Hello everyone:

There has been a development in our industry recently and it is an issue I wanted to let you know about, and tell you my position on. As I have discussed with many of you in recent conversations, there are always folks trying to come up with new ways of altering structured settlements, specifically attorney fee structured settlements, to be more competitive with market products, less constraining, and possibly more lucrative for the person selling it.

In recent months, one of the new attorney fee products has landed in the crosshairs of the IRS. The IRS recently released a Generic Legal Advice Memorandum (GLAM). The report addresses a product that does not follow the Childs methods or procedures that have been in place for decades. Nationally known tax attorney, Robert Wood, describes this product as follows:

"The attorney’s right to receive periodic payments is not reflected in the settlement agreement or seemingly in other documents signed by the plaintiff or defendant. Under the settlement agreement in the GLAM scenario, the plaintiff’s attorney is owed only a lump sum payment, not periodic payments, except by virtue of a deferral agreement with a third-party assignment company that is associated with the new attorney fee product.

In the GLAM scenario, the attorney instructs the defendant to pay a portion of the lump sum payment to the assignment company. Neither the plaintiff nor the defendant agrees to the attorney’s periodic payments, and the defendant was never obligated to make the periodic payments. Unlike Childs, there is no assignment between the defendant and the third-party assignment company. The defendant cannot assign any obligation to make periodic payments to the assignment company because the defendant does not have an obligation to make periodic payments.”

Since learning of the GLAM report, I have made calls to various life company contacts who have shared with me their belief that their respective companies see no similarities to the attorney fee structures they have been doing for decades. I agree with their conclusion. This new product basically promised to structure post-constructive receipt funds. We all know that the tax protections cease with constructive receipt and why there needs to be cooperation on the part of the defense as well as language in the documents that facilitate structures for the plaintiff and/OR the plaintiff attorney.

In conclusion, the annuity companies are revisiting the language in their standard Hold Harmless agreements to mention the GLAM report, some specifically, some more broadly. That being said, all structured settlement annuity companies (as of this writing) are still offering the attorney fee structured settlement annuity, except for Pacific Life, who is currently reviewing their process in light of the GLAM report.

As I mentioned earlier, Robert Wood has written a great analysis of this situation and I am including the link here: *IRS Targets Structured Legal Fees 28 Years After Childs - 02/13/2023 (woodllp.com) I recommend you read it if you have any concerns about the current situation surrounding attorney fee structures. And, as always, I am available to answer any questions you may have.

Kelly Ramsdale is President of Kelly Ramsdale & Associates in Denver, Colorado. She advises plaintiff attorneys and their clients in medical malpractice, wrongful death, products liability, aviation, auto bodily injury, trucking cases, sexual molestation/assault, sexual harassment and "me too" settlements, civil rights and wrongful termination/age discrimination cases. She travels extensively to not only attend mediations, but to personally meet with the injured parties and their families all over the United States. She has been involved in the US Gymnast sexual assault cases, the Purdue Pharma class action cases, the Columbine High School cases, the
9-11 Victims' Compensation Fund and Pan Am Flight 103 (Lockerbie) cases. She works with many highly renowned firms across the country.