them while at the same time be able to support their financial needs.

How else has the Affordable Care Act affected your clients? Are there other significant implications of the Act on settlements that you are aware of? Please share your thoughts with us.

Filed Under: Affordable Care Act, Brian, structured settlements Tagged With: Affordable Care Act, Medicaid, Special Needs Trust

How Dennis Rodman and Confidentiality Clauses may Affect Your Legal Settlement

December 2, 2014 by Randy Levine Leave a Comment

Amos v RodmanThere’s something we’re seeing more and more of here at ESS Settlement Services. It’s subtle, quiet and often sneaks in at the last minute, when all but the sharpest sets of eyes are no longer paying attention. It’s something we think more lawyers should know more about and be wary of: one-sided confidentiality clauses.

It’s no secret that a large percentage of settlements have a confidentiality clause thrown in at some point. This is to ensure that both parties keep the contents of the document private and it’s often important to many clients. The problem arises when only one side is subject to confidentiality and that problem is taxes.

Take the now famous Amos case, for instance, where prominent Chicago Bulls basketball player Dennis Rodman chased a ball out of bounds and fell onto a group of photographers. As Rodman, who was known for erratic behavior, disentangled himself from the throng he kicked photographer Eugene Amos in the groin.

Amos alleged that the kick was intentional and lawyered up, seeking damages for his injuries. Rodman’s attorney contacted him shortly after and the parties agreed to a $200,000 settlement, before a lawsuit was filed. The settlement imposed an obligation on Amos to keep the terms confidential.

Settlements for physical injuries or illnesses are ordinarily tax free, so Amos excluded the full $200,000 from his taxes. However, the IRS audited him and declared that only a nominal amount was tax-free because his injuries were minor and the bulk of the amount was simply to keep the settlement confidential and prevent Amos from defaming or disparaging Rodman. Ultimately, the court ruled that 60 percent was exempt, while 40 percent of the settlement was taxable. [Read more…]

Filed Under: structured settlements Tagged With: Amos v Rodman, confidentiality clause, Dennis Rodman, tax on settlements

IRS Approves New Option for Structured Settlements!

September 12, 2014 by Randy Levine Leave a Comment

IRS private letter rulingThe Internal Revenue Service (IRS) on August 29, 2014 issued a Private Letter Ruling (PLR-143928-13) approving a Pacific Life Structured Settlement annuity with an annual payment adjustment based on the S&P 500 Index’s performance.   In addition, the claimant can request an immediate present value lump sum commutation payout of their annuity by submitting a Notice of Hardship Conversion request to the Life Company’s Assignee who will review and consider it on a case by case basis.

Pacific Life launched the Index-Linked Annuity Payment Adjustment Rider and has published a brochure that helps educate attorneys and their clients on the program and its benefits.  .  It has hypothetical examples showing how the payments of one’s annuity can increase annually based on a positive S&P 500 index returns with a 5% cap and the annual payment cannot decrease if the S&P 500 Index return decreases or remains flat. [Read more…]

Filed Under: Randy, structured settlements Tagged With: IRS, notice of hardship conversion, private letter ruling, structured settlements

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