Trial Magazine

How do settlement planners work with both attorneys and their clients?

We assist plaintiff attorneys as they build up cases, fighting for clients who have suffered catastrophic injuries and often must live on a recovery for the rest of their lives. We help attorneys construct damages estimates for negotiation and mediation based on what level of settlement must be recovered—not to make clients “whole” because that’s almost impossible given the significant loss, but to help them put the pieces back together and build a future.

We also partner with families. Receiving a settlement provides significant relief, but injured people or their loved ones then face the enormous burden of figuring out what to do with these funds. How can they protect new assets? How can they invest them wisely? Settlement planning experts can guide a family through these complex issues.

What should you look for in a settlement planner?

The service marketplace is competitive, so attorneys and their clients today have access to a much wider community of qualified experts and companies. Ask your professional colleagues and others in their peer groups about their experiences with different settlement planners. And don’t hesitate to interview a planner to learn more if you think that working with one could help clients keep their compensation secure.

Having a settlement planner who is a certified financial planner is extremely beneficial. Settlement planners at Forge do not receive compensation for selling products, and any planner you work with should be trained to make recommendations in the best interests of the clients, regardless of the financial impact to the company.

I also would put at the top of my list strong relationship-building, particularly for trust officers. Get to know planners before beginning to work with them. Over the years, families regularly will turn to that person for disbursements for expenses such as replacing medical equipment or fixing a bathroom. The professionals working with them must be sensitive to those needs and be their advocates. The flip side is that they also have to be prepared to say no if it’s not an appropriate purchase. It’s a fine line to toe, but that’s what it means to partner with families for the long term.

When working with families, at what point are you typically introduced?

We hope to have as much time as possible to learn a family’s personal and financial issues, but attorneys rightfully are cautious about raising their clients’ expectations about a case’s outcome too soon. We certainly can meet with families for the first time after a mediation, but in general, we find that a good time to connect is as the litigation starts to approach settlement negotiations.

Our goal, which can be accomplished over several conversations, is to get a complete inventory of the family’s circumstances. For example, what types of public benefits are they currently receiving? Are they on Medicare or Medicaid? Do they have any other financial assistance that we need to be aware of? By understanding the family’s situation, we can create a plan tailored to extend the life of any recovery.

I encourage attorneys to be open and honest with their clients about what settlement planning means. Make sure clients are aware that finances and other deeply personal matters will need to be discussed at some point and that this may feel uncomfortable at first. It’s helpful for families to gather information about their benefits, their monthly budget, and what they may need to accomplish immediately after settlement. Will they need to modify their home or vehicle or arrange in-home care? The answers to questions like this will help a settlement planner properly allocate money among insurance, wealth management services, and trusts.

What types of plans often result from settlement planning?

No single financial product can do everything a family needs; that just doesn’t provide the flexibility to address changing circumstances in the future. After going through and mapping each family’s situation, you need a mix of strategies to meet their needs, usually a combination of insurance products, intelligent and conservative investment management, and trust fiduciaries who can provide protections that may be needed to preserve benefits such as Medicaid or Social Security Disability Insurance.

Most families have debt or have borrowed money, so the first step is to help them navigate out of that position. We look at their primary risks, including running out of money in the future, and plan for contingencies. If the plaintiff is caring for a child, for example, perhaps the caregiver’s life needs to be insured so that if anything happens, a policy is in place to provide funds to hire a professional caregiver.

When they think of settlement planning, people often think of structured settlement annuities, and these work well when planning for fixed and determinable expenses—for example, nursing care, regular ABLE account funding, annual Medicare set-aside account funding, or college planning. But because they are inflexible, structures are not always the ideal solution for clients. Traditional annuities, such as fixed index annuities, often are a better solution for planning for those over 60, and they provide tax-deferred growth without the downside that can be experienced by dips in the market.

Trusts are another option that should be considered for many families. A revocable trust is often a good estate planning tool for competent adults, providing flexibility to change estate plans during their lifetime and ultimately avoid probate, as well as other benefits. We often recommend using trusts to help protect eligibility for government benefits. For example, when a family needs to decide whether to move or to modify their home to accommodate a wheelchair but also needs to consider collateral sources such as Medicaid, establishing a trust may make sense as they evaluate their long-term care needs.

What are some common obstacles that arise during settlement planning?

I would say the biggest obstacle is families feeling they must make quick financial decisions about the funds. A structured settlement can provide ­guaranteed future payments, but the parties must embed the terms of payment in the settlement documents, so there often is a general pressure to act fast. Settlement planners should have the ability to separate the questions that must be answered immediately from those that can be answered over a more extended time line, as well as the flexibility and expertise to know how to capitalize on all available options. For instance, a plaintiff may need the services of an insurance agency, a trust company, and a wealth management adviser, which is something that Forge and our subsidiaries offer.

Another common obstacle is the preconceived notion that any financial institution can handle settlement planning. These businesses provide a high level of service and professionalism, but they usually aren’t exposed to plaintiffs’ issues and so are unable to forecast potential threats that may arise due to unique complexities. Forge works only with plaintiff attorneys and plaintiffs, so we know the types of health care and financial decisions plaintiffs face—and also the unique support they will need moving forward.

Consider how plaintiffs and their families came to need these settlements in the first place. In most other circumstances, financial advisers handle people’s income from their jobs or companies they’ve built, but a settlement recovery comes at a tremendous cost—an injury or the loss of a loved one. We bring to our financial planning a lot of specific background knowledge of how an emotionally vulnerable family can be taken advantage of and how to best protect them.

In addition to supporting attorneys during litigation, you provide structured fee plans. What should attorneys know about these?

Number one, they should know that it’s an option. There are several variations, but essentially, these plans allow attorneys to spread all or part of a fee they earn over a period of time, over several years potentially, instead of receiving it all at once. It’s a great tool to establish a guaranteed cash flow to coincide with a firm’s current and future operating expenses. We’ve been using structured fees to help attorneys fill in gaps in their stream of income for many years. Normally, we work with an attorney’s tax professional to identify whether it’s something to consider, which depends on individual financial circumstances.

Every attorney—like every plaintiff—is unique, but the plans we execute usually approach the attorney fee structure in two different ways. Some attorneys defer payment from any fees into the next few years to cover estimated annual expenses; they prefer the freedom to focus on clients over deciding how to cover routine expenses. Others use the attorney fee structure as a retirement planning tool, taking a percentage from many settlements—sometimes 5% or 10%—to create guaranteed retirement income. It’s a way to force savings. Either way, spreading out income in a predictable way creates financial confidence over time.

What do you wish more ­people knew about settlement planning?

When you consider working with settlement planners or connecting your clients with them, one thing to consider is how they measure success. To me, that should always be based on the number of repeat requests from attorneys asking for their involvement and the number of families who received their services and can share that their settlement continues to be a source of relief to them, as much today as the day they received it.

Over the last decade or so, we have seen settlements evolve from an area that insurance companies dictated to an area that provides families with many more options. I got involved in this work because it felt—and continues to feel—incredibly powerful and purposeful to help ensure that people overcoming an injury or loss should be able to use their settlements in a way that is right for them, not defendants.

Spooner Phillips is the founder and CEO of Forge Consulting. To learn more about Forge Consulting and its subsidiaries, Advocacy Wealth Management and Advocacy Trust, visit www.forgeconsulting.com or email info@forgeconsulting.com. Mandy Brown is an associate editor for Trial.