Case Study: SCOTT TURNER

In 2001, Susan Turner lay in a hospital bed, wondering if her newborn baby would live more than a few hours. Minutes before, Scott had been delivered with the umbilical cord wrapped around his neck, depriving his brain of much needed oxygen. Tom, Susan’s husband, held Susan as she wept thinking about her new baby’s fight for life. Luckily, Scott made it through those first couple of hours, but Tom and Susan soon learned that the oxygen deprivation had caused a severe form of spastic cerebral palsy. Scott survived, but the injury caused severe mental retardation that would limit Scott’s ability to walk, talk, and live the life of a healthier boy.

Scott’s health issues caused many sleepless nights and long days of caring for him.

Tom and Susan loved their son, but struggled to take care of him. Scott’s health issues caused many sleepless nights and long days of caring for him. The $8 million settlement reached with the hospital had helped provide financially for Scott, but it did little to relieve the pressures of caring for a severely handicapped child. Most of the settlement had been structured to provide enough monthly income for the Turners to pay for Scott’s medical expenses and some respite care. The structured settlement was guaranteed to pay throughout at least 25 years Scott’s life.

Scott was always seen smiling and laughing, and against all odds, he learned how to walk and play with his family. Unfortunately, this did not last, and as he approached his 7th birthday, his health began to decline. He eventually became completely bedridden, and then slowly began to lose control of his body. He fell into a coma, then died several weeks later. Tom and Susan struggled to deal with his passing. While the work had been strenuous and tiring, caring for Scott had become a big part of their lives. Although he had brought them a considerable amount of joy, Tom and Susan had to make some large sacrifices to care for Scott, including Tom dropping out of college and Susan having to step away from a promising career.

Scott’s death also caused an unexpected and immediate problem; it had created a huge estate tax liability that the Turners had no way of paying. At Scott’s death, almost 20 years of guaranteed payments from the structured settlement annuity remained to be paid to Tom and Susan. These remaining payments had a value at the time of Scott’s death in excess of $4 million. This caused an estate tax liability of several hundred thousand dollars but there was no way to accelerate the payments from Scott’s only valuable asset, the annuity to pay the taxes.

Not knowing what to do, Tom and Susan decided they would need to factor the annuity to pay the estate taxes. To advise them on these matters they hired a CPA who knew little about factoring, but remembered the name of a factoring company from a TV commercial. He was able to locate the company on the internet and made contact. They made an offer to buy the entire structure for what seemed to the Turners to be a very low price. When the CPA attempted to shop the structure to some other companies, he was able to find one that would offer 20% more than the initial offer and reluctantly advised the Turners to sell.

Before they had signed a contract, Tom and Susan were telling a close friend about the situation. After hearing their story, the friend called one of his contacts who was in the structured settlement industry. The friend of a friend was very helpful and referred them to Bentzen Financial. The Turners called and spoke with Rhonda Bentzen, who was very sympathetic to their situation. She asked them questions about their goals and needs that the other company had never bothered to ask. Together, they worked out a plan that involved withdrawing some funds from a retirement plan, saving some money from the next few annuity payments received, borrowing some money from their credit union using their car as collateral, and selling a carefully selected number of future structured settlement payments.

By only factoring some of the payments, Tom and Susan would still receive guaranteed tax-free monthly payments that would be sufficient enough to meet their financial goals. Bentzen Financial walked them through the maze of paperwork, notices, waiting periods and coordinated a date for what proved to be a short hearing with a local judge. Since Rhonda had offered a much higher price on the payments purchased and had taken the time to get to know Tom and Susan well enough to know that they only needed to sell of few of their payments, the Turners’ financial life was greatly improved. The Turners were thrilled by the service and attention they received and were appreciative of the planning service which saved them from what would have been a disastrous factoring transaction.

Bentzen Financial walked them through the maze of paperwork, notices, waiting periods and coordinated a date for what proved to be a short hearing with a local judge.