by: Begley Law Group

This is the third in series of articles addressing post-settlement issues. [The original article was published in the Barrister. The other parts are here – Part 1, Part 2, Part 4]

by Thomas D. Begley, Jr., Esquire, CELA

Structured Settlement

There are many advantages to a Structured Settlement in wrongful death cases as with other cases.  The Structure guarantees a lifetime payment to the person receiving the recovery.  The payments can be designed to be monthly, to increase with inflation, or to provide for POPS at certain ages such as for payment of college education.  The payments are income tax free and provide creditor protection to the Structure beneficiary.  By utilizing a rated age, a medically-fragile individual can be guaranteed a large monthly income because of a shorter than normal life expectancy.  Structures are particularly useful in preventing the beneficiary from squandering the money.  While there is a secondary market for the sale of Structured Settlements, if the Structure is paid into a trust this temptation is removed.

A problem can arise with a commutation rider.  Most, if not all, insurance companies offer a free commutation rider, so that if the beneficiary dies the remaining proceeds minus a holdback are paid in a lump sum to the initial beneficiary’s designated beneficiaries or trust.  The problem is that if the initial beneficiary dies quickly, the amount held by the insurance company can be significant.  In a recent case involving a large Structured Settlement, the insurance company retained approximately 24% of the initial premium.  Unfortunately, New Jersey Medicaid requires a commutation rider when a Special Needs Trust is being utilized.  

If a claimant in a personal injury case has filed for bankruptcy, the claim may be affected.  Whether the trustee in bankruptcy has any interest in the personal injury litigation, the judgment, or settlement proceeds is based on the timing of the injuries as compared to the filing of the bankruptcy petition.  There are limited exemptions from creditors.  If a personal injury claim exists but the cause of action has not been filed at the time of the bankruptcy, the cause of action for the personal injury belongs to the trustee in bankruptcy.  The Trustee would file the claim and prosecute it on behalf of creditors.  If the suit has already been filed, the trustee can take over the suit for the benefit of creditors.  If the settlement is complete, then the debtor is in control of the allocation as to loss of future earnings, bodily injury including pain and suffering, etc.  In some cases, courts have found that attorney fee allocations are not protected as exempt.  Personal injury attorney should ascertain at the initial client interview whether any bankruptcy exists and, if so, retain the services of a competent bankruptcy attorney.

Court Approval Required

In New Jersey court approval is required if the settlement involves a minor or incapacitated adult.  In some cases in order to reduce potential estate taxes for a beneficiary who has a serious medical condition and an uncertain life expectancy, an unusually high allocation to another beneficiary who might then establish a trust for the benefit of the medically-fragile person may be desirable.  Another alternative would be for the medically-fragile person to make a gift to a healthier beneficiary in order to avoid potential death taxes, then court approval may be required or at least advisable.


In wrongful death cases there is frequently an issue as to the rule of the administrator ad prosequendum and the administrator of the estate.  Basically, an administrator ad pros can be appointed by a surrogate and given the authority to file a claim.  However, the authority of the administrator ad pros does not include authority to settle the case or authority to distribute the assets of the estate.  To settle the case, sign the release and distribute assets of the survival claim, the appointment of an estate administrator is required.

State and Federal Agency Approvals Required

In Pennsylvania the allocation between the survival claim and the wrongful death claim must be approved by the Pennsylvania Department of Revenue.  There is no similar requirement in New Jersey.  If the beneficiary is receiving SSI and there is a Special Needs Trust, the trust must be approved by the Social Security Administration.  If the individual is receiving Medicaid in New Jersey and there is a Special Needs Trust, the trust must be approved by the State Medicaid Agency.