Law Times

Law Times • November 25, 2013 BRIEF: STRUCTURED SETTLEMENTS Page 15 Case considers effect of family law issues on structured settlements BY CHARLOTTE SANTRY Law Times A judge has rejected a mother's claim to have her paralyzed ex-husband's support payments based on the entire damages award received through a structured settlement. The Superior Court of Justice decision confirms that damages awarded for medical costs don't count as income for the purpose of calculating spousal and child support payments. Daniel Mason and Jennifer Mason separated in February 2012 and have joint custody of their two young daughters, according to Justice Helen Pierce's decision this fall in Jennifer Lyn Mason v. Daniel Mark Mason. Daniel suffered a severe injury in a motor vehicle accident when he was 17 that left him paralyzed from the waist down and with compromised functioning of his upper arms and hands. The court issued a damages assessment of which roughly a third, or $600,000, was for his loss of earning capacity. The rest of the award was mainly for the costs of his ongoing care. For family support purposes, he put his annual income as $117,415, nearly all of which was from the settlement. However, his ex-wife argued his actual income should be $187,000 to account for the fact that structured settlements are tax free and to include a lump sum he receives every five years. "The family relied on the whole of the father's income from the structured settlement to support their lifestyle and thus, his income should not be reduced for purposes of calculating support," according to the decision's summary of one of the ex-wife's arguments. The father submitted that annuity payments didn't count for the purposes of calculating child support payments. The 2004 case of M.K. v. R.A.S. had confirmed that fact, he suggested. M.K. also underscored that "the portion of the damages award attributable to loss of earning capacity is properly considered to be income within the meaning of the [child support] guidelines," wrote Pierce. By contrast, Pierce added: "The court also held that costs for future care related to his needs arising from the accident are personal to the recipient and should not be imputed to him as income." The court in that case also declined to "gross up the income" to reflect the tax-free element, Pierce noted. Daniel, who was 48 at the time of the decision, "will never work," according to Pierce. His expenses include an elevator; a nanny; drugs; medical supplies and equipment, including $500 a month for wheelchair replacement; and capital costs such as a specialized van with a lift. There are a variety of reasons why clients He also needs income to support the ered in a family law scenario," says Kyla Baxter, may be wise to avoid attributing too much of children when they're in his care, Pierce president of Baxter Structures. "We counsel all our clients that should they their settlement to future earnings, says Jim pointed out. Pierce concluded the father's income for find themselves in a separation or divorce situ- Moore, head of the legal department at McKelthe purposes of child support was a third of ation that it is imperative that they have their lar Structured Settlements Inc. The situations include clients later declared $117,415 or $39,099 stemming from the pro- family law lawyer contact us immediately so portion of his settlement aimed at replacing his we may fully explain to them what a struc- bankrupt or who go through a divorce or want tured settlement is and how it should be treat- to claim disability payments. lost earning capacity. But these possibilities are often "off the radar Grossed up by 18 per cent to allow for ed when it comes to assessment of income," screen" of clients, says Moore. tax, this became $46,137. And in any event, it's not alPersonal injury lawyer This is a very interesting topic and one that is not completely ways clear at the time of putting Alfred Kwinter, a foundblack and white with respect to how the structured together the settlement how the ing partner at Singer Kwinsettlement is considered in a family law scenario. costs break down. ter, says the case shows the "There are all sorts of casimportance of considering how much is due to loss of earnings in any she adds, citing the differences between family es where there never, ever is that kind of breakdown, especially for capable adult clicosts breakdown drafted during settlement and personal injury law. Barry Chobotar, managing partner at Hen- ents who don't require court approval," says negotiations. "If you think you might be in a position derson Structured Settlements LP, says the po- Moore. In cases where there was a breakdown at where you will have to pay support down the tential for support payment calculations to inthe time of the settlement, it may still be posroad, think about the costs you're responsible clude settlements is something his firm always sible for someone to claim their situation has [for] paying," he says in summarizing what he mentions to clients. Mason is "consistent with previous court changed and for a court to take that into actells clients. It might be wise to err on the side of cau- decisions where they looked at the amount of count in support payment calculations, says tion when it comes to calculating lost future either loss of earning capacity or future loss of Kwinter. "If after a couple of years you can show [the income," he says. earnings, he advises. In most cases resulting in a large settle- client's care needs] are costing $9,000 a month "This is a very interesting topic and one that is not completely black and white with respect ment, the largest component of the award is instead of $2,000 . . . if the evidence is there, a court can do that," he says. LT to how the structured settlement is consid- for costs associated with care, he adds. STEVE NOYES I. T. Consultant Volunteer The McKellar Structured Settlement™ Financial security. Guaranteed payments. 100% tax free. Some decisions are easy. Untitled-1 1 www.lawtimesnews.com 12-05-08 11:11 AM

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