Lightning Can Strike Twice When a Decision Is Made NOT to Structure

Volatility of non-guaranteed investments is the second lightning strike after settlement.

Havoc is defined as “widespread destruction.” When a decision is made NOT to structure a settlement based on emotions alone, that is exactly what may ensue. Bad things happen in life, but when settlement dollars are prematurely dissipated, lightning can strike twice. It’s natural for emotions to come into play during negotiations, given the inherent adversarial positions of the parties, but once a settlement has been reached, it’s time to embrace rationality … sometimes easier said than done.

Whether you represent the injured party or are working with an injured party, you may be called upon to offer advice as to what to do with the ultimate recovery. While offering specific investment guidance probably falls outside the scope of your expertise, there are some general principles that you may consider sharing:

• There is a difference between guaranteed and non-guaranteed. Market-based investments involve the risk of loss of principal. Many individuals or families can no longer afford any meaningful risk after an accident, particularly when the ability to earn income has been compromised.
   
• PTSD – Post Traumatic Stress Disorder is a natural byproduct of an accident/injury. Non-guaranteed investments and the volatility that accompanies their ownership can ADD to stress levels and create PSTSD (Post Settlement Traumatic Stress Disorder). The guaranteed nature of a structured settlement often REDUCES stress by providing peace of mind and improving post-settlement quality of life.
   
• The right answer rarely involves only one solution. If the settlement resources are adequate, guarantee the really important obligations first (RATIONALITY). With that foundation in place, non-guaranteed investments can create opportunity (this is different than GREED), but without being as gut-wrenching during a major downturn in the market.
   
• Lastly, while this isn’t by any means an exhaustive list, structured settlement annuities are highly customizable, income TAX-FREE vehicles (per IRS Code Section 104(a)(2), specifically created by Congress for the INJURED.
  .

Promises Kept Since Before the Civil War

Structured settlements are funded with structured annuities from some of the finest life insurance companies in America – some of which have made good on their guarantees since before the Civil War. These companies hold general portfolios that contain bonds, stocks, real estate and selected private placements not available to the general public.

The overall IRR (Internal Rate of Return) of a structured annuity is also often higher than what people expect. Add to this the fact that the plaintiff doesn’t have to pay income taxes or ongoing investment fees or costs, and the EFFECTIVE YIELD is generally somewhere between long-term stock and bond average returns. In other words, it is INVESTMENT NEUTRAL from a performance standpoint as compared to a balanced investment portfolio (and often significantly better depending on the level of taxes, fees and market timing). The difference: QUALITY OF LIFE – PEACE OF MIND – GUARANTEED as opposed to NON-GUARANTEED.

Be open to a structured settlement, whether you represent the plaintiff or are on the defense side of the equation. To begin the discussion, contact your Ringler Advisor and allow them to help you help everyone involved.