Law Times

Page 12 March 25, 2013 �� Law Times ��� BRIEF: STRUCTURED SETTLEMENTS Case shows value of structures BY CHARLOTTE SANTRY Law Times P enderson_LT_Mar25_13.indd 1 13-03-20 ersonal injury claimants whose marriages collapse can face the triple whammy of having to transfer financial settlements to an estranged partner. This can happen if they invest their settlement in property that���s later split as part of divorce proceedings. Booth v. Howser demonstrates the risk. The case also suggests that a structured settlement, which divides the money into regular tax-free instalments, may offer protection to claimants facing this scenario. After receiving $275,000 in 2005 following a motor vehicle accident, Kelly Booth used some of her settlement towards paying off the mortgage on a house in Baldwin, Ont., that she shared with her partner Joseph Howser. The couple separated soon after and the house was sold four 12:22 PM years later. Booth took half of the $200,000 net proceeds while Howser took $20,000 and $88,000 remained in trust. Booth claimed all of the $88,000, saying Howser would be unjustly enriched if they divided the money. Superior Court Justice John McDermot���s decision last July stated: ���The applicant���s lawyer, Lawrence Mandel, offered a structured settlement, but Ms. Booth elected to take a lump sum settlement and to pay off the mortgage on the jointly owned common residence. ���Mr. Mandel was concerned about this use of the funds, especially as these funds partially constituted proceeds of a claim for pain and suffering, normally exempt from equalization under the Family Law Act.��� In a memo to an associate dated May 12, 2005, Mandel wrote: ���I warned her about the fact that she is putting into the matrimonial home and that if there is a breakup, the husband What do your clients need? The means to move on. Guaranteed. ��� Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. �� Pre- and post- settlement consultation and support Need more information? �� Caring professionalism for over 30 years �� No fee to you or your clients Contact us at 1 800 387 1686 or baxterstructures.com gets half the value of the house. ���She is aware of that and still wants to pay off the mortgage and I am satisfied, as long as she knows what the potential repercussions are if there is a break up, and she understands that.��� The pair also put the settlement money towards a hot tub and a pool for the house, a horse for their daughter, and paying for a friend���s breast implants. McDermot threw out Booth���s unjust enrichment argument on the grounds she knew she���d be providing a benefit to Howser when she paid off the mortgage. However, as Booth���s financial decision had denied her use of the settlement funds, he awarded her a $40,000 lump sum in spousal and child support payments from Howser. He also had to pay back $25,132 in credit from remortgaging the joint home. While Booth retrieved some of her money, to what extent would structured settlements protect others who find themselves in a similar position? Barry Chobotar, managing partner of Henderson Structured Settlements LP, says: ���Because the structured settlement is nontransferable, it can���t be cashed in, so is protected. Every time we sit down with someone, that���s one of the advantages we raise.��� The injured party doesn���t own structured settlements, meaning they can���t be taxed or handed to former partners as a result of equalization claims. Chobotar highlights the importance of retaining the funds for the personal injury claimant���s sole use. ���The injured parties receive this money to replace a sum they have lost. It���s very important to protect the injured party so they can continue to receive funds to replace their lost income or provide necessary medical and rehabilitation treatment that has been recommended for them as a result of the accident. That money is earmarked for something.��� For this reason, parents of young accident victims also sometimes favour structures given the knowledge that their child���s payout will be protected from any future partner with whom they may buy property or other assets, he says. Settlement funds invested in a structure can, like other assets and cash, be taken into account in spousal and child support calculations. Ralph Fenik, president of McKellar Structured Settlements Inc., says: ���Clients shouldn���t expect any sympathy from the court in respect to the issue of child support. But with spousal support, by definition the people we���re working with have significant needs and a sympathetic court will take that into account.��� What responsibility do lawyers have to make clients aware of these issues? Bob Munroe, a personal injury lawyer at Ross & McBride LLP, See Yields, page 13 Baxter_LT_Jan7_13.indd 1 www.lawtimesnews.com 13-01-02 10:11 AM

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