First, you know, a new theory is attacked as absurd; then it is admitted to be true, but obvious and insignificant; finally it is seen to be so important that its adversaries claim that they themselves discovered it.”
William James, Pragmatism: A New Name for Some Old Ways of Thinking (1907)
In 2020, I gave the keynote address at the annual conference of the Society of Settlement Planners (SSP). My title was “Settlement Planning: Striving to Become a Profession.” Six years later, settlement planning is still striving for professional status.
Settlement planning has been a recognized area of practice for more than 25 years. In that time, settlement planners have helped thousands of injured people and their families through some of the most consequential financial decisions of their lives. Planners have earned credentials, written practice standards, and built national associations. Yet many leading settlement planners acknowledge that settlement planning is not yet a profession. SSP itself says it is working to move the profession “toward real fiduciary-level expectations,” not that it has reached them.
This series initiates and encourages a broad discussion of how settlement planning can become a profession, organized around seven questions. This first article answers each question briefly. Later articles will take each question further.
1. Why hasn’t settlement planning achieved professional status?
The treatise I have co-authored since 1986, Structured Settlements and Periodic Payment Judgments, has long identified an open question: who regulates, or should regulate, the business conduct of structured settlements and settlement planning? No statute or regulation has ever answered that question. No federal or state agency licenses settlement planners as such, examines their competence to plan, or oversees their conduct toward the people they serve. Yet those people are often the ones the law protects most carefully everywhere else: minors, people with catastrophic injuries or diminished capacity, and people who depend on government benefits.
Part of the explanation lies in what settlement planning inherited. Settlement planning grew out of structured settlements, and structured settlements brought assumptions and practices that shaped everything later built on them:
The defense role. Structured settlements were first promoted largely by defendants and their liability insurers as a way to settle cases at lower cost. Consultants were selected by the defense side of the case and paid commissions by the life insurance companies whose annuities the defense purchased.
The dissipation myth. The structured settlement industry assumed, and still maintains, that injured people who receive a lump sum will quickly spend it, so periodic payments have been sold as protection against the injured person’s own choices. Fifty years of research have never confirmed that belief.
The compensation plan. Consultants who sell structured settlements are paid by commissions from the life insurance companies whose annuities they place. A commission is a one-time payment, contingent upon a successful sale.
A service that ends at settlement. Once the structured settlement annuity is purchased, the consultant’s work is considered complete, even though the payments, and the injured person’s needs, continue for decades.
An agency relationship with life insurance companies. Structured settlement consultants are licensed insurance agents, appointed directly or through general agencies by the companies whose products they sell. Contracts carefully define that relationship. The relationship with the injured person has never been defined in the same way.
A narrow market focus. The structured settlement industry has viewed and measured its market through the lens of its own annuity sales, without attempting to define or measure the larger settlement planning market.
Resistance to qualified settlement funds. A qualified settlement fund (QSF) is a court-supervised trust that receives settlement money and can benefit both defendants and plaintiffs, including by giving the injured person time to plan. Defense resistance to QSFs has protected certain structured settlement business models and restricted the development of settlement planning.
The rest of the explanation lies in what settlement planning has not yet done. Its principal conduct standards date from 1997, when the National Structured Settlements Trade Association (NSSTA) adopted its Statement of Ethics and Professional Responsibility, and from 2008, when the Registry of Settlement Planners last revised the Standards of Professional Conduct for its Registered Settlement Planner (RSP) designation. SSP’s practice standards reflect the framework of the CFP Board (the Certified Financial Planner Board of Standards) as it stood in 2017. Since then, the CFP Board has adopted a fiduciary duty for all financial advice its certificants give. The model regulation for annuity sales that most states follow, written by the National Association of Insurance Commissioners, has moved to a best interest standard. None of those settlement planning standards has been revised in response. And settlement planning has either missed or misapplied the law that should define its relationship with the people it serves.
2. What has been achieved to date, and by whom?
Before addressing shortcomings and proposing solutions, significant settlement planning achievements deserve recognition.
Settlement planning draws on many professions, and each has made its own contributions: settlement planners and structured settlement consultants, plaintiff attorneys, special needs attorneys, life care planners, Medicare set-aside professionals, lien resolution specialists, tax attorneys, trustees, and financial advisors.
Structured settlements have their own history and play an important and unique role in the development of settlement planning. Instead of a single lump sum that had to last a lifetime, an injured person could receive periodic payments guaranteed by a life insurance company, free of income tax, for as long as the payments were needed. Highlights in the United States include:
The Periodic Payment Settlement Tax Act of 1982. The Act confirmed that damages for personal injuries are free of income tax whether paid as a lump sum or as periodic payments (Section 104(a)(2) of the Internal Revenue Code). It also added Section 130, which allows a defendant to transfer its obligation to make periodic payments to an assignment company. Section 130 was later extended to workers’ compensation.
The founding of NSSTA in 1985, and its subsequent Certified Structured Settlement Consultant (CSSC) and Master’s Certificate in Structured Settlement Consulting (MSSC) programs. NSSTA describes its mission as promoting the growth, establishment, and preservation of structured settlements.
The publication in 1986 of the treatise Structured Settlements and Periodic Payment Judgments, with continuing semi-annual updates.
Childs v. Commissioner (1994), which established the ground rules for, and a market in, deferred attorney fees.
Section 5891 of the Internal Revenue Code (2002) and the state structured settlement protection acts. Together they brought court review and a best interest test to the sale of structured settlement payments.
Industry surveys by NSSTA and its members, and quarterly structured settlement annuity production reports, which give the industry a continuing measure of its own market.
The best structured settlement practice also started from the benefits the injured person needed and then determined their cost. That benefit perspective remains the right starting point for any settlement plan.
Plaintiff-centric settlement planning, however, has had a separate history that distinguishes it from NSSTA’s role, from structured settlements, and from defense participation in product selection. Milestones include:
The Medicare Secondary Payer Act (1980). As the Centers for Medicare & Medicaid Services began enforcing it, protecting Medicare’s interests became part of most injury settlements.
The Thorshov case study (1981), published by trial attorney Fredric Levin and his team. It was the first structured settlement case study in the professional literature, and it showed what plaintiff-side planning could achieve.
Section 468B of the Internal Revenue Code (1986), its qualified settlement fund regulations (1993), and Revenue Procedure 93-34, which allows a qualified settlement fund to make the same assignments a defendant can make under Section 130.
The Omnibus Budget Reconciliation Act of 1993, which authorized special needs trusts and pooled trusts that preserve an injured person’s eligibility for Medicaid and Supplemental Security Income.
The formation of SSP in 2000, and later of the American Association of Settlement Consultants (AASC). SSP describes itself as “the professional home for settlement planners, structured settlement specialists, attorneys, and product providers.” AASC describes itself as an industry advocacy group and as “a movement.”
The ABLE Act (2014), which created tax-advantaged savings accounts for people with disabilities that do not jeopardize their government benefits.
Practical guides written for attorneys and injured people, such as Jason Lazarus’s The Art of Settlement and Traci Kaas’s What You Can Expect When Expecting a Settlement.
Qualified settlement funds moved greater control of settlement decisions to the injured person’s side. A defendant could pay its settlement into a fund and leave the case, while the injured person’s side kept the decisions that matter most: how much to allocate to periodic payments, how to design them, whether to use a trust, how to resolve liens, and how to protect government benefits. Settlement planning grew up around those decisions.
Settlement planners broadened the work from a single product to the full range of issues a settlement raises: government benefits, Medicare, liens, trusts, taxes, and investments. SSP’s Settlement Planning Practice Standards (the SSP Standards), adapted from the practice standards of the CFP Board, ask the planner to recommend whatever products and services suit the injured person, not annuities alone. That principle is known as product neutrality. The SSP Standards also ask the planner to define goals, gather information, and analyze the injured person’s situation before recommending anything. That principle is known as planning before products. And the SSP Standards state that the planner’s “focus and duty must remain on the client,” whoever retained the planner.
I refer to settlement planning as most planners practice it today as “transitional settlement planning.” The term is not meant as criticism. From an injured person’s perspective, transitional settlement planning represents genuine progress. But transitional settlement planning has not freed itself from all of the structured settlement inheritance, and it never started from a clean slate.
3. How can settlement planning achieve professional status?
Every profession rests on law that defines the relationship between the professional and the person served: lawyer and client, physician and patient, trustee and beneficiary. Settlement planning is surrounded by law that governs its products and transactions: tax law, government benefits law, Medicare rules, trust law, and insurance regulation. Those laws reach the planner only in a particular role, as an insurance producer, an investment adviser, or a trustee, and only for that product or service. No statute or regulation addresses the settlement planning relationship as a whole.
One body of law does. The common law of agency governs anyone who acts on behalf of another person, and it imposes fiduciary duties on that person’s agent. Structured settlement consultants have long applied the word “agent” to their relationship with life insurance companies. Far fewer consultants have asked whether they are also agents of the injured people they advise. The law defining the relationship predates settlement planning. What settlement planning has lacked is the focus and discipline of studying how that law impacts the planner, and how that law can and should be enforced.
Becoming a profession therefore begins with four questions every profession must answer, applied here to settlement planning. What is the fundamental law of settlement planning? What is the source of that law? What duties does that law impose, and on whom? And who is responsible for enforcing the law?
4. What is Modern Settlement Planning?
Modern Settlement Planning is a new look at settlement planning, starting from a clean slate. It frames settlement planning first, with the structured settlement annuity as one central, but not exclusive, potential funding tool within the plan. Its aim is to identify and keep the best of what structured settlements and transitional settlement planning have built, to set aside what no longer serves injured people, and to complete the work of making settlement planning a profession. Modern Settlement Planning rests on seven basic values:
The planner is the injured person’s agent. Under the common law of agency, a planner who acts on an injured person’s behalf owes that person fiduciary duties: loyalty, care, and full disclosure, including disclosure of compensation and every conflict of interest. Those duties do not wait for a new statute or a new association standard. They exist now, they belong to the injured person, and the injured person can enforce them. A planner may also commit by contract to a best interest standard, but an agent’s fiduciary duties are broader than any single standard.
The injured person is a client with a claim. The injured person is not a victim with a check, and not a dissipation risk to be managed. The settlement plan is measured against the goals the injured person states, in the injured person’s own words, not against a professional’s view of what is best, or against a presumption that the injured person will waste the money.
The plan covers the whole settlement. Attorney fees, liens, government benefits, trusts, taxes, products, and any court approval are all part of the plan.
Every recommendation states its basis. Each recommendation is tied, in a record the injured person, the attorney, or a court can check, to the facts and analysis that support it. Alternatives are presented, together with all compensation the planner will receive under each one.
Responsibility continues for the life of the plan. The planner who designs a plan remains responsible for the plan as a whole for as long as the plan runs, unless the planner and the client agree otherwise with informed consent. That responsibility means monitoring the plan, reviewing it when the injured person’s circumstances change, and recommending adjustments. It does not make the planner responsible for decisions entrusted to others, such as a trustee’s distributions, an investment manager’s choices, an annuity issuer’s payments, or the attorney’s legal advice.
The plaintiff attorney’s responsibility is part of the plan. The plaintiff attorney’s own duties reach settlement planning. Most states base their rules of professional conduct on the American Bar Association’s Model Rules of Professional Conduct. Under those rules, the attorney must represent the client competently (Rule 1.1) and explain matters well enough for the client to make informed decisions (Rule 1.4). When the attorney retains or directs a planner, the attorney must also make reasonable efforts to ensure the planner’s conduct is compatible with the attorney’s own professional obligations (Rule 5.3). A written request for proposal gives the attorney a practical way to meet those obligations. In a request for proposal, the attorney asks each candidate planner to state, in writing, the planner’s services, duties, and compensation. Enforcement then has three sources:
The injured person can enforce the planner’s fiduciary duties directly.
The attorney’s duties are enforced through state lawyer discipline and malpractice law.
Where a court must approve the settlement, as for a minor, the court reviews the plan as well.
Technology serves the relationship. Artificial intelligence will do far more than speed up analysis. AI will make possible what has been too costly to provide: a record that can be checked and kept current, review of a plan over decades, and careful planning for injured people whose settlements have been too small to attract a planner. As technology takes over more of the analysis, what will increasingly set a professional apart is judgment and the client relationship.
5. Why call it Modern Settlement Planning?
The name marks a stage. Structured settlements were the first stage, built around a product. Transitional settlement planning was the second, built around a process. Modern Settlement Planning is the third, built around a relationship: the planner as the injured person’s agent.
The name is also, in William James’s phrase, a new name for some old ways of thinking. The law of agency is older than the republic. What is new is applying that law, with the help of modern technology, to the people settlement planning exists to serve.
6. How does Modern Settlement Planning differ from current practice?
Taken together, the seven values reposition the settlement planner: from a seller of products who undertakes to be fair, to the injured person’s representative, bound by law as that person’s fiduciary to act with loyalty, care, and full disclosure. That repositioning has consequences for the standards, ethics, compensation, and business models of settlement planning.
A commission paid when a product is placed does not pay for duties that continue for decades. Compensation will therefore change as well. A planner whose duties continue for the life of the plan needs compensation that continues too. That compensation can include fees disclosed in advance, alone or combined with commissions shown under each alternative. Product providers may also change how they pay, for example by offering annuities without a built-in commission or by paying for continuing service.
A standard that an association asks its members to follow is not a duty the injured person or her attorney can enforce. New business models will follow: firms that consolidate services the injured person now buys separately, firms built to outlast any individual consultant, and practices reshaped by artificial intelligence. The repositioning also opens a market far larger than annuity sales have ever measured. Settlement planning’s associations have not yet addressed those consequences. Later articles will examine each difference in greater detail.
7. What are the objectives of this series?
This series has four objectives:
To state clearly what Modern Settlement Planning is, and why and how it will improve settlement planning.
To credit what structured settlements and transitional settlement planning have achieved, while being candid about what they have left unfinished.
To address each of these seven questions in greater depth, in weekly articles.
To initiate a discussion, among all the professions that contribute to settlement planning, of how settlement planning becomes a profession, encouraging others to take the same new look.
Settlement planning was clearly meant to become a profession. I believe it will become one. The discussion needs greater priority and a modern perspective.
HOW I WRITE THESE ARTICLES: I write these articles with the help of AI tools. The ideas, judgments, and final text are my own, drawn from more than four decades in structured settlements and settlement planning.
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