EP 821- Post Settlement Issues

Episode Notes

Transcript

Announcer:

Welcome to Heels in the Courtroom, a podcast about successfully navigating law and life featuring the women trial attorneys at the Simon Law Firm.

Amy Collignon Gunn:

Hello everyone, and welcome back to another episode of Heels in the Courtroom. I am Amy Gunn, and today I am joined by Liz Lenivy and Erica Slater. Hello ladies.

Liz Lenivy:

Hello.

Amy Collignon Gunn:

Hey, today our topic is post settlement issues and I will give you the highlights. So after a case settles, and again speaking to personal injury litigation cases after a case settles, there are a number of things that need to be done buttoned up, put away before you can actually close the case. And we have pulled out three categories of cases to talk about minor settlements, wrongful death settlements, and then what we’ve categorized very eloquently as regular settlements. So we’ll start with the easy one, regular settlements. The plaintiff is an adult, married or non-Married, doesn’t make that much difference, but we’ll go with a single adult. That case has been litigated and a settlement has been determined. And the court, and this is speaking to the areas where we generally practice most Illinois and Missouri doesn’t need to be involved in approving that settlement. As long as the plaintiff is a competent adult, no court action is needed.

And so generally it just comes down to having a settlement agreement release drafted, making sure those terms are reasonable, the settlement monies are wired or a check is sent and then the case is dismissed with prejudice. Really not very complicated. Just got to be sure that you’re paying attention to any liens that may exist on the file, whether they are private liens such as United Blue Cross Blue Shield, or government liens including Medicare and Medicaid and those types of things. We’re not going to spend too much time on liens today. That’s been the topic of other episodes. Just the takeaway is don’t forget about them, be sure to check on them. Now, moving into wrongful death settlements, Liz, can you give us the highlights of what we should look for in terms of wrongful death settlements?

Liz Lenivy:

Sure. So the thing that you need to immediately, and hopefully you already know about this before you’ve settled the case, is who exactly is entitled to participate in the wrongful death settlement? Who are the class one or if you have to move to class two beneficiaries. And

Erica Blume Slater:

This is Missouri, correct?

Liz Lenivy:

And this is from Missouri. I should be clear. Whoever is entitled to take will depend upon the state. So for example, Missouri allows parents to take in a wrongful death settlement. I don’t believe Illinois does. Illinois does not. As

Amy Collignon Gunn:

Long as there are descendants.

Liz Lenivy:

Correct. So if you’ve got a case, and we’ve had this happen before, let’s say individual dies and let’s say the spouse decides to bring a lawsuit for the wrongful death of that individual. But it’s a situation where maybe there are surviving parents or maybe they’re surviving adult children or maybe children by someone other than that particular spouse. And there may be some animosity between the family and so other attorneys get involved. Or what has happened sometimes is they say, we don’t want to participate in the lawsuit. It’s too painful, it’s too messy. I don’t want to go through this. But you’re free to do that. You still have to consider if you’re the attorney representing the plaintiff that’s gone forward, you still have to consider all of those potential takers once the case settles. And so you have a duty to inform these people. So for example, if they don’t have a lawyer, you still need to show the court that you have taken some action to properly inform this individual.

And sometimes what will happen is someone will get the notification that they have the right to participate in the wrongful death settlement hearing and in the process, and they say, I don’t want to. That happens every now and then. Or they’ll say, I don’t want to show up for all of this, but if you can throw a little bit of money my way, I can live with that and I’m good with that. Either way, you still have to show the court that you have gone through the proper channels and procedures to inform every individual who has a right to participate that they have that right now. Sometimes you’re able to work out agreements ahead of time as far as who gets what and how much, but if you’re not able to work that out, then you may have a contested hearing. And we may have talked about this before, but what exactly a contested hearing looks like? What is it that you as the attorney representing someone in a contested, wrongful death hearing, what factors you need to present to the court to make the best argument for your client as far as why they should get a particular percentage of the total settlement? Now, other things to consider, you still have to think about liens. The individual was that died, there still may be liens asserted against them, asserted against the lawsuit. So you have to be aware of that. Am I missing anything other than liens and

Amy Collignon Gunn:

Well, I would say what I think is best practice, and we can focus on a Missouri wrongful death case because Illinois handles it a little bit differently as do most states. Let’s say an adult died, as you said, Liz, and there’s a parent as well as a spouse as well as children, minor or otherwise. Missouri says class one members are parents, spouses and children, and you don’t go to class two, which I believe is even siblings. If there’s any one person in class one, the vast majority of our cases are class one members. And I think best practice is to speak to every class one member and sign them up as clients. And you can do that without conflict

Erica Blume Slater:

Early on, right?

Amy Collignon Gunn:

Early on, yes ma’am. Early on, as long as you tell them what’s going on, what the law says, and because I think best practice is to get everybody on board, not only for business reasons, but also for the case. You don’t want the defense to believe that there’s animosity among the class members that can affect damages. And so at least at the beginning, it’s best in my experience to get everybody in the same room and have everybody play on the same team.

Liz Lenivy:

And can I add yes to that point because I’ve had that situation happen to me before, and what I do is I include a specific paragraph in the contract where I say, you and I have talked about conflict of interest. You understand this, we’ve had this conversation. And that way if let’s say we do get down the road, and it can be a situation too where maybe everyone gets along at the beginning and then there’s some sort of falling out between the parent in-laws and the surviving spouse, I don’t know what’s going to happen,

Erica Blume Slater:

Which is actually part of the damages

Liz Lenivy:

Because the person who passed away was, yeah, I mean it’s

Amy Collignon Gunn:

A very emotional thing to go through as a family to lose someone and then to add having to be involved in a lawsuit on top of that, you can’t underestimate how adversely that affects someone.

Liz Lenivy:

And

Amy Collignon Gunn:

Sometimes that translates into just bad feelings in general.

Liz Lenivy:

So I just throw in a paragraph explaining that we’ve had the conversation and frankly if we get to the point that we have to, if we can’t agree on a percentage, I cannot advocate for one client over the other if everyone has signed up with me, if we get to that point and I have that conversation first and then I include it in the contract that way if we’re two, two and a half years down the road, it’s in there. It shows that we had the conversation

Amy Collignon Gunn:

Definitely best practice.

Erica Blume Slater:

And you agree there’s a potential conflict, but there’s not an actual conflict until there’s recovery, whether that’s settlement or a judgment that’s held on appeal or not appealed after a trial.

Amy Collignon Gunn:

The only caveat to that is this is sort of minutiae detail, but we would be remiss if we didn’t mention, if let’s say there was a motor vehicle accident and one of the family members was in the car, maybe the driver, then that would be a true conflict and you’re better to have some other lawyer represent that person. But if there’s no potential liability on any of the family members, then Liz, I agree very much with the notion that it should be discussed and reduced to writing in the contract. So it starts there. Let’s say we’ve litigated, we’ve come to a resolution of the case, now everybody has to get together and make a decision about who gets what of the net. So a couple different things can happen here. It could have already been discussed. And again, this is sort of a difficult thing to broach.

Number one, it’s just, it sort of feels bad to talk about who’s going to get what when there’s no money yet. I don’t love it because I don’t want to set expectations with clients that there’s going to be a certain amount. So I don’t love that. But if the group comes to the table and says, here’s how we want to divide this and everybody’s on board, fantastic, then you can write that in the proposed order and there’s very little belief that the defendant would have an objection to an agreed upon distribution among the family members. The court will sign off on it, we distribute according to that percentage, and this case gets dismissed. You run into some issues where folks aren’t able to agree and believe that somebody is entitled so to speak to more than somebody else. And that’s where Liz, as you say, we can’t advocate for any one member of the class slash client of ours over the other.

We have to educate all of them on what the court uses to make decisions. I first say, if y’all can’t decide, the court will, sometimes that lights a fire because there’s uncertainty about how a third person would judge the percentages. But if not, then each of you gets to talk about your number one dependency, if there is any on the decedent, and number two, what that relationship was. And then the judge will order it accordingly. And in that position I say, I’ve got a list of questions. I’m going to ask everybody the exact same questions and you’ll have an opportunity on the stand under oath to express your answers to these questions that will allow the judge to make an informed decision that has happened before. And again, it doesn’t have to be terribly contentious. I think the group will follow what you as the lawyer is guiding them to, which is a very objective way to present their case, so to speak to the judge.

And then again, whatever the judge decides gets decided and we act accordingly. One of the things though that can happen, and Liz you alluded to it earlier, is that maybe there is an adult sibling who is not interested in being involved in lawsuit, is not interested in being a client, maybe was estranged even before the parent died. We have a statutory obligation to let that person know when the case has settled, give them opportunity to appear at the hearing to express their relationship if they’re interested to the judge. Sometimes that person gets a lawyer and that lawyer comes in, represents that particular class member advocates for that particular class member. How is that lawyer’s fees handled? And Liz, I look to you because you’ve done some research on this.

Liz Lenivy:

Just as a reminder, this is a Missouri specific case regarding a Missouri specific statute. If you are practicing in a different jurisdiction, obviously look up whatever statute or case law is controlling for your area. But for anyone who practices in Missouri and isn’t aware of this, there was a case that was decided in the southern District of Missouri back in just a couple months ago, this calendar year 2024, called J verse Lambert. And in this particular case, a young man had died. His mother hired an attorney to represent her in the lawsuit regarding his death. And this attorney got an excellent result. And as they were proceeding towards settlement, the mothers of the decedent’s children, there were, I can’t remember how many kids there were, but there were at least two women who had had children by this particular young man who had passed away.

They then hired an attorney to represent them in the settlement process. So they did not participate in the actual litigation or the process in getting to the settlement, but once the case was settled, they then hired an attorney. And the issue in that case was, well, you’ve got an attorney who has done the vast majority of the work in achieving the settlement. You could say all of the work in achieving the settlement. And now you have another attorney who is coming in sort of at the last minute and wanting a fee. And the issue is, and Amy you talked about this, the court has to analyze well what is the best way to distribute these funds? And a parent who is not financially dependent upon an adult’s child is not in a great position compared to two minor children or two or three minor children, however many kids there were in this case.

And I think that’s true in any situation. It’s pretty tough to say you have a better argument against children. And so the way that the settlement was distributed was that the mother who had hired, the attorney who had worked up the case got a much smaller percentage than these minor children. And what the trial court did was said, well, your attorney’s fees are based off of whatever percentage your client got as opposed to saying, well, attorney A who worked up the case, you’re going to get this contractual percentage of the total settlement because that’s what you achieved. It is based upon what your client actually gets. And so this case was appealed, it went up to the southern district and the southern district affirmed it and said, under our statute, that’s the way attorney’s fees have to be divided up. And so that again goes to your point, Amy, of if you’re going to be doing the work on this, especially if you know have someone, the person that’s come to you may not necessarily have the largest I guess stake in the decedent’s settlement, it is best to try to get everyone on board, especially in a case like this.

So that is something that if you practice in Missouri, you do personal injury, wrongful death, you’ve got a situation where there’s multiple people involved, multiple class one beneficiaries, maybe not everyone’s coming to you at the same time, just something to be aware of.

Amy Collignon Gunn:

Do you have that exact site?

Liz Lenivy:

I do. So the exact citation is 6 82 Southwest 3D 4 24.

Amy Collignon Gunn:

Erica, how do you feel about that?

Erica Blume Slater:

Up until that case, I think there was some other case law out there that didn’t as explicitly make that the rule as far as interpreting the statute, but we kind of operated under that framework, which is why attorneys in Missouri for the most part practice the way you mentioned Amy, of getting all the beneficiaries together to work with one attorney or if a conflict, one or two attorneys that are working in tandem that is different than Illinois, where a lot of US practice who also practice in St. Louis, Missouri, where the attorney who did the majority of the work also has a equitable reasonable argument of what portion of attorney’s fee goes to the portion of the work done by each attorney. And unfortunately may not value the parent of an adult decedent’s case as much as finding the caregivers of the children who are left behind.

I don’t like that part of attorney business, it just feels ick. I don’t like the way that that statutory interpretation translates into practice. However, with that being said, no matter what framework you’re practicing under, whether it’s Missouri or Illinois or any other state that has these types of rules that would affect the way an attorney may value the case in their own work in the case, I believe it is good practice for a family in this position to be agreeing with and working with the same attorney because an opposing counsel will take advantage of any perceived division. So to the extent that it incentivizes Missouri attorneys to gather everyone together and be working in tandem, at least for the efforts for the case to acquire a common fund, cool with that because that’s the strongest position for the family. But I don’t like the IC factor that it puts into attorneys deciding about cases.

Amy Collignon Gunn:

I appreciate the clarity and I don’t think it’s a wrongly decided case from the court, not from me, correct. Both. There was no clarity. Now one off opinion, I don’t think it’s a wrongly decided case. Certainly it is a classic, the courts interpret the statute, the legislature makes the laws, and so if we want a change then we need to go to Jefferson City, the capitol building to do that versus courthouse. So I appreciate the clarity. I don’t love the result of it because what alluded to Erica, which is let’s say that it’s the parent of the deceased adult who is bringing the claim is really investigating is hiring a lawyer and just for economic reasons, you could look at that as the lawyer and say, gosh, I’m sorry if I can’t get the whole family signed up. I can’t spend a hundred thousand dollars investigating this med mal case.

Erica Blume Slater:

More importantly, thousands of hours you might get reimbursed for the expenses, but certainly not the time. That’s right.

Amy Collignon Gunn:

And so I don’t like that result of it, but I guess the court system isn’t in place to make me happy. I don’t know. I’m still grappling with why that’s the case, but okay. So I think we’ve covered regular easy settlements, wrongful death, and the last one on my list is minor settlements. Erica, do you have a way to walk us through best practices for these?

Erica Blume Slater:

Yeah, a lot of my cases involve minor settlements because I handle a lot of birth injury and NICU or medical setting injuries for minors most often. The first thing I’m thinking about, and I’m usually thinking about this at the outset of the case, is that if the case is dealing with catastrophic injuries and they often are or permanent disabilities of any sort for a child, we’re usually looking at special needs trusts that will be established with any potential settlement funds that will hold funds that will serve that child throughout their life into adulthood for their life expectancy. And that is because many children who grow up with those disabilities and permanent injuries that are a result of birth trauma or a injury in the NICU or something like that qualify for really beneficial government services such as disability or Medicaid or Medicare at certain depending on what stage they’re at.

So a special needs trust is protecting those services while allowing the funds that you are able to acquire through your efforts as an attorney to work for them in everything else they need because of course the government support with any medical or other agencies that can provide support, there are a whole host of other things that children need to make sure that they are supported, safe and well cared for in the event that any caregiver that is in their life is no longer there because of some other tragedy or whatever is happening. So it is your job as the attorney to make sure that this child’s life is basically planned for and you are not hurting them in a way by getting them the compensation that they’re owed from your legal work. So the first thing I’m always thinking about is setting up a special needs trust.

It’s a special vehicle that we engage another lawyer who does trust in estates to write the actual trust document and the purpose of the document and what’s allowed and what’s not allowed. And there’s special tax codes that apply and all provisions in an area of law that I feel fortunate not to practice in because it is absolutely something that I would never veer into myself because it’s a completely different area of law. So that is something that we have attorneys that we bring in who help us with that piece as far as drafting the trust document. Another thing that often exists with minor settlements throughout the litigation, we’ve usually been representing the parents on the child’s behalf. In Missouri it’s called being appointed as next friend. That is how the parents stand in the shoes of the child for purposes of the litigation. Other states may have a different mechanism for how the parent or caregiver, whoever that may be, it could be if the child’s awarded the state, it could actually be a guardian ad litem or someone else appointed how they’re able to work with you on behalf of the child to pursue the litigation.

So we’re usually working with parents or caregiver or whoever has custody of the child to go through the litigation up to that point. So we are working with them also to understand early on in the case what benefits that child has and may need to be reimbursed. So I’m thinking things like Medicare or private insurance or any other benefits that they’ve received because they have some sort of disability. So those often are liens that need to be taken care of and can be held in trust in the funds that are held in the special needs trust. So you can fund the trust and continue to negotiate those medical liens as you go through this process. Another important thing, at least in Missouri, I’m sure there’s mechanisms in many other states, is that the court has to approve any minor settlement and the court in most jurisdictions in Missouri will be issuing the special needs trust. Sometimes we can get that done in the circuit court in which we’re litigating in. Sometimes we are transferred to the probate division. There’s many local rules sometimes that apply to that scenario. And depending on the size and complexity of the case, be prepared to sometimes be ushering judges in the jurisdiction about how a minor settlement looks that involves a special needs trust.

Liz Lenivy:

And Erica, if I could just jump in the last two cases where we had pretty, it was very complicated minor settlements with very serious injuries and both needed a special needs trust. And when I went to the court in both of those cases, I had the attorney who drafted the special needs trust come with me because that’s the expert who can explain what the law is, what the court has power to do, what exactly the purpose and how it will function. The trust itself, I have a basic understanding of it and I can do my best to educate the court on it, but if I have the opportunity to have the actual expert there, I’ve done that in two of the last cases I’ve had and it’s been very helpful to just have that person there at the hearing to explain this to the judge. And it empowers the judge I think too, to know that they’re doing the right thing. That is ultimately what the judge’s responsibility is. And again under Missouri statute is to just make sure that everything is being done to protect the best interest of the child.

Erica Blume Slater:

And I even take it a step further and often have the corporate trustee there when I know a case has the potential to settle, like if we have a mediation coming up or a case does settle, and I put this process into action, I get a group together of people that I’m used to working with and that I trust and have worked with several families that I’ve worked with over the past decade. And it involves the attorney who’s going to write the trust, a representative from a trustee company that we’ve worked with who their sole purpose is to be a co-trustee with the parents and manage the money which the court will need to see. And then we also use a structured settlement Embroker who can maximize and take advantage of a special tax code to be able to secure some guaranteed payments into the special needs trust in the future, which is not subject to rate and fluctuations and stock market fluctuations.

So it’s just one more piece of investment vehicles that are guaranteed and gives some stability to the trust and every situation’s different. So sometimes that team makes sense. Really the Embroker is the one that their piece may make sense or if it does amount of their piece may fluctuate depending on the situation and the size of the settlement. The first thing I do is sit down with the family and the parents or the caregiver or guardian with that team and we basically talk about that entire process and what the next step is because it’s really difficult to understand all these moving parts. And it’s very important for me to coach and guide my clients through that process because all those people we choose, including the attorney, the trustee, the co-trustee, and the Embroker are all vendors that they are hiring. I may choose them and put them together because I like working with them and I know they get me things on time and I know they don’t screw things up and the judge appreciates their work, but at the end of the day, they need to be able to ask them questions.

And it’s important for me to talk to the families I’m working with and for them to understand there’s no financial relationship between me and the people that we’re bringing in to help us through this process. We pay them their fee, but in the future they need to understand what the trustees management fees are and what the broker’s commission fee is on whatever investment vehicle they’re able to add to the trust. So that sounds like a big weird part of all that for minor settlements, but those are really the big ones where special needs trusts are involved. And all of that has to start immediately because it’s such a long process. And then drafting the documents to ask the court to approve your settlement is it takes weeks and weeks.

Amy Collignon Gunn:

So it kind of goes back to one of the things that I’ve always believed and been taught, which is really nothing good happens between the day that you settle a case and the day that it’s actually over everything that happens. It is still a lot of work, particularly when you’re dealing with minors and you think your job’s done the day you settle the case. And it is certainly

Erica Blume Slater:

Not. It is just the next phase starting basically. And when we started recording, I was trying to look on my phone. You have, I have this picture in my mind of a chart I’ve seen, and it’s a bell curve of how your clients feel about a successful settlement. Like litigation’s ramping up, you’re doing well, you’re doing well, you settle a case and everyone’s happy on that day hopefully. And it only goes, client satisfaction only goes down after that day, the longer and longer it takes to get to that point. So to combat that, I think the most important thing is to be an extremely close touch with your clients during that time and to have prepared them, even if at the initial meeting to discuss with them what to expect in a case that you’re litigating for their child the first time they hear the term special needs trust should not be at mediation.

You’re going to know when a case will involve that. It should be at the first meeting and they should know at every step of the way what you are doing, what meetings you have to set up. It’s taking so long to get this meeting with everyone you need to bring to the room because you’re coordinating the schedules of three different busy professionals. You don’t want clients to sit there wondering what you’re doing to get a settlement to go through because any layperson’s understanding would be once a settlement is achieved, the case is over. And of course that’s not true with a minor settlement that you need approved by a court.

Liz Lenivy:

And Erica, I think it’s such an important point. It should be reemphasized that first meeting you have with the parent of an injured child, that’s the first time they should be hearing potentially the term special needs trust or at least explaining where the money goes and how the money is supposed to be spent. And then it’s for the benefit of the child, it’s for the benefit of the child. And I will say the 99% of the time I explain this to a parent and they go, good, I’m glad to hear I’m fine with these protections in place. I want to make sure that this money is for their benefit, for their health needs, for their education, whatever future expenses they may have that it’s for them. And then every now and then I get someone who seems shocked that there are these protections in place and it’s always a good, I’m not saying that these are bad parents, I’m just saying that they may be uneducated on the process.

It’s my job to educate them on that. It’s a good reminder whenever that in the very rare instances where I get pushback from a parent before I’ve even agreed to take their child’s case, but where I get pushback that, okay, look, I’m telling you this now and this is the law. I’m not doing this. I want to be mean or because I don’t trust you or I think you’re a bad parent, I don’t know anything about you. I’m telling you this because it’s important for you to understand that if we are successful in some sort of resolution for your child, your son, your daughter, that this is what’s going to happen and this is what has to happen because that is the only way we can effectuate this. And are you on board with me here? Are we on the same page from day one? So that’s why I think it’s important to reemphasize that you should be having that conversation early and then as you are nearing or what you think may be nearing settlement increase, having that conversation. So it’s already sort of deeply embedded in their brain of okay, how this has to happen.

Erica Blume Slater:

And I think what you’re probably identifying is the law doesn’t allow any sort of payment to the parents for the obvious pain and suffering and worry and frustration and stress and just the very difficult situation of raising a child with special needs and permanent conditions. The law doesn’t allow compensation for that. However, the money that we are able to recover for children in those situations where it was somebody else’s fault who caused those damages, the family benefits from what we’re able to do for the child. So special needs trust can purchase houses for families that house their child, the transportation, anything that benefits the child, the secondary benefit to the family can be realized. It’s just not owned by the parents. And that’s kind of the understanding of the trust that goes to benefit. The child owns the house and that’s kind of the understanding that needs to be clear so there’s no dipsy doodle in that conversation.

Amy Collignon Gunn:

One thing I want to interject in the minor settlement discussion is a relatively new statute in Missouri, 4 36 point 700 and it’s entitled Missouri Statutory Thresholds for settlements involving Minors Act. And it used to be the case that if a net amount of $10,000 or less was going to the minor, then the judge could basically give it to the parents with this notion that they were going to use it in the best interest of the minor and that would be as long as there was other money going to other places safeguarded, that kind of thing. So if we would have a case where annuity was purchased and there was like five grand leftover, you could feel good about giving it to the parents to use for the child’s benefit. I believe that has been replaced by this new statute. And this now deals with cases worth $35,000 or settlements of $35,000 or less.

And it allows for a mechanism where you actually don’t even have to get a lawyer. It can be filed in the court and the order can be entered upon an affidavit of the parent or the conservator, I’m sorry, upon the affidavit of the legal custodian of the minor, indicating that the money will be put into an UGMA account as long as the money is put away according to the statute and safeguarded until the minor turns 18. And that has been kind of nice to have because sometimes you struggle with these smaller settlements, you have to get a lawyer, you have to file these things and it just wasn’t very economical. And so this is just something I want our listeners to be aware of. If you’re dealing with minor settlements that are $35,000 or less,

Erica Blume Slater:

And it comes up in our practice a lot if we’re handling a car accident where someone with state minimum coverage is the defendant driver and state minimum coverage is $25,000 in Missouri. So it’s under that threshold and you can recover that amount and then we’re likely focusing our efforts on pursuing underinsured motorist coverage on the family’s own policy or whatever that is, or a different tort visa or whatever it is. So that has made that situation much less cumbersome from a paperwork standpoint.

Liz Lenivy:

Okay, so we’ve talked about special needs trust, which is where you’re trying to protect. I always say I’m trying to protect government benefits for your kids. I’m trying to make sure they don’t lose their Medicaid, they don’t lose whatever other benefit they may be entitled to. What happens though, if we have a child, you get a great settlement for them, but we have a child who is under their parents’ private health insurance, they don’t have any government benefits. What conversation are you having with that parent to advise them on where and how to properly safeguard the net settlement for their child

Amy Collignon Gunn:

In that situation? I typically recommend that the parent or custodian talk to a structured settlement professional. These are essentially annuities that are purchased. There’s a special section of the tax code that allows an annuity to be purchased directly from the defendant or the defendant’s insurance company to the life company. And it allows that money to grow for as long as necessary tax free. And that can be a big benefit. And it’s crucial that the money go directly from the defendant’s insurance company to the life insurance company because there can’t be even constructive receipt. So in other words, the full settlement amount comes into our escrow account and then we send it to the life company. Nope, it’s broken. It will not meet the code requirements and it’s a way for the parent or guardian have a certain amount of control over that money. So for example, let’s say there’s a hundred thousand dollars that is the net settlement to the child.

You could buy a hundred thousand dollars annuity and let’s say the child is still three or four years old and by the time the child turns 18 that a hundred thousand dollars could have doubled, maybe even tripled depending on the market. And the payout can start at 18. Now you say, oh, I don’t know if I want my 18-year-old to get $300,000 and I would be with you there. What’s nice about annuities is that you can set up payouts for pretty much any time in that child’s life. They normally do start at 18 because you’re anticipating paying for higher education. So you can pay out at 18, 19, 20, and 21 a certain amount to help pay for tuition, and then you can pay out either lump sum payments after that when they turn 24, 25, 30, whatever makes sense, or monthly payments, they can start paying out a thousand dollars a month for as long as it lasts.

And it’s really a nice way for a parent or guardian to be able to have a say in what this child does with his or her money even after they turn 18 because there’s just the general notion, not a hundred percent accurate, but a general notion that you don’t really want to give a whole bunch of money to an 18-year-old. You fear what could happen to that money, what could happen to that now young adult who has that kind of money, what kind of folks it would attract, and you just really worry. And so with the tax benefit and the ability to control, at least in part that money, it is always my recommendation now, is it a hundred percent going to be followed? No, there are ultimately, and this is where I get in trouble, what is our job? Our job is to litigate the case and either try it to resolution or settlement and then advise our clients about best ways to deal with that settlement money.

But ultimately it’s not our job or our place to dictate specifically what’s done with it. That’s where I have a hard time letting go. You’ve spent so much time and energy getting this case where it is hopefully in a good place to settle or to get a jury verdict and then you have to kind of walk away and it’s kind of like a mom I look at, especially with minor children, I feel like I’m walking away from them, but you have to catch yourself because what I believe should be done with that money isn’t necessarily right and it’s really not my place ultimately, actually what’s really nice with a minor settlement is that the judge has to approve it. That gives you comfort and cover sometimes that the judge has taken in all the information and made a final decision about where the money goes with annuities.

Again, it’s just an easy way to make sure that money is protected. Can they be busted? Yes. And what that means is let’s say the kid turns 21 and is like, I don’t understand why I can’t have my money. I want all my money now. And maybe there is an actual need for the money. They can hire a company, go in, that company has lawyers, that lawyer goes to the court, gets the money released, takes a hefty fee, but allows an avenue for the court to get an order entered to have the life company give the child whatever is the value of the money at the time. Again, actually I’ve had that happen. It’s heartbreaking. There’s nothing I can do about it. I just learned about it sort of happenstance afterwards, just called it heartbreaking. But again, I mean that’s sort of my thought about it, but they’re an adult.

It’s their money they can do with what they want. My only thought is, and you have some clients who are getting whispered at by other financial planners, other family members, oh no, go see my guy at blah blah bank. This also happens and that person at the bank wants all of it and fine, they want all of it and they say, I’ll buy an annuity. It’s the same difference. But it’s not just please be aware that it’s not because that tax benefit, because the money then comes to me, then goes to them and it’s broken. The chain is broken and you’re not going to get that tax benefit. And anytime that money comes to that kid, it has to be reported as income or whatever it’s called under the tax code and they’re going to have a tax consequence. And that may not be something that is easy to deal with and it could very well mess up the whole scheme of what they wanted to do with that money. So annuities are an interesting thing in my 30 years, other than the one or two times that I’ve learned after the fact that they’ve been busted, they have been very useful and a very safe and comforting place to put a minor’s money.

Erica Blume Slater:

I think the overview here is that these kinds of things, if you’re listening to this and you’re like, this sounds really complicated. The important thing is to talk to people who have dealt with these settlements, especially if you have a high value settlement that involves people who are receiving government benefits or people. I’ve run into this a lot even with adult settlements where I have someone who has been a lifelong laborer or who has lived below the poverty line their entire lives, and here we are with a seven or eight figure settlement for whatever happened to them, and how do you hand that amount of money to someone and say, go manage this. So we could talk with that client and decide based with an annuity, what kind of income that person may want to make to mimic just replacing income and having a guaranteed income and then all the rest that’s not tied up in an annuity, do whatever. And then that person has some sense of security no matter what happens with the other amount, which can provide security for minors as well, depending on the situation.

Amy Collignon Gunn:

I think we have covered regular settlements, wrongful death settlements, minor settlements. There are many things that are involved in all three of these types of settlements that we haven’t covered in death, but we wanted to give an overview of things that we see on a regular basis and to make everyone aware that they’re out there and hopefully give some thoughts or advice about the best way to handle them. Thank you for listening to another episode of Heels in the Courtroom. We so much appreciate you guys hanging with us all these years. Please feel free to let us know any thoughts you might be having at comments at heels in the Courtroom Law. Thank you. Bye.

Announcer:

Heels in the Courtroom is brought to you by the Simon Law Firm at the Simon Law Firm pc. We believe in the power of pooling resources in order to create powerful results. We often lend our trial skills and experience to lawyers around the country to achieve better results for their clients. Our attorneys welcome the opportunity to work with you on your case offering vast resources, seasoned litigators, and a sterling reputation. You can contact us at 3 1 4 2 4 1 2 9 2 9. And if you enjoyed the podcast, feel free to share your thoughts with Amy, Liz, Erica, Mary Elizabeth at Heels in the Courtroom Law, and subscribe today because the best lawyers never stop learning.

Continue Reading