Lifetime Security


It’s one thing to win a big settlement in a lawsuit. It’s a whole other matter to manage that money the right way to make it last.

That’s why there’s a growing trend in legal circles to use structured settlements with sizable lawsuit payouts. Instead of a lump sum payment, the settlement can be arranged to provide regular income for the victims for 20 years or more. The advantage for injury victims or other lawsuit victors is that the structured settlement give them greater long-term financial security by assuring them a stream of income for many years.

That helps ease one of the main risks of lump sum settlements: That the victim spends or invests the money unwisely and blows through their nest egg in a matter of years, leaving them with continued medical expenses or other costs, without a steady source of income.

“Instead of getting $1 million in cash, they’re getting lifetime security,” said John T. Bair, the president of Forge Consulting, a Buffalo structured settlement company that opened earlier this year.

They also get a major tax break. Under the current law, passed 20 years ago to give beneficiaries who won big payouts after being severely injured or disabled a big incentive to use structured settlements to guarantee them a long-term source of income, the payments are free from federal and state taxes.

The settlements can be structured any number of ways, from simply providing a steady stream of income, to giving the victim a portion of the award as a lump sum and putting the rest toward a structured settlement, or arranging it so larger sums are available at certain points in the future, such as when a child’s college tuition bills will come due. Most settlements are invested in annuities.

“A structured settlement can tie into your life in ways that no lump sum can,” said Randy Dyer, executive vice president of the National Structured Settlements Trade Association in Washington, D.C.

Structured settlements also have gained popularity as a less expensive way for insurance companies to settle lawsuits, since $1 million paid out as a stream of income over 20 years is less costly than $1 million paid out in a lump sum.

“What a structured settlement does is allow greater flexibility,” Dyer said. “It bridges that gap (during settlement negotiations) between offer and demand.”

As a result, more settlements are being made as structured settlements, with about $6 billion in annuity premiums written on the annuities issued as part of structured settlements last year, the trade group said.

While Bair said structured settlements can make sense for any award of more than $10,000 — and for any payout involving a child — the option becomes more common. A 1997 survey by the Insurance Services Office found that structured settlements were used by nearly 30 percent of all claims of $1 million or more, but less than 7 percent of the time on losses of $75,000 to $99,000.

Bair, a West Point graduate and former Army helicopter pilot, started out in the structured settlement business at the suggestion of a friend’s father and opened the Buffalo office of a national settlement firm four years ago.

Bair, who grew up in Oregon and came to Buffalo after marrying Amy Foschio, the daughter of U.S. Magistrate Leslie G. Foschio, then founded Forge with three other partners, including Howard T. Saperston III, earlier this year.

Forge, which now has 15 employees and is based at 737 Main St., gets about half of its clients from court cases in Western New York, but the company also has offices manned by other partners in Georgia and Mississippi to expand the firm’s reach. The firm also has an office in Oakville, Ont.

The key to getting business is establishing relationships with lawyers, which is why Forge is active in legal trade groups and organizations.

That approach also helps the company gain exposure in national legal circles while keeping its base in Buffalo.

Bair said Forge, which mostly works with injury victims, ideally prefers to get involved in a case in the early stages, even when it’s far from certain that a case will produce a substantial damage award. The firm typically receives a 4 percent fee.

“We’re the settlement adviser and lay out the choices for them so they can make a good choice,” he said.

“It’s about taking these people through a life planning event,” Bair said. “You try to coach them into something that is going to serve them well.”

A bill signed into law earlier this week by Gov. George Pataki allows structured settlement firms to waive their commissions on agreements crafted for the families of victims from the Sept. 11 terrorist attacks. More than 50 consultants, including Forge, have agreed to handle 9/11 settlement cases for free, Bair said.

“This is not about sales,” he said. “It’s about doing what’s right.”

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