The Settlement Alliance

Are You Making Assumptions About Client Needs?

Are You Making Assumptions About Client Needs?

Jul 20, 2015

Recently, one of our consultants met with a young widow, Kelly*. The mother of two young girls, she was blindsided by the sudden death of her husband, Mark*, as the result of medical malpractice in the state of California. Within two short weeks, Mark was gone, leaving Kelly and her daughters devastated.

Kelly received a net settlement of $500,000 and other than possible mental health counseling, there were no future medical expenses. Kelly held a stable job and had an excellent earning capacity. Many might assume that a 39-year old client in this position would prefer to take the settlement in a lump sum, but in Kelly’s case, there were better options. If her attorney had not dug a little deeper and referred her to a settlement consultant, Kelly might have been left with a settlement plan that didn’t meet her needs.

Kelly’s Situation: Planning for the Future

With steady employment, combined with her husband’s Social Security checks, Kelly was not concerned about immediate financial needs. However, after meeting with our consultant, it was determined that what Kelly truly wanted was to ensure that the $500,000 lasted for the long term. She wanted safety, security, and to not have to think about what to do with the money while grieving the loss of her husband.

Our consultant spoke with Kelly and her financial advisor to review all possible options. Kelly was particularly interested in a tax-free structured settlement, versus traditional investments that carried an element of risk. Her financial advisor admitted that he could not provide her with the guaranteed return and security that comes with a structured settlement.

In the end, Kelly chose to take a small portion in a lump sum and to structure the remaining settlement funds, with a focus on retirement and the future educational needs of her children. Her settlement plan relieved her of the burden of figuring out how to invest the money, and ensured that the funds would be there in the future, when they would be most needed.

Asking the Right Questions During Settlement

If the right questions aren’t asked, the client’s real needs may not be met. Some of the most common assumptions made during the settlement process include:

ASSUMPTION: There are no future medical expenses and the client is young, so of course they’ll want the cash.

REALITY: The client might be interested in structuring funds to supplement current income, to provide for retirement, or to cover the cost of their children’s future educational needs.

ASSUMPTION: The client is over 60 years old and wouldn’t be interested in structuring the settlement because their children are grown and their income needs are supplemented by Social Security.

REALITY: With average life expectancy hovering in the mid-80s, clients do not want to outlive their money. A structured settlement can provide them with that peace of mind.

ASSUMPTION: The amount of the settlement is too low.

REALITY: There are options for claimants of all ages with settlements as little as $10,000.

ASSUMPTION: Interest rates are too low in this environment to structure anything.

REALITY: Rates are competitive with banks and depending on life expectancy, claimants can expect to receive a tax-free return of 4-6%.

While a structured settlement may not be suitable for every client, it was the perfect fit for someone like Kelly, who wanted long-term financial security and guaranteed educational funding. Until a client’s unique fears and motivations are uncovered, you can’t be sure that the settlement plan will meet their needs. The next time you are close to settling a case, involve an experienced settlement planner to discuss all of your client’s options.

REMEMBER: What’s best in terms of a settlement, regardless of the dollar amount, is what’s best for the client.

*Names have been changed to protect the client’s identity.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • Liberty Life Assurance Company of Boston
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential