Why do so many trial lawyers retire broke?

Why do the majority of trial lawyers, despite making millions over decades of practice, struggle to retire or in many cases find it impossible to retire due to a lack of any kind of planning during their peak earning years? 

Wahlstrom & Associates is introducing a new series for trial lawyers, this time talking about one of the great unspoken issues in trial law practice, that being the often horrific, disjointed and mismanaged retirement and financial management by trial lawyers during their peak earning years.

During this series  I'm not just going to talk about the problem, I'm going to show you how to FIX the problem, so that no matter what stage of practice you're in, early, middle years or nearing retirement, you can have the opportunity to keep more of your money by using tools that ONLY trial lawyers have in the tax code. I'm looking to reduce your stress level now, reduce your tax and financing costs each year and to show you a few very simple steps to leverage your legal fees in a way that insures a quality retirement when you decide to hang it up. 

After 35 years of working with trial lawyers and helping their clients plan for their futures through the use of structured settlements, settlement trusts and annuities I discovered that while the clients were set up and taken care of, often the trial lawyers financial situation was precarious during most of the years they ran their practice. I've made a strategic decision to help trial lawyers with these issues as it in turn allows them to more effectively practice law and live happier lives. 

Why do most trial lawyers, despite making millions over their careers often struggle to retire, or in many case never retire, because of poor retirement planning? In this series Mark Wahlstrom, President of Wahlstrom & Associates, uses his 30+ years of experience in working with trial lawyers to address the three major obstacles to financial security for trial lawyers. This video in part One of a four part series and is the introduction about how lawyers can get off the "debt cycle", reduce their taxes, automatically put away funds for the future and reduce case financing costs and stress NOW. Watch for parts 2-4 or go to https://wahlstromandassociates.com to see the entire series or learn how Mark Wahlstrom can assist you with this planning.

The three major issues that I'll address in this series are as follows: 

One, The failure to properly arrange case financing or being caught in an endless debt cycle so that by the time they pay their case finance and taxes, there is often zero money left for investment in retirement plans. There are now an incredible number of finance firms and options that favor responsible trial lawyers in financing a case or their practice and in part one I'll go over those new options for you. 

Two, failure to use of 468B settlement trusts or settlement funds in administering your cases, thus eliminating many planning options for yourself and your clients. This is a huge mistake I see happening over and over again, simply because lawyers are use to resolving cases in cash, causing huge tax bills and litigation loan repayment triggers that can wipe out an entire legal fee. 

Thee, and this is a big one, the failure to use structured legal fees to spread out a tax hit or defer income into future years. Virtually no other profession has the ability to legally defer income into future years, earn interest on that money and pay it on a schedule that funds your retirement, lowers taxes and provides stability. I know all the reasons you DON"T do this, I've heard ever reason there is. In part three of this series I'm going to show you how TO DO this in a routine way that doesn't harm your practice or cash flow now, but insures financial freedom in the future.   

Now as I said, this is a three part series so I want you to watch for, or go check out, each of the segments as I publish them during the month of August. I'm looking forward to showing you how Wahlstrom & Associates can use 30 years of experience, coupled with unique modern techniques, to get you off the treadmill and start enjoying the practice of law and your eventual retirement. 

October 1, 2017 Medicare Secondary Payer Policy changes

Beginning October 1, 2017, the Centers for Medicare and Medicaid (CMS) will implement a new policy regarding Medicare Secondary Payer (MSP) reimbursements—specifically,liability Medicare set-asides (LMSAs). At the request of CMS, the Medicare Administrative Contractor will begin to track the existence of any LMSAs related to a claim and deny payment for items or services that it deems should be paid from that LMSA rather than being paid for by Medicare. According to CMS, “Liability and No-Fault MSP claims that do not have a MSA will continue to be processed under current MSP claims processing instructions.”

I can not stress how important it is for trial lawyers nationwide to be aware that these changes in Medicare policy are going to generate a lot of additional issues, and potential liability, when injury victims and their lawyers settle claims with a Medicare component. 

Many trial lawyers believed this was a settled issue, but it is vital to note that Medicare's authority in this area has never changed! There has been no change in statutory or regulatory policy. Rather this is a notice of CMS commencing enforcement of a long standing provision in the law allowing for CMS to deny future payments for claims in which a liability settlement was in place. 

While this instruction from CMS does not create an affirmative directive for Medicare beneficiaries, both current and future, to create a liability set-aside (Medicare Set Aside Account), it does indicate that you MUST evaluate and begin to resolve any lien early in the settlement process. 

Further, and possibly of greater importance, is the need to understand the MSP statute even if you are currently contracting out your Medicare Lien Resolution to a third party. The stakes are substantial and you absolutely must make plans for FUTURE Medicare clients at the time of settlement by way of a set aside and determine if funds need to be placed in a MSA account to resolve that liability at settlement. 

It is the opinion of Mark Wahlstrom, at Wahlstrom & Associates, that these changes are going to dramatically impact the settlement process and increase the cost of settlements once trial lawyers understand the importance of including the present value of this possible future liability in their settlement demands and ultimately their settlements. 

If you have questions on how to handle these new MSA and MSP issues, contact your current expert or contact Mark Wahlstrom at Wahlstrom & Associates for a better understanding of the options for staying compliant and protecting both the injury victim and their attorney from future liability.  It is clear that CMS is attempting to shift towards a mandatory LMSA regime and trial lawyers must have a legally sound,and efficient strategy and process in place to deal with this increase demand for Medicare reimbursements. 

Do Maryland revisions on structured settlement cash flow sales raise issues of suitability?

"Structured settlements" have recently gotten back in the news through a series of articles by Terrence McCoy in the Washington Post. The stories covered the lead paint cases arising in Baltimore, Maryland. The tragic death of Freddie Gray has also brought the lead paint litigation issue and the widespread use of structured settlements to resolve personal injury litigation to the forefront, as it turned out that Gray was a lead paint victim. The stories discussed problems which arose long after his settlement and structured settlement were put in place and involved the purchase of his future structured settlement payments at a discount of their present value for cash. 

The issue that brought structured settlements into the news was the purchase of structured settlements by companies that engage in the business of factoring, or purchasing future cash flows at a discount in return for a lump sum. Many of these purchases discussed in the Post story were made of victims of the Baltimore lead paint cases. Children who ingested the paint had filed claims against landlords and building owners who had failed to re-mediate the properties that had lead paint in them. Many of the lead paint victims had severe cognitive problems as a result, something that is common in almost all lead paint injuries, leading to the wide spread use of structured settlements at the time of settlement to pay out their damages over a period of years. This fact and the contention that “A lot of them can barely read.” is the topic of interest I cover in this video commentary for The Legal Broadcast Network. 

The articles in the Washington Post prompted the Maryland Court of Appeals to adopt some new rules regarding the purchase and sale of structured settlements. Which, like 47 other states, has in place a structured settlement protection law which requires the involvement of an independent professional advisor and court approval in the sale of the settlement benefits for cash. However, what came to light in the investigation appeared to be the rubber stamping of proposed structured settlement sales through essentially the same professional advisor on almost all of the cases, with what the courts in retrospect feel was less than rigorous analysis whether the sale would be in the best interests of the structured settlement payee. However, it is still to be determined if the parties involved in those sales were doing anything less than what the law required in order to obtain court approval. 

While this apparently lax approval of process in selling benefits in the courts, as well as aggressive sales tactics used by representatives of factoring companies, has been the primary focus of the articles and the primary structured settlement industry. Yet for me the troubling issue not being discussed in these cases is that many, if not all, of these child or young adult plaintiffs apparently had mental or cognitive disabilities at the time of settlement. These plaintiffs clearly had the same mental problems when the structured settlements were put in place at settlement. 

Look, the job of trial lawyers is to get the largest possible settlement for their clients based upon the facts of the case and the economic recovery possible given insurance overages and the assets of the defendants. From all reports that was clearly done by the attorneys in these cases. However, once the settlement distribution process was locked into the use of structured settlements due to the impaired mental and cognitive capacity of these clients a decision had to be made as to whether an irrevocable fixed payment program was going to adequately address the future needs of the victim. If, as is contended, these plaintiffs were not so impaired as to require a Guardianship or incompetency hearing, should not at least a suitability assessment as to the use of a structured settlement annuity program have been done to determine if they might not be better served by a managed settlement preservation trust account? If you sell an annuity to a senior citizen in most states in the US you are required to do a full suitability assessment, as the presumption of potential Elder Abuse by recommending long term, low liquidity investments is high on regulators radars. There are civil and criminal penalties if those annuities turn out to be unsuitable for seniors, but in the settlement profession we are under no similar guidelines when it comes to the use of structured settlement annuities.

Under the new standards adopted by the Maryland Courts just the other week, Independent advisors on the sale of the cash flows now must appear before the court, explain their business relationship with the purchaser and also be willing to address the cognitive, educational and comprehensive ability of the person selling their payments. This is clearly a higher standard, one that makes sense, however my concern is if this standard is now going to be used on the liquidation of cash flows, plus we have state laws on annuity sales suitability, how much longer is it going to be before structured settlements experts on the front end of the process are swept under these exact same standards. I believe that most independent advisors are incapable of making decisions and assessments on competency and cognitive ability of a client and would be foolish professionally to even attempt that analysis. So who is going to make that decision going forward and what is that process going to look like? Only time will tell. 

In conclusion,  if structured settlement payees were being taken advantage of in these court-approved sales of their future cash flows, the solution to the correct solution to that problem is better oversight by the courts involved, which appears to be how this is going to resolve. However, before the primary structured settlement tears a rotator cuff patting itself on the back we might want to prepare ourselves for what I feel is going to be  heightened oversight and analysis of the cognitive abilities of these and many other structured settlement clients on the front end. I have no doubt that once the dust settles that factoring companies will start pushing to apply the same oversight at the beginning of the process, when structured settlements are being considered and put into place. Structured settlement companies are not presently required to do a suitability assessment for the sale of the annuities that make up structured settlements, I fear that won't be the case for too much longer and experts are going to need to prepare and upgrade their standards.