The reality of legal practice is that lawyers are almost always scrambling to keep up with the rush of events. This is particularly true for personal injury lawyers who often find themselves juggling dozens of active cases at any given time, with their attention jumping from the complaint that needs to be drafted on a new matter to the depositions scheduled for tomorrow to witness preparation for a trial that begins next week. We know the story from our own law practice and also see in our consulting practice how most of our lawyer clients contend with similarly hectic schedules in their working lives. Running a successful personal injury practice reminds us of nothing so much as the old vaudeville routine of the guy rushing around trying to keep the spinning plates in the air.
That’s part of the reason we decided to establish our consulting practice. We know many highly skilled trial attorneys who simply don’t have the time to master everything they need to know about structured settlements and financial service products in order to serve their clients well when it comes time to settle the case, particularly if the case involves complications related to Medicare.
Just the other day I received a call from a client that perfectly illustrates the point. This lawyer was calling for advice on settling what seemed to be a pretty straightforward personal injury matter. The parties had reached substantial agreement on the financial terms of a settlement but now defense counsel was insisting that a lump sum of $88,000 of the total settlement amount had to be ear marked for a Medicare set-aside account for the life expectancy of the plaintiff. Our client thought this was too much.
“Have you thought about using a Tax Free annuity to spit out a tax free annual benefit to cover the set-aside obligation?” I asked. There was silence on the line from which I inferred that this option hadn’t occurred to my client. “Using an annuity,” I went on to explain, “you can cover that set-aside with a much lower out of pocket cost to your client.”
After doing a little bit more analysis on the costs of an annuity I quantified the exact savings for the plaintiff in this case would be $22,000, thereby reducing the cash cost of the set-aside by more than 25 percent.
And mind you, that’s not the only tangible benefit from using an annuity instead of funding the set-aside obligation with a lump sum of upfront cash. In addition to the extra $22,000 of settlement proceeds that now could go straight into the client’s pocket, using a qualified annuity that spits out an annual MSA amount for the life expectancy provides an additional advantage since Medicare’s own guidelines state that if the MSA monies are properly exhausted and the MSA has no funds then Medicare must come in and pay for injury related care without reimbursement rights. This will stop once the fresh annual annuity monies fill up the MSA account again. So with an annuity in place, the plaintiff still has the benefit of Medicare as a backstop, if actual medical expenses ever exceed the available amount of funds in one’s MSA account.
So don’t let the day-to-day pressures of your practice keep you from achieving the best possible financial results for your clients. Contact us to learn more about how we can help you take full advantage of structured settlements and financial planning in crafting the next settlement on your busy docket.