Law Times

Law Times • November 30, 2009 BRIEF: STRUCTURED SETTLEMENTS PAGE 13 he volatility of financial markets has meant a ban- ner year for structured settlements, say those who pro- mote the arrangements as secure and tax-free ways to provide in- come for the seriously injured. Both lawyers and judges are also advising those receiving large insurance payouts to con- sider structured settlements, says Bob Nigol, managing partner of Henderson Struc- tured Settlements Inc. Structured settlements are arranged for people who are no longer able to manage their own financial affairs. Some people, believing they or their financial adviser can outperform them, choose to invest their payouts themselves during bull market times. However, Nigol says the events of last year have given everyone pause. "I can unequivocally con- firm that the past year, in terms of structure volume for our firm, and I'm sure that is true of the others as well . . . has been phenomenal," he says. "Struc- tured settlements are generally, almost invariably, appropriate in the cases of parties under disability, and what I mean by parties under disability are people that are not capable of managing their own finances." That said, Nigol advises that in Ontario, the judicial system also promotes structures for people unable to handle their own affairs. Nigol says lawyers in Ontario have also leaned to- ward structures for the severely disabled in the past. Today, law- yers are promoting them even for those people competent enough to manage the payouts. "I think it is fair to say the lawyers themselves have fallen victim to exactly what they don't want their clients to fall victim to," he says. "And that is, the debacle of Sept. 14, 2008, has reduced individual portfolios of people in those positions, like lawyers, by 30 or 40 per cent. "That just trickles down. If they themselves as competent, intelligent beings lost a signifi- cant amount of money in vari- able investments, investments that are not guaranteed, then clearly they are going to endorse more vociferously guaranteed investments for their clients, particularly one that is tax-free, [as] incredibly attractive." Structured settlements are available for people receiving compensatory damages for personal injury or death. They work much the same as guaran- teed tax-free annuities or pen- sions. The agreements were cre- ated by the federal government as an incentive for people to in- vest compensatory damages to provide guaranteed income. Structured settlements carry the least risk of any investment on the market. They have three levels of guarantee, the first be- ing the assets of the company holding the money. If payments Untitled-3 1 Billions of dollars invested, not a penny lost. The McKellar Structured Settlement™ McKellar introduced the concept of structured settlements in Canada in 1979. With almost 40 people at your disposal, we continue to set the standard today, providing safe, reliable, tax-free investment options for injured parties, while lowering claims costs. McKellar. Now you're sure. Volatile markets provide boost to structured settlements T BY KELLY HARRIS Law Times can't be made, Assuris, similar to the Canadian Deposit Insurance Corp., covers $2,000 per month or 85 per cent of the amount, whichever is greater. As well, the owner of the contract covers whatever is not made up in the first two levels of guarantee. Canadian insurance compa- nies are regulated by the Office of the Superintendent of Fi- nancial Institutions. One of the injured parties than a structure," he says. "The tax-free nature of structures tends to be certainly an attraction, perhaps the grease for the wheel, but ultimately I think the driving force is the fact that it is so secure, and it is the secu- rity of income . . . that ultimately makes people decide on the struc- ture approach to settlements." Fenik also says structures are not an all-or-nothing proposi- effect on whether personal in- vestments are worthwhile. For example, the marginal tax rate in Ontario combining federal and provincial levies for the first $36,848 of income is 21.05 per cent. In that case, people doing their own investing would have to outperform a structure by 21.05 per cent just to break even. "If you look at parallel in- vestments that are conservative, roles of the office is to make sure insurance companies operating in Canada have enough capital and surplus to satisfy their obli- gations to their policyholders. Ralph Fenik, president of McKellar Structured Settle- ments Inc., says the security and tax-free status are what really make structures so attractive. "There really isn't any other investment that is as secure for tion. He refers to up-front cash being provided in settlements to allow injured parties to get their affairs in order and pay off things like credit-card debt so they can live better on what is often a fixed income. For those who believe they may be able to outperform a structured settlement, Fenik points again to the tax-free nature, an issue that has a big like [guaranteed investment certificates] and perhaps some bonds . . . the rate of return is going to be somewhat less than it is on the structure," he says. "But even if it were the same . . . one is taxable; one is not. "Again, it is essentially a no- brainer to opt for the tax-free investment. . . . On the other hand, if a person is prepared to take risks, could they out-invest a structure? Perhaps, but if they think they can, the statement that they are making is that they have the ability to out-invest a totally tax-free investment." Structures are guaranteed, so people know precisely what they are going to be getting each month, says Fenik, add- ing that there are also built-in considerations for cost of living and inflation. If you look at parallel investments that are conservative, like [guaranteed investment certificates] and perhaps some bonds . . . the rate of return is going to be somewhat less than it is on the structure, but even if it were the same . . . one is taxable; one is not. As a result of such advan- tages, people like Kyla Baxter of Baxter Structures are also seeing more lawyers advising structured settlements for their clients. "Although the outside market stands as our chief competitor, we have observed that an in- creasing number of lawyers are recommending that their clients pursue structured settlements," she says. LT www.mckellar.com GUELPH 1-800-265-8381 McKELLAR STRUCTURED SETTLEMENTS INC. HALIFAX 1-800-565-0695 www.lawtimesnews.com EDMONTON 780-420-0897 USA 1-800-265-2789 11/25/09 11:48:41 AM

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