Amy was still visibly shaken as she recounted the phone call that changed her life forever. It was a beautiful day, and she was looking forward to relaxing at home while her husband and three daughters visited relatives. But the day took a tragic turn when the phone rang. There had been an accident: The driver of a logging truck had lost control of his vehicle and logs had toppled out onto the highway, killing Amy’s husband and daughters instantly.
Two years after the accident, Amy’s case against the logging company settled in mediation. The net settlement would be $700,000, after legal fees, attorney fees, and expenses. Although no amount of money could alleviate the pain of losing her family, the money would help Amy rebuild her life.
Amy had no prior experience managing a sum this large – the extent of her financial education was making ends meet, paycheck to paycheck. Amy had worked briefly to support her husband while he finished his engineering degree, but she had stayed at home once they had children. She and her husband had dreamed of having this kind of money someday, but now the prospect of managing the funds seemed lonely and burdensome.
Weeks before mediation, Robin Young met with Amy to discuss, in great detail, Amy’s current financial situation – as well as her goals for the future. Amy was not interested in simply making her life more comfortable. She wanted to use the money to give her life new purpose and meaning. When she was first married, she dreamed of becoming a teacher one day. Amy wanted to use the money to fulfill that dream and return to school.
Young worked closely with Amy to design a financial plan that would repay all of her debts and provide upfront cash for immediate needs, while structuring the remainder of her settlement to pay for Amy’s college tuition and provide her with a monthly stipend.
Life Changing Considerations
- Amy was dealing with the tragic loss of her husband and daughters.
- Amy was a stay-at-home-mom while her husband was the sole provider.
- Amy’s financial education and experience was limited.
- Amy and her husband qualified for their home mortgage based on his income level. The loss of his income would result in the loss of Amy’s home unless she could assure the mortgage company that she could meet the monthly payments.
- Amy and her husband had a small savings account that could help Amy pay for burial costs and meet the monthly bills for about three months. She would then deplete their entire life savings. She was not employed; nor did she have the education required to begin a teaching career.
- Amy’s health and life insurance was provided and paid for through her husband’s employer. Amy could remain on the COBRA, but found the premium too costly.
Amy’s Desires and Personal Goals
- Pay off debts
- Cash savings for immediate needs and miscellaneous living expenses
- College degree to become a teacher
- Financial security for life
Plan of Care
- Health Insurance: Young introduced Amy to an insurance agent that Amy could trust to provide her ongoing insurance assistance. Amy will cancel private health insurance once she graduates from college and secures a full-time teaching position with employee benefits. The private insurance agent also offered to review Amy’s home and automobile insurance to ensure she is provided with the very best rates.
- Debt Resolution & Cash Availability: $50,000.00 upfront cash from the settlement award to pay off all of Amy’s debts. Remaining upfront cash to ensure a readily available pool of funds for emergencies and unforeseen needs.
- Structured Settlement: Remainder of the settlement award to be designed in a structured settlement that meets Amy’s needs and desires.
Structured Settlement (the design of payment streams)
$4,000.00 payable semi-annually, guaranteed for four (4) years
Using a structured settlement annuity with tax-free interest and growth, Amy’s college education did not cost as much as she had expected. Her structured settlement payments were scheduled to pay each semester during registration. This provided Amy with peace of mind that she could cover the costs of tuition, books, and fees for four years.
Monthly payments during college
$2,500.00 payable monthly, guaranteed for four (4) years and six (6) months
Amy specified that she would like to receive a monthly payment to guarantee, tax-free $30,000 annually while she was enrolled in college so that she could focus on her education without having to worry about working to make ends meet.
Monthly payments for Amy’s lifetime
$3,369.19 payable monthly for life, guaranteed for twenty (20) years
After her four years of college, Amy’s monthly payment would be increased. She would receive a guaranteed, tax-free monthly payment the rest of her life.
$ 975,606.00 Guaranteed Benefit
$1,578,691.00 Expected Benefit
All benefits are tax-free.
Guaranteed and Expected does not include the upfront cash portion as illustrated to be $50,000.00 directly to Amy during settlement disbursement.
Cost, rates, and benefits subject to change and review; the above has been provided as a sample illustration based on this Case Study.
While money and compensation could never replace Amy’s loss of her family, Amy felt immediate relief as it related to finances. Amy could stop worrying about how she would pay the ongoing bills and past debts. The bitterness dredged up by the legal disputes diminished as Amy began to heal and face her future. Knowing that she would never be taxed on the future income and that could always depend on the guaranteed and expected payments for as long as she lived gave Amy a great sense of comfort and security.