Ep. 5 – Protecting Your Financial Future With Structured Settlements

Todd Morrow:

What really a structured settlement is nothing more than a person that’s going to receive a settlement, taking part of that settlement in cash. And part of that settlement in future periodic payment. For example, we might have a dog bite case or something like that.

Todd Morrow:

And they’re going to get a smaller amount of money. But that’s going to allow that kid to set up properly to go to college where they might not otherwise have been able to go to college.

Host – David Craig:

Todd Morrow is our guest today. Todd is the founder of Moral Settlement Services headquartered in Driftwood, Texas. Today, we’re going to focus on structured settlements. This is an extraordinarily important subject. One of our concerns about the attorney, not just the amount that we get the clients in their settlement, but it’s also to protect their financial future.

Host – David Craig:

And that’s where Todd comes in. Todd has an accounting degree as a licensed CPA. He has decades of experience helping injured people protect their financial futures. This is After the Crash.

Host – David Craig:

I’m Attorney Dave Craig, managing partner and one of the founders of the law firm of Craig, Kelley & Faultless. I’ve represented people who have been seriously injured or who have had a family member killed, and semi or other big truck wreck for over 30 years. Following the wreck, their lives are chaos. Often they don’t even know enough about the process to ask the right questions.

Host – David Craig:

It is my goal to empower you by providing you with the information you need to protect yourself and your family. In each and every episode, I will interview top experts and professionals that are involved in truck wreck cases. This is After the Crash.

Host – David Craig:

This is After the Crash, the podcast. Today we are fortunate enough to have Todd Morrow from Morrow Settlement Services as a guest. Todd, I just want you to start off, tell us where you live and a little bit about yourself.

Todd Morrow:

Okay. Thank you, Dave. I’m a CPA and a settlement planner with Morrow Settlement Services. And we are based in Austin, Texas. But we work with plaintiffs all over the United States, so.

Host – David Craig:

And I know you got a CPA. And so, tell me a little bit about your education. Where’d you get your CPA from and your undergraduate degree from?

Todd Morrow:

I went to a college called Southwest Texas State University in San Marcos, Texas. It’s now called Texas State University. But when I was there it was Southwest Texas State University. I graduated there in three and a half years with an accounting degree. And then, about a year later, I sat for the CPA exam and became a CPA.

Host – David Craig:

And what was it that got you into settlement or structured settlement and the settlement business?

Todd Morrow:

Well, it’s interesting, I thought that I wanted to become an accountant and be in public accounting. And in working with some different folks, I was working for an insurance agency and also had started an accounting firm on the side. And I met a guy named James Street. And we started talking for several months. And he was telling me about a unique business that had to do with settlement planning.

Todd Morrow:

And overtime, we kept talking and he said, “You know what, I think this business of mine is going to take off. And I’d really like you to come on and help me get it going. And I need somebody with your background to help with the accounting. But you can also learn the entire business. And so, he hired me.

Todd Morrow:

And as we started getting more and more into the settlement planning side, that’s what I really fell in love with. And so, we ended up hiring an accountant, a true accountant. And then, I started going out with James and getting to meet with claimants, which is what I really enjoy.

Host – David Craig:

And I knew James, and James was bigger than life. He’s no longer with us. But if anybody who’d ever met him would never forget him.

Todd Morrow:

That’s for sure.

Host – David Craig:

And he was one of the pioneers in this industry, wasn’t he?

Todd Morrow:

He really was. He was the first one to designate his company as a plaintiff-only structured settlement firm. And I remember that there wasn’t anybody else out there that did designate themselves as plaintiff-only. There were some folks that might have done a little bit on both sides, but done some on the defense side and some on the plaintiff side.

Todd Morrow:

But James saw a need for there to be somebody that would just look out for the plaintiff’s interest. And we started marketing. And we knew that this product, structured settlements, was really meant for the claimant. And that they should have their own representation and be able to design their own plans and get to use and pick which companies they use and things like that.

Host – David Craig:

Why not? And today, my goal is to inform people about what structured settlements are. I’ve been practicing law for over 35 years. And I have a lot of clients who don’t know what a structured settlement is, or they don’t know what. They’re not correct in what they think a structured settlement is.

Host – David Craig:

And I think it’s really important for people to have some knowledge and have a little bit of background before they go into it. You know, we try to advise our clients and give them options. But not all law firms do that. And not all young lawyers understand what structured settlement is. So, my podcast is designed for average everyday folks who might find themselves in a horrific situation.

Host – David Craig:

Where they’re looking at how do they preserve the money that they might get from a settlement or a jury verdict, and then a settlement after that verdict. And so, that’s what we want to do. And I’ve worked with you over the years. And I thought you’d be a great person to come in and explain to people what a structured settlement is.

Host – David Craig:

And I know that after James passed along, passed away, you started your own business. And I’ve had an opportunity to work with you when you were with James. And I worked with you since then. And one of the things you do is you only do plaintiffs side. And plaintiff for people who don’t understand what a plaintiff is, plaintiff is a person who is injured.

Host – David Craig:

We call him the plaintiff, because when we file a lawsuit, they’re the plaintiff in the lawsuit. But we’re talking about the victims. The victims are the people who get hurt or lose a family, who lose a loved one. And your company only works for the victims. And tell us a little bit, is that an advantage? And if so, why is that?

How are structured settlements useful?

Todd Morrow:

What really a structured settlement is nothing more than a person that’s going to receive a settlement, taking part of that settlement in cash. And part of that settlement in future periodic payments, which they get to help design. And now, it’s a little different depending on if it’s a minor or an adult, and what their particular situation is.

Todd Morrow:

But for example, for minors, a lot of times you’ll have a settlement and you’ll want to set it up to help take care of college for the minor once they reach the age of maturity. And with adults, sometimes they’ll want to take part of their settlement, let’s say, for example, they’re getting $250,000, and they want to take $50,000 in cash.

Todd Morrow:

And they want to design the other 200,000 to pay out future periodic payments. Saved monthly for 10 years or 15 years or whatever they want to desire to help them pay the bills and help them budget. And the key reason why it’s good to have somebody that’s on the plaintiff side working for you is because not only can we help you analyze your financial situation and help you design a plan that fits your needs.

Todd Morrow:

You’d also have somebody to look out for you with which companies, which life companies have the best ratings, which life companies have the best rates for you. If you don’t have somebody on your side, it’s very possible that you’re not getting the best rates or that you’re using companies that might be related to the defendant.

Todd Morrow:

And sometimes that’s okay, but you want to have somebody checking it out to make sure that the plaintiff is getting the best bang for the buck.

Host – David Craig:

I know, that I’ve been in mediations before where the trucking company that’s the cause of the catastrophic event. They have a certain insurance company. And that insurance company really wants to push an annuity of a related company. And so, all the quotes will come in from a related company. And they push out this information to your clients.

Host – David Craig:

And they’ll give you a sheet, saying, here you go, give these to your clients. And I always say, no, thanks. And we have our own person. And we’ll work with somebody like yourself. But I think that a lot of times clients don’t understand that, is that sometimes they’re sitting there in a mediation or in a settlement conference, and they’re getting these sheets.

Host – David Craig:

And they have no idea that the company that they’re looking at is actually related to the company who they’ve got the lawsuit against or the insurance company for the company. And again, like you said, that may not necessarily be a bad thing, but certainly not knowing that’s not right.

Todd Morrow:

Exactly. Essentially what they’re doing in a lot of those cases is taking money out of one pocket and putting it in the other pocket. And if they’re not giving you a competitive rate, then it’s another way that they’re taking advantage of the claimant.

Host – David Craig:

Well, one of the things that I remember years ago, reading, I think it was back in 2007, there was a survey done by American General Life, and it was eye opening to me. It showed that most folks that when they get a settlement, a personal injury settlement, that that money is 100% is gone in a short period of time. And only 10%, 12%, 15% have 75% of it in a relatively quick period of time.

Host – David Craig:

So, that’s scary, is that people think they can handle their own finances. And they have the best intentions. And yet, statistically or according to studies, that’s not what happens.

Todd Morrow:

That’s correct. I see these types of stories happen all the time, where somebody gets a large settlement. And it’s human nature, anybody that comes into a large amount of money that’s not used to it, they’re going to struggle a little bit.

Todd Morrow:

And I come into situations all the time where they’re scared to death because they are getting advice from all different people, family members, friends, you need to do this, you need to do that. And they’re scared to death because they don’t want to do the wrong thing. And so, whenever I come in, I try to completely sit down, analyze their situation, look at their needs.

Todd Morrow:

Lots of times somebody may be injured in such a way that they’re going to need to replace equipment every three or four or five years. So, we can help design a monthly payment that takes care of their monthly expenses, but they might have a big expense that is going to come up every three or four or five years, for a van or whatever it might be.

Todd Morrow:

And so, we designed another lump sum payment to come out whenever it’s appropriate so that they can replace the equipment or whatever they might need.

Host – David Craig:

I think that as the plaintiff’s lawyer, unfortunately, for some lawyers, you look at it as their job is just to get the money for the folks. And certainly, that’s a big part of it. You know, I care about the results I get. We work hard to make sure that we maximize the client’s recovery. But beyond that, you have to worry about their future. I mean, at least I do, and our firm does.

Host – David Craig:

And so, if you’re going to do that then you need to take that into consideration. And you need to at least have discussions with your clients. And give them those options. Obviously, it’s their choice, but to give them their options. And certainly, structured settlement is a way that can provide income indefinitely up until their death, and if it can be paid out as they determine.

Host – David Craig:

And so, I think that’s an option that I think attorneys should do. And if you’re a client and you’re listening to this, one of the things you may want to do is approach your attorney and say, hey, look, because again, some attorneys are just looking at it as a settlement. And timing is important in these cases.

Host – David Craig:

And so, if you are listening to this, and you happen to be a client and your attorney’s getting ready to settle, before he actually settles or before he actually gets the money, he needs to or she needs to discuss structure settlement. Tell us why the timing is important.

Todd Morrow:

The timing is important because there’s a couple of parts in the IRS code that allow for a structured settlement. Section 10482 of the IRS Code allows for a personal physical injury recovery to be tax free to the recipient. It goes on to say that if you take that recovery over a period of time that the interest earned is also tax free.

Todd Morrow:

So, it’s important that it’s set up properly from the beginning. And one of the things that has to be done is we have to include some language that the IRS requires into the settlement documents. And we have to list out exactly the types of payment plans that the client chooses.

How do structured settlement consultants and law firms work together?

Todd Morrow:

So, the reason why, if you’re going to do a structured settlement, you need to get somebody involved like my firm to make sure that the proper language is in the settlement documents, make sure that they’re protected going forward. And that has to be part of the process initially for it to be tax free.

Host – David Craig:

And isn’t it important that the money not come to the attorney first? And so, if an attorney settles and they collect the money, then according to the IRS rules, it’s too late, correct?

Todd Morrow:

You’re exactly right. And I failed to mention that. But yes, if the money comes to the attorney’s trust account, that’s considered constructive receipt. And therefore, the client loses the ability to structure the money and get the tax-free benefit. They could still go out and purchase an annuity or something like that, and the growth on it would be taxable.

Todd Morrow:

But to get the tax-free benefit of a structured settlement, the money has to go directly from the defendant to whichever life insurance company that we choose is going to provide the structured settlement.

Host – David Craig:

I think it’s important for a lot of clients that don’t even know that their settlements are tax free. So, when someone settles a case, just for those listeners if you happen to have a case. When you settle the case, at least, currently, the proceeds of your, generally in a personal injury or wrongful death case, generally, your proceeds are not going to be tax free.

Host – David Craig:

But once you get that money, and you put it in your own account, then you’re going to be taxed on any interest or profits you make from investments, correct?

Todd Morrow:

That is correct. So, the fact that the entire thing is tax free to you is great. But if you want to take advantage of being able to get tax-free interest ongoing into the future, you would have to place part of the money or some portion of the money into a structured settlement. But if they take the entire amount in cash, as long as it’s for the personal physical injury or wrongful death, that recovery is tax free.

Todd Morrow:

They could then go to a bank or a financial person and place it in other investments, which a lot of times we recommend that they do part of their money into other financial investments, because there are some advantages and disadvantages to a structured settlement.

Todd Morrow:

And one of the disadvantages is that once you set up a structured settlement, it’s very difficult, if almost, if not, impossible to change it. So, that’s why you need some flexibility. And in most cases, we’ll set a part of the money, either in a trust or for them to take in cash so they’ll have some flexibility with their money. There is a trade off with the structure.

Todd Morrow:

The fact that it’s not flexible is not necessarily a good thing, but it also can be a good thing. Because it keeps people from… it protects them from themselves and it protects them from outside sources to have part of the money in a structured settlement. But the cash money that they take, we always recommend that they do that if they’re in a position to do that.

Todd Morrow:

And then, they go and put it into other investments. And if they earn interest or earn income on the money after they take possession of the funds, then that interest or that income then becomes taxable to them.

Host – David Craig:

And I think that, I mean, it’s important for people to understand that it’s not all or nothing like you just mentioned. I mean, I worked with you back when your company, when you interact with James Street and I’ve worked with you since. And there’s many times when we mixed it up, where we’ve done part of the settlement in a structure, part of it in trust, part of it in the in investments.

Host – David Craig:

And that’s why it’s important to have people who are qualified, who are CPAs, and who have the support staff around them or bring in independent people to evaluate what is in the best interest. But a structure can grow tax free, which is a great advantage. And it’s a huge advantage when you’re dealing with a child who you don’t want to see get all the money when they turn 18. So, it’s huge.

Host – David Craig:

And you have actually a parent that has some control over when those payouts are going to be. And so, those are some huge advantages, we’ll go into more detail, there’s huge advantages. But you, guys, often recommend mixing it up and using a little bit of different tools.

Todd Morrow:

Yeah, that’s correct. And that’s how the industry has evolved over time. I’ve been doing this for about 25 years. And in the beginning, we were pretty much limited to doing just structured settlements. In fact, everybody called themselves structured settlement brokers. The industry over time has evolved into all of us becoming more well-rounded.

Todd Morrow:

And so, really, what we call ourselves now is settlement planners. So, we come in, we analyze each case, because each case is unique. And we help decide, help the party decide what fits their needs. So, there are some cases where we come in and we analyze the situation, and we figure out that a structured settlement may not be something that they should be using in a case.

Todd Morrow:

So, we’ll come in and say, okay, in this situation, we’re looking at a case where this person really should put 100% of their proceeds in a trust, for example. Or like you said, it may be a situation where we recommend that they put most, if not, all their money with a financial advisor and get a diversified portfolio.

Todd Morrow:

But in most cases, there is usually a need to put at least some portion of their settlement into a structured settlement, and we recommend that. But at the same time, we do not put pressure on anybody. It’s their decision ultimately. And what we do is just provide them with the information necessary by analyzing all different types of things.

Todd Morrow:

Their government benefits that they may be on. All different things that they’ve got going on as far as debt and things like that. So, we analyze each case individually, and then we go through and make recommendations. And ultimately, it’s their decision. And if they decide that they don’t want to put any money in a structured settlement, we understand that.

Todd Morrow:

But most of the time, a structured settlement is really a good tool, because there’s really nothing better for being able to provide monthly income. Or like you said, with a minor, being able to spread the money out over time. And let these young people make a mistake maybe with the first batch of money that they get. But they learn from that and it’s not the end of the road for them.

Todd Morrow:

They have more payments come in. They can learn from it. And I think that’s one of the most important things about a structured settlement, especially for a minor, is not necessarily the rate of return that you get or anything like that. It’s the fact that you’re protecting them, letting them learn and being able to provide payments into the future for them.

Host – David Craig:

I know, I mean, I had a case where my client will get $69 million over their lifetime in future payments, but they also got quite a bit upfront. Part of the money was set up in a trust for the family because that person was a minor. And so that they could help take care of his needs, which there would definitely going to be significant needs.

Host – David Craig:

But we could take care of his needs on the front end and give the guardian some control of some money and have the use of some money in case there were psychological needs or psychiatric needs or medical needs or whatever. And then, they wanted to control at certain points in his life. Make sure college if they want to go to college, was taken care of.

Host – David Craig:

But make sure that when he was old enough to buy a house that he had those options available to him. And his money jumped up significantly over the years. And it was important to the guardians because they had some control over it. They didn’t have to wait. They could all talk about it. They could talk to financial planners.

Host – David Craig:

They could talk to your company. And they can make a decision, okay, what do we think as a group is in his best interest. And they didn’t want an 18-year-old to make those decisions. So, when he turned 18, all of a sudden, he has access to all this money and he may make mistakes.

Host – David Craig:

And so, I think that’s a great opportunity where we use multiple tools, investments, savings accounts or investment accounts, trust accounts, as well as we place structures through four different companies. So, I think that there’s a lot of flexibility when you’re looking at these.

Todd Morrow:

Definitely. And we come in and help set up trusts on a large number of our cases, for the reasons you discussed. And then, there’s other reasons, you can also have a situation where somebody is on Medicaid, for example, and they really need to be able to stay on Medicaid. They’re getting the settlement. And if they take the settlement in cash, it will then disqualify them for Medicaid.

Todd Morrow:

And sometimes the settlement may not be enough money to take care of someone’s future medical expenses. And so, therefore, we want to maximize what we can do with the settlement dollars. And you can set up what’s called a special needs trust for these folks. And if you serve a special needs trust, you can place part of the funds from the settlement into the trust.

Todd Morrow:

And you can still set up a structured settlement to feed into that trust and replenish the money over time. There’s an advantage to doing some of both. With the structured settlement, you can set it up outside to pay into the trust, and therefore you’re not subject to the annual trust fees that are charged by trust companies to manage the trust.

Todd Morrow:

And I’m not trying to say that you shouldn’t allow there to be plenty of money in the trust for the trustee to be able to manage it properly. Because the trust fee is a necessary thing, they need to be able to make money as well. But the fact of the matter is if you have a large settlement.

Advantages of Structured Settlements When Receiving a Large Sum

Todd Morrow:

And let’s just take a quick example, if you had a client getting $2 million, and I’m simplifying this, obviously, and let’s say you put $1 million into the trust initially and you structured $1 million to pay into the trust over time, either monthly payments or annual or whatever makes sense.

Todd Morrow:

The trust fee, unless let’s make it easy on the trustee and say it’s 1%, they’re going to charge 1% annually on the $1 million or $10,000 a year to manage the trust. That the million dollars that you structured outside of the trust is not subject to that one million, I mean, that 1% annual fee.

Todd Morrow:

So therefore, you’re saving $10,000 a year in trust fees while you’ve got a little bit of diversification out here with a tax-free product that’s going to feed into the trust. So, there’s good and bad about both products. But a trust is often a great tool to protect government benefits, or like you said, to provide a goalkeeper for a young person so that they’re not able to use the money or use it all at once.

Host – David Craig:

And I think that’s smart. I mean, when I was 18 years old, I had a nice car. When I turned 18, if I had money available, I wouldn’t have made the right decisions. And so, it’s to protect people from themselves. Well, I think with a structure, some people don’t even know what a structured settlement is. So, tell us what a structured settlement, what we’re purchasing.

Todd Morrow:

Okay. A structured settlement is a specialized annuity product in most cases. And it’s not an annuity that you and I can go down the street and purchase. There’s a lot of differences to a structured settlement and just a typical annuity. And I have to clarify that.

Todd Morrow:

Because there are a lot of folks out there that they hear the word annuity, and they automatically have negative thoughts about it because of some of the financial advisors out there will talk negative about some regular annuities. But with a structured settlement annuity, it only applies to personal physical injury or wrongful death recoveries.

Todd Morrow:

And what happens is the annuity is a funding vehicle for your settlement if you’re claiming. So, another difference with a structured settlement is you can set it up to pay out however you want to. There’s no limitations on when you start the payments. Whereas with a regular annuity, if you start them too early, you get an early withdrawal penalty, there’s none of that with a structured settlement.

Todd Morrow:

You can make payments that start out immediately. They can go for a person’s lifetime. You can do it for a shorter period of time, five years, 10 years, 15 years. You can also set up lump sum payments at key times during a person’s life. That’s another thing that’s not really something that’s common with regular annuities.

Todd Morrow:

But you could say, okay, this person when they turn 25, let’s give them a large lump sum, because they might be looking to put a down payment on a home or there could be a variety of reasons why you’d want to set up lump sums into the future. So, essentially, a structured settlement is an annuity product. It’s provided by a very small list of life insurance companies.

Todd Morrow:

And there’s a reason why there’s just a small number of life insurance companies that provide structured settlements.

Host – David Craig:

And I think that in… so you’re buying from this select group of life insurance companies and you’re buying these special annuities. But it’s important, and I think people are concerned, and the economy has gone up and down. And certainly, during my career, I’ve seen a lot of ups and downs over the last 35 years.

Host – David Craig:

And so, sometimes people are concerned about will they be able to pay these annuities? And one of the things that I know you do, is you look at the financial security of the life insurance that we’re thinking about purchasing the annuities from. Talk a little bit about that.

Todd Morrow:

Okay. Yes, there’s only about eight life insurance companies that provide structured settlements. And most of them are the biggest, strongest life insurance companies in the world. And there’s a reason for that. A lot of times with a settlement, the settlement has to be approved by a judge. And so, with a minor, for example, a judge has to approve a settlement in most cases.

Todd Morrow:

And judges and courts are not going to approve a minor’s money, for example, going with a company that’s not one of the top financial institutions in the world. So, there are, like I said, around eight life insurance companies that are in the business. To give you some examples, there’s New York Life, MetLife, Berkshire Hathaway, Prudential, Pacific Life, there’s a few others.

Todd Morrow:

I won’t name all of them. But all of those companies have ratings, financial ratings. And some of the top financial ratings firms like AM best or Standard & Poor’s will provide a rating for these companies. And all the companies that are involved with structured settlements are among the top financial ratings that you can get from a company like Standard and Poor’s or AM Best.

Todd Morrow:

So, not only have these companies been around for hundreds of years, they get the top ratings from outside companies, outside sources that they have financial people looking at the financial statements of these companies constantly and keeping those ratings updated over time. So, we only use the top companies in the world.

Todd Morrow:

And that’s important because there are some companies out there that will have, like you said, a related carrier that may not have as high a ratings. And again, sometimes that’s okay, if it’s a shorter-term plan or if it’s a smaller amount of money. But if you’re talking about a major settlement, you want to make sure that that money is safe.

Todd Morrow:

And the companies we use are among the safest financial institutions in the world. And that gives everybody peace of mind and security when they’re going to do a structured settlement.

Host – David Craig:

And I think that’s important. And I think it goes back to why I like to use people who only represent the victims, like yourself, your company, because I want to know the straight scoop. And I’m out with a law school, and they don’t teach you this stuff in law school. There was no class on structured settlements. There is no class on whether you use an AM Best or a Moody or a Fitch, there was nothing telling me about the ratings.

Host – David Craig:

And then, my God, the ratings, they’re similar but they’re different between which company. And so, if you don’t know what you’re looking at, you can think, well, guys, this is an A, and maybe that’s good or bad, but there’s subtle differences between the different rating companies. And so, we should go to people who know this stuff.

Host – David Craig:

I think people need to understand that even though a lawyer knows how to handle a case or may have been able to get your case settled, doesn’t necessarily mean that they understand the nuances of a structured settlement or how to pick the right insurance companies.

Todd Morrow:

That’s exactly right. And really, I’ve always said this, because oftentimes, I hear about and see cases where they didn’t have any representation. The claimant didn’t have any representation on their side. And really, the best plaintiff attorneys out there are the ones that know that they can have somebody looking out for their client.

Todd Morrow:

And we’re trying to educate attorneys constantly through CLEs and attending attorneys conferences and things like that to help to, to educate them that they do have a resource available for their clients to look out for all of these things that we’re talking about.

Todd Morrow:

And they’re for the longest time, and I’ve been working with you for a number of years, that’s how I knew which attorneys were some of the best out there is the ones that knew that they could bring somebody in like me. It didn’t have to be me, but somebody that would represent plaintiffs. And it’s getting more and more common we’re plaintiff attorneys do bring in their own representation.

Todd Morrow:

But way back 15, 20 years ago, it wasn’t all that common. And you were on the cutting edge whenever you were bringing us in for cases that are back in the future.

Host – David Craig:

And I see it. I still see it. I’ve seen people who hold themselves out as plaintiff only. And I’ve been at mediations, and lo and behold, they’re over there working with the insurance companies. And I’m like, “What? I thought you’re plaintiff-only?” “Well, most of the time I am?” I’m like, “Well, that’s not really right.”

Host – David Craig:

And so, I do think that the attorneys and the clients should ask their attorneys if they’re considering structured settlement and does this company, because there’s some very big companies that do both sides. And then, there’s some smaller companies that primarily do one side, but then every now and then they dabble in the other side.

Host – David Craig:

But I think it’s a legitimate question to ask your attorney is, “Hey, does this company that I’m working with, do they only do plaintiff side?” Do they only? Because they’re going to look out for your interest. They’re going to get paid the same regardless of which side, so why not pick somebody that’s got only your interest at stake rather than the insurance company’s interest.

Todd Morrow:

That’s correct. And there are certain cases that are very complicated, where the defendant will have their structured settlement expert involved, and the plant will also have somebody involved. And it’s the type of case where you can see a benefit to having somebody on both sides.

 

Todd Morrow:So, it’s common in a lot of these complicated cases or more comprehensive cases to have somebody that works for the defense side involved for their purposes. And that’s a totally different purpose whenever you’re involved on the defense side than it would be on the plaintiff side. We’re working directly with the injured party.

Todd Morrow:

We know over time and through proper planning exactly what this person might need in the future. And we know how to design the plan to fit their needs. We know how to take care of making sure that the company that we placed their money with is one of the top financial institutions in the world that their money’s going to be safe.

Todd Morrow:

But sometimes the defendant will want to have their person involved to make sure from their perspective that they are protected on the defense side. And so, in those cases, a lot of times what we’ll do is we’ll establish a Co-Broker Agreement.

Todd Morrow:

And we will agree that once we figure out what the claimant wants to do, we will send it over to the defense broker, which is what we call them on the defense side. And we will allow them to review for their purposes what they need to review.

Host – David Craig:

And we certainly have had that. And then, typically, in my understanding is the brokers split the fee. And I guess some people are probably wondering, how can I afford somebody to do all this financial planning. And I guess maybe talk a little bit about how you get paid when you do this work.

How can I afford a Structured Settlement Service to do my Financial Planning?

Todd Morrow:

That’s a good question. And with structured settlements, the way we get paid is we get paid a one-time finder’s fee. Some people might call it a one-time commission by the life insurance company where we placed the settlement funds in that particular case. So, we’re not tied to any one life insurance company.

Todd Morrow:

All the life insurance companies pay us the same one-time fee. And because we’re not tied to any one, that frees us up to be able to shop any potential final quote with all of the life markets, and make sure that we are providing the best rate for the claimant on top of the fact of making sure it’s with a top company. But whichever company ends up doing or handling the money will pay us a one-time finder’s fee.

Todd Morrow:

And in those cases where we have a broker on our side and a broker on the defense side, we will split that fee, that one-time fee, with the claimant. So, it’s not being taken directly out of any claimant’s money. We’re essentially paid by the life insurance company. And it’s at no charge to the claimant themselves.

Todd Morrow:

We all know that the life insurance company does take that into account with their rates and things like that, but it’s not something that’s taken directly out of the funds from the claimant.

Host – David Craig:

And I think that’s what’s important, too, for people to understand is that there’s a lot of times, you’re giving an advice, and you’re talking to people, and you’re making proposals, and you’re giving them plans. And I know my office, we’ve called you before and just said, “Hey, this is the case, and can you send us some ideas.”

Host – David Craig:

And our clients don’t even get charged for that because let’s say, until up until annuity is actually purchased. So, I mean, clients can have access to information from people like you really at no charge until something has been purchased, correct?

Todd Morrow:

That is correct. And we do a whole lot of cases where we will provide options. We’ll explain the options. We’ll help the client understand everything about the options. And then, if it turns out to be a case where it just doesn’t fit to do a structured settlement. So, in those cases, a lot of times, we’ll talk about some other things that we can help them get set up.

Todd Morrow:

But if they decide not to do a structured settlement, then we’re not paid, but they’re not charged anything either. So, you’re exactly right on that.

Host – David Craig:

And so, if you’re listening to this, and you got a case, or you’re a young attorney, I mean, there’s really no reason not to reach out to somebody like Todd, because you can get information. I mean, the information is not going to hurt you. You can get the information and then you can make a decision, does this make sense to me or not?

Host – David Craig:

But if you don’t have the information, you can’t possibly know what this investment could do for you in the future. And so, I would strongly recommend that anybody out there listening that there is absolutely no, I can’t think of any reason why you would not on any type of significant personal injury settlement, why you wouldn’t want to at least get the information.

Todd Morrow:

That’s exactly right. And we, like I said before, we will oftentimes help the attorneys, another aspect to what we do, we will help attorneys, for example, analyze their life care plan. And sometimes in a case there’s a life care plan that projects the future needs of the claimant. And sometimes those can be very extensive and cover a wide variety of future medical expenses and things like that.

Todd Morrow:

So, what we will do a lot of times is we will have the attorney send us the life care plan. We will take a look at that life care plan and analyze it, and figure out what the annual cost would be over time. A lot of times they’ll give you what the annual costs are on the actual report. But sometimes they won’t, and we’ll figure that out.

Todd Morrow:

And then, we will go in and see what it would cost if we funded that future life care plan with a structured settlement. So, for example, let’s say, a person has $100,000 a year that it’s going to cost them for future medical expenses.

Why should the plaintiff’s side contact a structured settlement specialist?

Todd Morrow:

We can basically take that $100,000 a year figure and plug it in and figure out how much it would cost using a tax-free structured settlement to provide that $100,000 a year so that they know that they can take care of the future medical for X amount of dollars today. So, basically, we’re providing them a present value figure of what it would cost today to fund that future life care plan.

Todd Morrow:

So, we do that at no charge to the attorneys as well. And that helps them know what’s it going to take medically to take care of this person for the rest of their life. And lots of times the person might have health insurance or other things that will help pay for that.

Todd Morrow:

But they can look at the worst case scenario. What would we need to get for this payment, if they had to pay for all of it out of their pocket? And so, we can help them do that as well.

Host – David Craig:

And I think it’s important for people to understand that this isn’t some sketchy product. This has been around, I mean, the United States Congress, they passed, I think, in early 80s the statute that deals with this, the Periodic Payment Settlement Act. And so, I think it was even in the ’70s, they started utilizing it. I think it started in Canada.

Host – David Craig:

And then, the United States adopted it and said, “We support this.” And then, the Internal Revenue Code has been drafted to protect peoples and make sure that they get this money to them interest free when they get the payouts. So, this is something that’s actually been around since the early ’80s, right?

Todd Morrow:

That is correct. And early on, it was used I believe in more of the mass tort-type cases and things like that. But it has evolved over time to where it is used on a wide variety of cases. And it’s used very often for a lot of the different reasons that we’ve talked about.

Host – David Craig:

Now, in all the years, I mean, 35 years I’ve put people, well, probably 25 or 20, 25 years I’ve put people in structured settlements. And I can say that I’ve not, in my personal history, I’ve not seen anyone not get paid. Everyone that was supposed to get paid, got paid, and/or is still getting paid. And so, from my perspective, at least, it looks secure now.

Host – David Craig:

We’ve been careful on what companies we put it in. There have been times when we put it in multiple companies, because we’re talking tens of millions of dollars and so you don’t want to just put that all in one company just in case. But in your experience, how safe has structured settlement has been?

Todd Morrow:

Structured settlements as I’ve said previously, they’re one of the most secure and safe tools that anyone can use. The companies that we’re talking about have been around for hundreds of years. They’re highly rated. It’s as secure a place as I know of for somebody to place part of their money. Now, it doesn’t mean you shouldn’t take precautions like you’ve said.

Todd Morrow:

On larger cases, a lot of times, we don’t want to put all of our eggs in one basket. So, we will then spread the money out and place it with two or three or four life insurance companies or however many is appropriate for the amount that we’re working with. So, it’s very secure. There had been to my knowledge no companies that had failed to make payments for structured settlements.

Todd Morrow:

Back in the ’80s, there was a company called Executive Life that that did provide some structured settlements that went into insolvency. And so, when that happened, the other structured settlement companies that provide structure stepped up and came in and took over those payments. There might have been a delay for some people in getting them well that whole process took place.

Todd Morrow:

But to my knowledge, none of them went without getting their payments. And that was just one example over the long history of structures where a company went bankrupt and had that happen. But luckily for us, the rest of the industry stepped up and made sure that those folks didn’t have to go without their payments. And since then, there’s been no problem at all.

Todd Morrow:

All the companies have remained strong and had been able to meet their future obligations.

Host – David Craig:

So, when you said they have structure, so to make sure clients understand, they can take part of their settlement, they don’t take all of it. So, if they have some immediate needs or they will have some desires that they want to buy a house or they want to buy a car or whatever it is, they can take some money upfront, and then they can invest however much they decide into a structure.

Host – David Craig:

And then, that structure provides guaranteed payments. They make the determination. But once that’s set, it’s set. It’s not going to change once you agree to it. And it’s going to make these guaranteed payments like clockwork whenever the dates are appropriate, correct?

Todd Morrow:

That’s correct. And a lot of times, people will say, well, interest rates… because a structured settlement is based on an annuity product, and it’s a fixed rate of return. And that’s also a requirement in the IRS code that it be fixed and determinable. So, because it’s a fixed rate of return, and because interest rates right now are at historical lows, a lot of people will say, “Well, it might not be worth it to do a structured settlement.”

Todd Morrow:

But I always believe that because it’s tax free and because it’s guaranteed that there is always a place for a structured settlement in most cases. Because there’s not any other financial product out there that’s better designed to provide a monthly payment. And the reason I say that is because if you have money sitting in the stock market, for example, that’s usually a long-term investment.

Todd Morrow:

And you don’t want to sit there and have to be pulling money out on a monthly basis to live off the money that you put into the stock market. That’s not beneficial. And it’s not a prudent way to invest in marketing investments. Because most financial advisors will tell you that you need to leave money in the market over time for long periods of time to get the benefit of the long-term gains and things like that in the stock market.

Todd Morrow:

So, a structured settlement annuity is specifically designed to put money, to take a portion of the settlement, put it with a life insurance company, and they will pay you back monthly overtime. And that’s what they’ve designed this product to do. And so, therefore, there is no better way to provide a monthly payment.

Todd Morrow:

And like you were saying, there’s instances where you may decide that you put a bigger percentage of the money, let’s say you’re going to get a settlement of a million dollars. After analyzing all the financial needs and everything else, you may decide, in some cases, that you want to put $750,000 into the structured settlement and take $250,000 in cash.

Todd Morrow:

But there might be other cases where it makes more sense for this particular claimant to take $750,000 in cash and structure 250,000. And there may be cases where they shouldn’t put any of the money in a structured settlement like we’ve discussed before. But each case is different. And I think you have to analyze them and figure out what makes sense.

Host – David Craig:

I think that’s key. I mean, I think that everybody, every case is different. Everybody’s financial situation is different. And certainly, the more information that you can give people like yourself that are helping advise, the more information you have, the better position you’re in to make appropriate advice.

Host – David Craig:

So, if somebody is extraordinarily wealthy or may already has their house paid, I mean they may look at things differently than if they need medical treatment for the rest of their lives. And for whatever reason they’ve been kicked off of Medicare or Medicaid. I mean, so everybody’s different, where the finances are different.

Host – David Craig:

And that’s something you need to know, I assume, in helping people, advise them through this process.

Todd Morrow:

That’s right, and the earlier that we can be involved, a lot of times, the better. Because if we’re able to come in early and get to know the family and the claimant and get to develop some rapport with them to where they become more open with us and give us all of their information that we need to help them better make a decision when the time comes and they do get a settlement.

Todd Morrow:

So, lots of times, we’ll get involved early enough to be able to do a better job of planning. And then, also, another thing that we do a lot of times is we’ll attend mediations with the attorney. And that gives us a good amount of time to gather information, both that we can get through the mediation process and through talking with the claimants and their families.

Todd Morrow:

And that’s a good time, a lot of times for us, to be able to slowly provide them with information because you don’t want them to be on information overload. On one side, they’re trying to get the case settled. On the other side, they’re worried about what they’re going to do if they do get it settled.

Todd Morrow:

So, the longer period of time you have to work with somebody, obviously, the better job you’re going to be able to do for them. And also, they’ll end up with the result that they’re happy with.

Host – David Craig:

I think it’s a good point is that, I mean, I don’t always settle my cases at mediation. In fact, statistically, I rarely settle my cases at mediation. Because that’s usually not why I’m there, I’m usually there to try to inform the other side of stuff they don’t, maybe the insurance carrier hasn’t seen, because maybe it got filtered out through the lawyer.

Host – David Craig:

And so, I’m trying to get the value up. But I like to have… oftentimes I’ll have structure people there. And I’ve had you there before. I’ve also had you there with an independent financial planner who is just paid by the hour, not based upon any kind of commission, who’s more local to Indiana. I’ve had cases where there’s a parent who has a claim where their spouse has gotten killed.

Host – David Craig:

There’re children who have claims who are also injured. And the needs are completely different between those three people. And again, structure people, most of my clients love a structure for the children, especially if they don’t have major financial type of needs. They love controlling when that money is going to come out.

Host – David Craig:

And so, you can do a mixture. But I would think it would be beneficial because you get to spend time whether the case gets settled or not. You get to meet the clients. You get the check and ask them questions about their finances and start building that relationship.

Todd Morrow:

And that’s exactly right. And I really enjoy whenever we do have that time together with the claimants. And we get to be involved in the mediation process, or sometimes even before that, we might have a preliminary meeting, either a Zoom meeting or an in-person meeting.

Todd Morrow:

And the more time that we get to spend with them, like I’ve said, we are able to do so much of a better job because it’s not a cookie cutter-type of product. Everybody’s different, everybody’s needs are different. Sometimes even on a smaller settlement, that might be more important that we set that up properly than it is on a larger settlement.

Todd Morrow:

So, for some kids, for example, we might have a dog bite case or something like that, and they’re going to get a smaller amount of money. But that’s going to allow that kid if set up properly to go to college where they might not otherwise have been able to go to college. So, every case is different. And the earlier we can get involved in the process, the more we can analyze everything that needs to be analyzed.

Host – David Craig:

And I assume now with Zoom, I mean, we’re doing so much by Zoom, I assume that you’d be willing to meet clients by this using this technology, which is the Zoom. And there’s no reason not to bring somebody in and get you in early, correct?

Todd Morrow:

Exactly. And that’s one of the things we’re trying to help when we’re out educating plaintiff attorneys about our products and services. That’s one of the things that I try to let them know that the earlier that they can get us involved. And now, with Zoom and technology, you’re right, it’s actually much easier to do it early.

Todd Morrow:

Because we’re based in Austin, Texas, and we have no problem traveling anywhere we need to go. But a lot of times, it’s a lot more cost-effective, it’s a lot more efficient to at least do some preliminary meetings by Zoom or by phone.

Host – David Craig:

One last thing that sometimes clients asked me is what happens if I die? You know, I’m getting these payments. But what happens if I pass away? Because I’m supposed to have these guaranteed payments? Can you talk just briefly a little bit about, well, how does annuities, how do these products deal with death?

Todd Morrow:

That’s a good question. And one of the things that you’re able to do if you place part of your funds in a structured settlement is you can name a beneficiary or multiple beneficiaries to the remaining payments if something were to happen to the claimant.

Todd Morrow:

So, their money is not going to be lost, it’s not going to go away. Any remaining guaranteed payments will be paid tax free. It’s still tax free to the beneficiary, which is another key thing. Those remaining guaranteed payments will be paid to the beneficiary or beneficiaries of the claimant.

Host – David Craig:

Todd, is there anything else that you think folks that are victims of a catastrophic event? You know, again, I do a lot of semitruck or trailer cases, and unfortunately, those often lead to catastrophic injuries. Is there anything else that you can think of that you think folks should know about structured settlements or how to protect their [inaudible 01:01:53] or their verdicts paid out as a settlement or settlements?

Todd Morrow:

Dave, I think we’ve covered it pretty well. I would just reiterate that getting us involved early with the claimants, them getting the ability to get all of the information they need, even if they choose not to do a structured settlement. And we didn’t go into a lot of different areas of settlement planning because this has been more concentrated on structured settlements in general.

Todd Morrow:

But we’re able to look at lots of different areas for them, government benefits, lots of times we’ll shop for health insurance plans. In certain cases, if they’re not going to be able to stay on Medicaid or they don’t have health insurance, we’ll look in to the health insurance plans for them. We do lots of other things for attorneys that include like Lien Resolution and things like that.

Todd Morrow:

And that’s the topic for another day. But just involving us early allows us to help the claimants. And I would highly recommend that they always have somebody looking out for their best interest on the plaintiff side. And people like Dave have been great for a long period of time at being able to make sure his clients are educated.

Todd Morrow:

And I’ve been fortunate to work with Dave for a lot of years. And there’s nobody better that I work with in helping these claimants. So, he does an awesome job.

Host – David Craig:

Thank you. Thank you, Todd. And I think that, again, my goal in doing these podcasts is making this information out there available to other people so that people… you know, I always hate the fact, I mean, as lawyers, we’re so busy prosecuting the case and making our case. And really what you want to do is empower your clients to make the right decisions for them, not to tell them what they have to do, but to give them the information.

Host – David Craig:

And I appreciate you coming on and taking the time to talk about structures. Hopefully, maybe sometime, maybe towards the end of next year or six months into the next year, we can bring it back and talk about it. Because there’s a lot about settlement, there’s a lot about liens, health insurance, Medicare, Medicaid, and a whole different and a whole lot of other things that we could talk about that I think people need to know.

Host – David Craig:

Because again, sometimes they don’t understand they’re going to lose their benefits if they take the money a certain way. But unfortunately, I see lawyers who don’t get that. Because maybe they don’t do personal injury that often and so they just dabble in it and they don’t advise their clients. They may lose their SSI or they may lose their Medicaid.

Host – David Craig:

And so, I think those are all really important topics. And hopefully, maybe you’ll come back in six months or so and we can chat about that.

Todd Morrow:

I’d love that. I really appreciate the opportunity and enjoyed chatting with you, Dave.

Host – David Craig:

This is David Craig. And you’ve been listening to After the Crash. If you’d like more information about me or my law firm, please go to our website, ckflaw.com. Or if you’d like to talk to me, you can call 1-800-Ask-David.

Host – David Craig:

If you would like a guide on what to do after a truck wreck, you pick up my book, Semitruck Wreck: A Guide for Victims and Their Families. It’s available on Amazon or you can download it for free on our website, ckflaw.com.