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					                          STRUCTURED SETTLEMENTS

Source: NORTH CAROLINA TRIAL JUDGES’ BENCH BOOK, SUPERIOR COURT, VOL.
2 (Civil), Chap. 13 (3rd ed.) (Institute of Government 1999)

   A. THE APPROVAL HEARING
         1. Plaintiff (parents, guardian, personal representative) and all trial counsel
         must be present.
         2. Hearing should be on record.
         3. Evidence of plaintiff's injuries must be received. Medical and hospital
         records may be used.
         4. In wrongful death cases, evidence of who is entitled to recover, as well as
         age, capabilities, etc., of deceased should be in the record.
         5. To estimate ability of defendant to pay, ascertain limits of insurance, if any,
         and other assets of defendant.
         6. Explain the following to plaintiff (parents, guardian, personal
         representative):
                 a. True value of settlement (the computed present value) to plaintiff as
                 opposed to total payout of plan over a period of years;
                 b. Terms of the payment, and the fact that plaintiff cannot modify
                 terms in the event of a future change in circumstances;
                 c. That attorneys' fees, computed on present value of settlement
                 rather than total payout of periodic payments, will take the bulk of the
                 initial cash payment.
         7. Be certain that all parties can understand that the structured settlement is
         an optional means of settlement and that they are entitled to pursue an all-
         cash settlement or proceed to trial if desired.
         8. Question plaintiff (parents, guardian, personal representative) as to
         whether he or she thinks the settlement is fair and reasonable.
         9. The court must determine whether the settlement is in the best interest of
         any minor or incompetent.
         10. Be sure all parties and counsel sign the judgment before you do.
         This is a consent judgment, and once signed by the judge, it cannot be set
         aside by the judge. Holden v. Holden, 245 N.C. 1 (1956). Relief from
         judgment on grounds listed in Rule 60(b) is available, however, in the
         discretion of the judge before whom such a motion is brought. See, e.g.,
         Goodwin v. Cashwell, 102 N.C. App. 275 (1991) (no abuse of discretion in
         denying defendants' motion to set aside judgment because whether mistake
         of fact had been made or had been mutual was not evident from the terms of
         the settlement agreement).

   B. THE SETTLEMENT AGREEMENT
         1. If the settlement is structured pursuant to the provisions of § 104(a)(2) of
         the Internal Revenue Code and relevant revenue rulings it will be tax-free to
         the recipient.


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        a. Payments must be fixed and determinable as to amount and time
        of payment.
        b. Plaintiff can have no ownership rights of any type in the annuity or
        other funds relied upon to make future payments (i.e., right to change
        beneficiary, right to the discounted present value of the agreed
        payments, right to control investment).
        c. Payments may not be subject to acceleration, deferral, increase,
        or decrease "by recipient of such payments."
        d. Settlement agreement should spell out that payments are solely
        for pain and suffering and not for lost income. (Payments for lost
        compensation might be taxable, but point is not settled.)
        e. Plaintiff must rely upon the general credit of the defendant or its
        insurer for payment of the obligation, and defendant or insurer cannot
        be required to set aside assets to guarantee payments. (Plaintiff must
        not have rights against the defendant or the insurer greater than those
        of a general creditor.)
        f. The liability of the insurance company writing the annuity to the
        plaintiff may be no greater than the obligation of the defendant or
        the defendant's liability insurer.
2. Adequate cash must be provided at the time of settlement to pay accrued
medical expenses, attorneys' fees, and some cash to plaintiff.
3. Consideration should be given to satisfaction of third-party claims from the
cash available at settlement (workers' compensation, Medicaid, etc.)
4. Periodic payments should be guaranteed to plaintiff, his estate, or his
designee for a reasonable period of time (usually, 20-year guarantee will not
affect cost substantially).
5. Consideration should be given to increasing payments annually or
periodically to provide for inflation. Plaintiffs may reject this because earlier
payments are smaller, but potential should be explored. Annual increases of
4% to 6% compounded can usually be negotiated and provide increased total
payout for person with long expectancy.
6. Consideration should be given to provision for future medical expenses
and rehabilitation needs either through medical trust or future lump sum
payments.
7. Consideration should be given to future lump sum payments in lieu of
larger monthly payments. The real present values of each should be
compared.
8. True present value of future monthly and periodic payments must have
been computed by an accountant, attorney, or other qualified person, and
evidence of present value should be presented in writing to the court.
9. If annuity is used to fund future payments, the defendant should be
required to obtain the annuity from an insurance carrier with sufficient assets
to create likelihood of continued solvency (preferably a company having the
highest rating by A.M. Best and Co., Oldwich, N.J.).
10. Settlement agreement must be signed by proper corporate officials. If
parties signing are not corporate officers, evidence of authority to sign must be
attached.


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C. ASSISTANCE FROM LIFE INSURANCE COMPANIES. Many life insurance
companies are equipped to provide expert technical information and suggestions
about "periodic payment" (structured) settlements. Some of them will provide this
service without charge.




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             QUESTIONS THAT YOU MAY WANT TO ASK THE PAYEE

Source: Superior Court Judge Ronald E. Spivey (from presentation at Summer 2008 Superior
Court Judges Conference)


State your full name and age. Are you married? Do you have children or other dependents?

What is your educational background and work experience?

Do you have sources of income, other than this structured settlement?

What happened to you that resulted in this structured settlement?

Is there a beneficiary listed in the structured settlement agreement in the event of your death?

Do you presently want to sell part of or all of your structured settlement proceeds to this
company?

Initially, did you contact them, or did they contact you?

What are you attempting to sell to them?

Did you receive “independent professional advice” from a licensed professional about these
arrangements?

Do you have a letter from that “independent professional” verifying this consultation?

Did you go out and find this “independent professional” or was this person recommended to you
by the company? Who paid their fees?

Did you specifically talk about the tax ramifications of selling your future payments to this
company?

Do you understand that the attorney for the company represents “the company” that is buying
your structured settlement for a discounted amount, they do not represent you or your interests?

Do you understand the total amount of the payments that you would receive over time that you
are now asking to transfer to this company? What is that amount?

Do you understand the present value of the payments that you are asking to transfer, according
to the company’s computations? What is that amount?

Do you understand how much you would be receiving as a lump sum if I approve this request?
What is that amount?

Do you know what percent of the present value this lump sum represents? What is that
percentage?

What fees are you paying to the company for this transfer?


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Are you presently involved in a bankruptcy proceeding?

Are you presently subject to a separation agreement or a divorce decree?

Have you made a motion to the court before to transfer all of or part of your structured
settlement?

If so, what was the stated reason at that time that was the basis of your motion?

If granted, did you use the proceeds for that purpose?

Do you recognize Exhibit #1, the disclosure statement, which sets out all of the terms of this
transfer arrangement? How long ago did you first see this?

Did you read the entire exhibit? Are familiar with it?

Is this your signature on the last page of the exhibit?

What were your injuries that originally resulted in this structured settlement?

How old were you when that happened?

Do you still receive medical treatment or do you have permanent injuries from that accident?

Why do you want to transfer your structured settlement to this company for an amount which is
(much) less than you would otherwise receive over time?

What will you do with the money if the court were to approve this transfer?

Do you realize that if I approve this, you can’t come back later and get your money back or
change your mind?

Do you understand that you would receive $__________ if I approve this transfer today?

Do you understand that if you didn’t transfer your structured settlement, that you would receive
$__________ over the life of the settlement as it presently exists?

Do you understand that you’re only getting _____ % of the present value as calculated by the
company?

Considering all the things I’ve asked you about, do you wish to have additional time to think
about the advisability of your request?

Do you realize that if I approve this request it would end your payments pursuant to the
structured settlement from this day forward (if payee is selling all payments)?

Are there any interested parties here who wish to be heard?




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    APPROVING UNSTRUCTURED WRONGFUL DEATH SETTLEMENTS

Source: NORTH CAROLINA TRIAL JUDGES’ BENCH BOOK, SUPERIOR COURT,
VOL. 2 (Civil), Chap. 13 (3rd ed.) (Institute of Government 1999)

   A. GENERAL RULE [G.S. 28A-13-3(23) (as amended 1995)]. A wrongful death
   settlement, whether in litigation or not, requires the approval of a judge if one or more
   persons entitled to share in the recovery is a minor or incompetent. If an action has
   been filed, the judge having jurisdiction over the action approves the settlement. If no
   action has been filed, either a superior or district court judge may approve the
   settlement. (Claims brought under the Tort Claims Act, G.S. Ch. 143, Art. 31, are
   subject to the approval of the Industrial Commission.)

   B. CHECK THE RECORD
        1. Weigh the strength of plaintiff's case. Damages recoverable for death by
        wrongful act are listed in G.S. 28A-18-2(b) and include punitive damages for
        wrongfully causing decedent's death through malice or willful or wanton
        conduct, as defined in G.S. 1D-5. See NORTH CAROLINA TRIAL JUDGES’
        BENCH BOOK, SUPERIOR COURT, VOL. 2 (Civil), Chap. 29: Punitive
        Damages.
        2. Are there any real defenses?

   C. THE APPROVAL HEARING
         1. Personal representative and counsel must be present.
         2. Estimate ability of defendant to pay. Ascertain:
                a. Limits of insurance, if any, and
                b. Other assets of defendant.
         3. Hearing should be recorded.
         4. Evidence of decedent's injuries must be received. Medical and hospital
         records may be used.
         5. Evidence of who is entitled to recover and of the age, capabilities, etc., of
         deceased should be in record.
         6. Question personal representative and counsel as to whether they think
         settlement is fair and reasonable.
         7. Determine if the interests of any minors or incompetents are protected.
         8. Inquire about fee arrangement and explain attorneys' fees to personal
         representative.
         9. Determine fee, considering difficulty of work done, time spent, results
         obtained, and usual and customary charges in area for services rendered.
         10. Be sure all parties and counsel sign judgment before you do.
         NOTE: The recovery is subject to reasonable funeral, hospital, and medical
         expenses not in excess of $1500, which must be approved by the Clerk of
         Superior Court; any adversely affected party may appeal from Clerk's ruling to
         superior court "in term time." G.S. 28A-18-2.


                                      Settlements - 6
     APPROVING UNSTRUCTURED SETTLEMENTS FOR MINORS AND
                       INCOMPETENTS

See: G.S. 1-402

Source: NORTH CAROLINA TRIAL JUDGES’ BENCH BOOK, SUPERIOR COURT,
VOL. 2 (Civil), Chap. 13 (3rd ed.) (Institute of Government 1999).

    A. CHECK THE RECORD
         1. Weigh the strength of plaintiff's case.
         2. Are there any viable defenses?

    B. THE APPROVAL HEARING
          1. Minor and his or her counsel must be present; parent(s) or guardian
          should be present.
          2. Estimate ability of defendant to pay. Ascertain:
                 a. Limits of insurance, if any, and
                 b. Other assets of defendant.
          3. Hearing should be recorded.
          4. Evidence of plaintiff's injuries must be received. Medical and hospital
          records may be used.
          5. Question representative of minor and parents as to whether they think
          settlement is fair and reasonable. Court should determine precise amount
          minor will receive (in trust fund) and find that this amount is fair and
          reasonable.
          6. Explain to minor and parents or representative about attorneys' fees.
                 a. Determine fee yourself; do not automatically adopt attorney's
                 figures. Consider:
                          (1) difficulty of work done,
                          (2) time spent,
                          (3) results obtained, and
                          (4) usual and customary charges in area for services rendered.
          7. Determine whether settlement is fair and reasonable and in best interest of
          minor under all circumstances.
          8. Explain to parents and minor or representative that minor's money will be
          held by Clerk of Superior Court until guardian is appointed or minor reaches
          age 18.
                 a. Medical or hospital bills cannot be paid with plaintiff's recovery; they
                 are legal responsibilities of the parents.
                 b. Parents' expenses cannot be paid from plaintiff's recovery.
          9. Be sure all parties and counsel sign judgment before you do.




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