Law Times

LAW TIMES / APRIL 7, 2008 BRIEF: STRUCTURED SETTLEMENTS PAGE 13 Structured settlement may be wiser way to go BY KIRSTEN McMAHON For Law Times t's been an unpredictable and uncertain year for the econo- my to date. There's much de- bate about whether or not we're in a recession. Whatever the answer may be, it's clear that the recent market turmoil and credit crunch in the United States is creating a roller-coaster ride when it comes to investments. For those personal injury plain- I tiffs receiving significant awards, plunking their money down into speculative investments in today's economy may make an already difficult situation worse, say ex- perts in the field. A structured settlement — a fi- nancial or insurance arrangement, including periodic payments, that a claimant accepts in order to re- solve a personal injury tort claim or to compromise a statutory periodic payment obligation — may be the wiser choice. "My experience is that's it's al- ways a difficult time to invest, be- cause when someone is profoundly injured, because they have a lot on their hands just struggling with re- habilitation and other issues, with- out the additional burden of huge amounts of money," says Frank McKellar, president, McKellar Structured Settlements Inc. "That only adds another bur- den to the whole transaction. What they tend to do is they pan- ic, because they're not steely-eyed professional investors, so they'll go into a mutual fund. But when the mutual fund drops they'll take their money and go somewhere else. They get panicky that way," he says. McKellar adds that this is the first time he's considered where he invests his money, never mind this clients. "This ever-increasing snowball of a credit crunch is going to seep through into ordinary things, be- cause the money is being sucked out of the system like oxygen out of a tube. It's going to affect all of us before it's done — and prob- ably, more significantly, this year," he says. John Rousseau, principal, of McKellar Structured Settlements Inc., says lawyers and plaintiffs may be surprised with the robust returns that typical structures are generating. "At the moment the typical Structured Settlements BC LT 4/6/05 2:54 PM Page 1 structure is generally generating a yield in the 4.5-per-cent range, which is substantially higher than what long government bonds are yielding; it's higher than what GICs are yielding. The structures are a reasonable investment when com- pared to any other comparably se- cure investment," he says. "The difficulty is that many plaintiffs don't compare them to comparably secure investments. They compare them to specula- tive investments. But even there, structures have two additional advantages in terms of the yield. The first is, obviously, that they're tax-free, so that if one were in the 33-per-cent marginal tax bracket, you'd have to generate 50 per cent more return from any other investments to pay one-third of your return in tax and end up with what a structure is going to leave you. Secondly, most of the structures that we do for signifi- cantly injured people are provid- ing for lifetime payments." Bob Baxter of Baxter Structured Settlements takes a different course and says that there are two sides to the structures argument and that it always boils down to individual need, not the state of the economy. "If the person is good at mon- ey management, there are people making money in this market. If they have the ability and they are astute enough, who says they should take a structured settle- ment?" he says. "But some people have recov- ery to worry about; they have em- ployment to worry about; they've got family things to worry about — their own mobility. There are so many factors other than the economy for reasons for looking at a structured settlement," he says. "Every time I talk to some- body, a lawyer will say, 'Go and visit my client.' I'm going to talk to them about the need. Do you need a structure? Can you man- age money on your own? How capable are of you of doing this? And how long do you want to do it for?" Bernard Younder, president of TSSC Structured Settlements, says structures aren't a sexy or ex- citing product. "When I talk to lawyers or people in the insurance industry, I say, 'Yeah, the product is as bor- ing as can be, but, my God, does it ever work well.' It really helps people out who don't understand a lot about money management and it guarantees the safety of their money and no one's ever lost money on a structured settle- ment," he says. "You don't have to look in The Globe and Mail to see how you're doing before you make the coffee in the morning. It's dull and boring but it's great. It really is. The only thing they have to worry about is where we should send the money." McKellar, whose company just celebrated its 30th anniversary, says, "The one thing we can say about the structured settlement is, as our letterhead says, 'Billions of dollars invested and not a penny lost.' And we can add: not a pen- ny taxed." LT Life Has Enough Great Mysteries 1.800.263.8537 www.henderson.ca Your Partners In Service® Since 1981 Bernard Younder, President, 121 Willowdale Ave., Ste. 305, Toronto, ON, M2N 6A3 Tel. 416-218-0110, Fax 416-218-0114, Email tssc@wwonline.com SUITE 501, 3 CHURCH STREET TORONTO, ONTARIO M5E 1M2 TEL:(416) 947 1266 FAX:(416) 947 0766 SETTLEMENTS@BAXTERSTRUCTURES.COM New address as of April 21st www.lawtimesnews.com

• Cover