by John Darer® CLU ChFC MSSC CeFT RSP CLTC
Some Settlement Planners Debate the Notion that Structured Settlement Factoring is Settlement Planning
A few months back I participated in a rather heated debate with a number of individuals in my industry on this very question. It is the opinion of this author that factoring has absolutely nothing to do with settlement planning.
My opponents in the debate were settlement planners who purportedly work exclusively or primarily have a fiduciary responsibility to plaintiffs and plaintiff’s attorneys. For those who aren’t “in the know”, factoring is a term that describes the act of selling cash flow (e.g. structured settlement payments, lottery payments, accounts receivables and other deferred payments) in exchange for a present value lump sum. For the purpose of this post we shall focus on structured settlement factoring.
My opponents in the debate would have you believe that the mere mention of the possibility that a plaintiff could sell their structured settlement payments by virtue of IRC Section 5891 (if they obtain a “qualified order” pursuant to one or more state’s structured settlement protection statute) is enough to be a part of the concept of settlement planning.
I couldn’t find a single client who agreed that factoring is part of settlement planning. If there is a plaintiff attorney who feels that it is, then I challenge you to speak up and respond to this post!
At the NSSTA meeting in Washington last month a life company representative related to me a conversation that he had with a prominent southern trial lawyer. As was related to me there is a concern at ATLA over factoring. The concern is that plaintiffs with structured settlements will sell their structured settlement payments at deep discounts and, if they are very likely to do that, “why put them in structured settlements at all?”. On Thursday this concern was echoed by a fellow conference panelist to a group of attorneys and cited in a white paper among other reasons not to do structured settlements. I should mention that my fellow panelist is a Senior VP at a prominent investment house seeking money to manage, however her comments clearly lend credence to my side of the debate.
Structured Settlement Factoring is a Solution to a Crisis But Not Part of Settlement Planning
In the opinion of the author, that factoring serves as a solution born out of desperation, utilized only after all other sources of cash have been exhausted to critical needs. While it may be a solution, factoring does not constitute part of settlement planning The author unaware of any factoring companies or their representatives who function as settlement planners. That is where the matter begins and ends.
If you are a plaintiff or plaintiff attorney you owe it to yourself and your client to find out where your adviser sits on this question.