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Your Asbestos Settlement and Avoiding Financial Risk

This is a guest post by Patrick Collins of Schultz Collins Lawson Chambers, Inc., the firm we hired to advise us on how to handle Kazan Law’s pension funds, our charitable foundation’s funds, and that some of our partners hired to advise them on personal money management.

A good monthly income from your settlement funds often requires that you put principal at risk; keeping principal safe often requires that you live on very little monthly income.

Let’s say that you have just received an asbestos settlement check for $1,000,000. Depending on your family circumstances, here are some questions that you might have:

  • How much can I spend?
  • Where should I put the money?
  • How long will the money last?

The first question is the “budget” issue; the second question is the “how-much-risk-do-I need-to-take” issue; the third question depends on your budget decision and investment strategy.

A million dollars from an asbestos settlement is a lot of money. Can it fund a lifestyle that requires a $4,000 monthly budget? Remember, each month you will need to increase the monthly budget by the rate of inflation in order to maintain your lifestyle. Also, if you put your money in a safe, principal-guaranteed, interest-earning investment like a U.S. Treasury Note or an insured CD, you will pay income tax.

In order to get a rough idea of how a “safe” investment strategy for your asbestos settlement might perform, we assumed that $1,000,000 was invested in a portfolio of short-term (6 month) U.S. Treasury Notes starting January 1, 1994. At the beginning of each month, you receive a check for $4,000 plus an adjustment for the rate of inflation. Thus, on February 1, 1994, you go to the mailbox and open a check for $4,013. By November of 2014, the check’s face value has increased to $6,407 because it takes $6,407 to buy the same amount of goods and services today that $4,000 bought in 1994.

We graph the value of the $1,000,000 fund after accounting for taxes (20% rate), inflation, and monthly withdrawals:

asbestos settlement

If the $1 million asbestos settlement could be invested in a world with no taxes or inflation, it would grow to $1,851,880. The income tax bite reduces it to $1,637,496. Inflation reduces the purchasing power to $1,019,671. This is a particularly sobering insight—after putting you money in a safe investment for approximately twenty years, the future value after inflation and taxes just about equals what you started with. You kept the money safe but earned nothing. Furthermore, this is before you start to take out your monthly check!

The chart suggests that if you are willing to (1) live on a modest monthly budget; and (2) spend down your nest egg over a twenty-year period, then you need not take much, if any, investment risk. For comparison purposes, we ran the same numbers at $5,000 per month withdrawal—the guaranteed interest and principal portfolio is fully depleted ($0.00) by January of 2012. So you ran out of money—two years too soon!

If you want to increase your monthly consumption budget; or, if you want to give a larger bequest to family, church, or charity, then you will probably need to take some investment risk. There’s no right or wrong—it’s up to you.

Of course, this example covers the period from 1994 through June 2013. It is not a guide to what might happen over the next twenty years. It shows, however, how hard it is to produce safe and substantial monthly income and keep the nest egg intact.

Your Mesothelioma Settlement and Safe Investing

This is a guest post by Patrick Collins of Schultz Collins Lawson Chambers, Inc., the firm we hired to advise us on how to handle Kazan Law’s pension funds, our charitable foundation’s funds, and that some of our partners hired to advise them on personal money management.

You cannot take fifteen pounds out of a ten pound sack. If a “safe” investment like a CD is unlikely to provide the funds for your critical lifestyle objectives, then that investment is not safe. 

mesothelioma settlementOK—you have made a budget for your mesothelioma settlement and you figure out that you need $x per month to pay for your target standard of living. Let’s say that you are age 60 and you want a $1 million nest egg to fund family-related expenses of $5,000 per month for 30 years. You realize two things: (1) that the cost of goods and services tend to go up in the future so you will have to adjust the $5,000 per month upwards to keep pace with inflation; and, (2) that investing means putting some or all of your money at risk. Ideally, you would like to preserve your target lifestyle by putting your nest-egg in safe one-year CDs at the bank.

You now have arrived at step two in the process of deciding how much risk, if any, you need to take with your mesothelioma settlement. So the big question is: how much money can you spend without taking any investment risk? In this example, if you can generate a 30-year income stream with a CD that does not put your mesothelioma settlement nest-egg at risk, you don’t need to own any risky investments.   You may want to own some growth-oriented investments; but you don’t need to own them.

Here is the central point: You cannot take fifteen pounds out of a ten pound sack. If a “safe” investment like a CD is unlikely to provide the funds for your critical lifestyle objectives, then that investment is not safe. It is unsuitable for you. This may be surprising because most consumer protection laws protect people from speculative or fraudulent investment schemes. However, in some situations, it is just as damaging to avoid risk as it is to take too much risk.

The posts provided by Schultz Collins Lawson Chambers, Inc. [SCLC] convey information on basic investment concepts.  They are intended to facilitate prudent investment decision making.   They should not, however, be the sole factor in making investment decisions; and, they are not intended to act as advice or recommendations for any specific investor.  SCLC acts as Independent Investment Counsel and is a Registered Investment Advisor.  It does not provide legal, accounting or tax advice; and the opinions expressed in the posts are solely those of SCLC.  You can find additional information about SCLC, their personnel, and client services at www.schultzcollins.com.

Who Needs to Take Risk with an Asbestos Settlement?

asbestos settlementThis is a guest post by Patrick Collins of Schultz Collins Lawson Chambers, Inc., the firm we hired to advise us on how to handle Kazan Law’s pension funds, our charitable foundation’s funds, and that some of our partners hired to advise them on personal money management.

The horrible byproduct of taking investment risk with your asbestos settlement is that losses may trigger considerable regret. Had you not taken the risk, the money would still be in your pocket. Damn.

Here are some propositions for you to consider regarding your asbestos settlement:

Proposition One: Wealthy folks don’t need to take investment risk. If you have a sufficient amount of money to support your spending and bequest needs, you don’t need to earn high investment returns. Billionaires like Bill Gates and Warren Buffett do not need to make risky investments—even if they never earn an additional dime, they will never be able to spend all of their wealth. This is why the super-rich give hundreds of millions of dollars to charitable causes. If you are super-rich, you don’t need more money. No need = no reason to take risk.

Proposition Two: The amount of risk you need to take with your asbestos settlement depends on the budget required to support a target standard of living for yourself and your family. All else equal, the higher your monthly budget, the more you may need to supplement existing wealth with money earned from future investment returns.

Proposition Three: It is not just your level of spending that determines the amount of investment risk that you need to take with your asbestos settlement. Rather, it is the level of spending relative to your existing wealth.   If you have a million dollars and want to live in a cabin in the woods and be self supporting, you probably do not need to send much, if any, of your current wealth into the future. If you have a million dollars and want to live like Donald Trump, you probably need to consider how to fund a great many future expenses.   A need for money to pay future bills = a reason to take investment risk today.

Proposition Four: Without risk there is no reward; taking risk with your asbestos settlement, however, does not guarantee that you will be rewarded. The whole idea of risk is that the value of an investment might shrink instead of grow. As a consequence, you must plan your investments carefully and take only the risk that you really need to take—not too much, not too little.

The first step is to figure out a budget—even if you do it on the back of an envelope. Write it down. Look at it. Chances are you’ve forgotten some important items so bump it up. Put in a margin for unexpected expenses. You are on your way to determining if you have the luxury of avoiding investment risk; or, if you need to become an investor.

The posts provided by Schultz Collins Lawson Chambers, Inc. [SCLC] convey information on basic investment concepts.  They are intended to facilitate prudent investment decision making.   They should not, however, be the sole factor in making investment decisions; and, they are not intended to act as advice or recommendations for any specific investor.    SCLC acts as Independent Investment Counsel and is a Registered Investment Advisor.  It does not provide legal, accounting or tax advice; and the opinions expressed in the posts are solely those of SCLC.  You can find additional information about SCLC, their personnel, and client services at www.schultzcollins.com

Related posts:

Your Asbestos Settlement and Investing

Your Asbestos Settlement and Financial Risk

 

Your Asbestos Settlement and Financial Risk

This is a guest post by Patrick Collins of Schultz Collins Lawson Chambers, Inc., the firm we hired to advise us on how to handle Kazan Law’s pension funds, our charitable foundation’s funds, and that some of our partners hired to advise them on personal money management.

asbestos settlementFinancial risk and uncertainty are both important aspects of investing your asbestos settlement.   As a general proposition, let’s assume that “uncertainty” is a condition that makes individuals more scared of taking risk.  When a child is uncertain about how the world works, he or she might be very concerned about what type of monster hides under the bed at night.  Getting out of bed when the lights are turned off is viewed as a risky undertaking.  As an adult with more experience and knowledge, such worries seem comical—however, to a child they are very real.

Fear, however, is no laughing matter.  Uncertainty drives both adults and children to protect themselves by avoiding situations with which they are unfamiliar or uncomfortable.  Investing often involves a fear of the unknown.

Lack of familiarity with financial concepts and technical jargon can make investing your asbestos settlement seems very risky.  The less you know, the easier it is to imagine bad outcomes, and the more attractive a safe alternative like a bank account may appear.  Equally worrisome, the less you know about a subject, the more reliant you become on trust.  Can you trust the auto mechanic not to overcharge for repairs; can you trust your doctor to give you a correct diagnosis; can you trust a financial adviser not to recommend investments that only serve his or her self-interest?

An American philosopher remarked that the only thing more difficult than making money was keeping it.  News reports often tell the sad story of lotto winners who, just a few years later, are flat broke.  Undoubtedly, these folks would have been better served by putting all their money into a passbook savings account, developing a budget for reasonable living expenses, and sticking to it.  The moral of their sad stories seems to be that everything should be put into the bank—don’t take any risk.

When is risk avoidance the best course of action?  Is there any course of action that is truly risk free?  Is there a reason to put your asbestos settlement “at risk” in an investment program?  If yes, how much should be put at risk?

These are topics for future consideration.

The posts provided by Schultz Collins Lawson Chambers, Inc. [SCLC] convey information on basic investment concepts.  They are intended to facilitate prudent investment decision making.   They should not, however, be the sole factor in making investment decisions; and, they are not intended to act as advice or recommendations for any specific investor.    SCLC acts as Independent Investment Counsel and is a Registered Investment Advisor.  It does not provide legal, accounting or tax advice; and the opinions expressed in the posts are solely those of SCLC.  You can find additional information about SCLC, their personnel, and client services at www.schultzcollins.com

Related posts:

Who Needs to Take Risk with an Asbestos Settlement?

Your Asbestos Settlement and Investing

How Much Money Can You Receive From an Asbestos Lawsuit?

asbestos lawsuitNobody initiates a lawsuit unless they think they will obtain some money from it and an asbestos lawsuit is no different. In fact, because of the irrevocable harm done to you from wrongful asbestos exposure and the devastating consequences of developing an asbestos-caused illness like mesothelioma, the stakes in an asbestos lawsuit can be higher than most.

Standard of proof
Asbestos lawsuits are civil cases not criminal cases even though you may feel that what was done to you was criminal. In most civil cases, as described in a California courts website, the judge or jury has to make a decision about which side wins based on a standard called “preponderance of the evidence.” This means that, if the case is decided in your favor, your side of the story is more likely true than not. It does not mean that one side brought in more evidence than the other side. It means that one side’s evidence was more believable than the other’s.

In some cases, the standard for reaching a decision is “clear and convincing evidence.” This means that, for the decision to be made in your favor, you have to prove that your version of the facts is highly probably or reasonably certain, or “substantially more likely than not.”

How large a settlement or judgment can you expect to be awarded?

How much money you might be awarded in an asbestos lawsuit depends on many factors, such as the medical evidence that confirms your diagnosis, how seriously you have been injured, your actual and potential losses, the identification of the asbestos products that you were exposed to, the companies that made these products, and their financial resources. With all the variables, it is impossible to answer this question with specific amounts without knowing more about your potential claim, and you should be suspicious of any lawyer who tells you “how much” on your first meeting.

I can’t speak for other mesothelioma law firms but at Kazan Law, we do not take a case unless we believe the facts are strongly in your favor. Because of our strong track record, most of our cases get settled entirely out of court.

We keep our clients’ settlement amounts confidential to protect their privacy. Defendants who pay our clients prefer confidentiality because if word got out other plaintiff lawyers would try to get as much as we do and then the defendants would not have as much cash with which to pay our next client!

Verdicts are a matter of public record. In recent years, several of our clients have received significant verdict awards ranging from about $5 million to $27 million. For specific amounts on trial verdicts and appellate decisions you can refer to our website.

Your Asbestos Settlement and Investing

asbestos settlementThis is a guest post by Patrick Collins of Schultz Collins Lawson Chambers, Inc., the firm we hired to advise us on how to handle Kazan Law’s pension funds, our charitable foundation’s funds, and that some of our partners hired to advise them on personal money management.

The decision on what lawyer to hire is the most important decision almost every family will ever make because so much potential money is at stake. If litigation goes well, the next decision is what to do with the proceeds so that the money is there and stays there to meet the family’s needs for many years to come. We thought it would be informative to offer information to help you understand what questions to ask, and what factors that go into money management are important.

 

What does it mean to invest your asbestos settlement?

Although there are a variety of possible answers—e.g., “risk money to make money”— the best answer is that investing means taking money from your asbestos settlement that you do not wish to spend NOW and sending it into the FUTURE so that it is available for you to spend at a later date. Investing is like stepping into a time machine so that you can meet yourself—and your money— in the future.

You could spend all of your money from your asbestos settlement now but that would be foolish because there would be nothing for you and your family tomorrow. So you are faced with a decision: how much to spend today versus how much to send ahead in time for your future use.

Let’s say that you wanted to send your money across a distance—perhaps New York to Los Angeles—instead of across time. You have a variety of shipping choices:

  • Truck
  • Railroad
  • Airplane

A variety of costs and risks confront you as you make your choice. Shipping by truck may be cheap; but, it is slow. There is little risk because if there is a truck accident, chances are that your package will survive intact. At the other extreme, shipping by air is fast but expensive and, if a crash occurs, your package may be obliterated. Maybe you decide to divide your money into three packages and ship each one differently. It’s up to you.

You confront a similar set of options regarding how to send your money across time. Here are some choices:

  • Bank Account (Certificate of Deposit)
  • Bonds
  • Stocks

Bank accounts don’t earn much money but they are relatively safe; stocks gain or lose money relatively quickly but, in the long run, they offer better return expectations. Bonds are the railroads of the financial industry—they are generally riskier than insured CDs but not as risky as stocks.

What is investment risk? What amount of risk do you need to take with the money from your asbestos settlement? In the next several posts we will talk about risk; types of risk; deciding how much risk, if any, you need to take; and, most importantly, the risk of trying to avoid risk.

The posts provided by Schultz Collins Lawson Chambers, Inc. [SCLC] convey information on basic investment concepts. They are intended to facilitate prudent investment decision making.   They should not, however, be the sole factor in making investment decisions; and, they are not intended to act as advice or recommendations for any specific investor.   SCLC acts as Independent Investment Counsel and is a Registered Investment Advisor. It does not provide legal, accounting or tax advice; and the opinions expressed in the posts are solely those of SCLC. You can find additional information about SCLC, their personnel, and client services at www.schultzcollins.com.

Related posts:

Who Needs to Take Risk with an Asbestos Settlement?

Your Asbestos Settlement and Financial Risk

 

Some Things Still Ring True After Four Decades of Asbestos Litigation

Asbestos Litigation Steven Kazan 1985This month Kazan Law celebrates four decades of obtaining justice for asbestos victims.  To commemorate the occasion, we are taking a look at the firm’s history to participate in our own unique way in social media’s Throwback Thursday. In my last post, I talked about how I founded Kazan Law in March 1974 when as a young attorney I found myself representing dying workers. They had been exposed to asbestos because of a company whose name now has become synonymous with asbestos litigation:  Johns Manville.  It was a landmark case that set a legal precedent and launched me on my journey of handling over a thousand of asbestos litigation cases.

In the firm’s archives, I found an interview I gave to the California edition of the Daily Journal, a legal community newspaper, in 1985. Some of what I said then about asbestos litigation still rings true now.  So for Throwback Thursday, here are several excerpts:

Working with asbestos-related clients is both depressing and rewarding, according to Oakland attorney Steven Kazan who heads one of the Bay Area’s major plaintiff’s asbestos practices.  “As much as you try to retain a sense of detachment, you get involved,” said Kazan, the founder of Kazan & McClain. But helping to obtain financial security for asbestos victims dying of chronic disease is rewarding.

Still true.  Except today it is Kazan, McClain, Satterley & Greenwood, A Professional Law Corporation.

Kazan said his firm will look at about 1,800 possible cases this year, 1,000 of them asbestos-related and take only about 100 of them, the article states.

Factors Kazan uses in evaluating potential cases include:

  • the degree of disability

  • the evidence of asbestos exposure

  • potential monetary damages

Also still true.

Kazan said he sometimes advises people with minor asbestos-related problems to wait and see if their illness progresses to avoid settling for an amount of money that will not cover their medical expenses if their condition worsens.

Still good advice.

Although exposure to asbestos has greatly decreased due to public awareness of its dangers, may people have been exposed but not yet become ill and Kazan predicted that he won’t have to change his practice much in the near future.

“For the next 10 to 15 years there will be a substantial volume of asbestos litigation,” Kazan said.

Sadly, this also has proved to be true.  In fact, it’s been more than 25 years and the need to help obtain financial security for asbestos victims continues to drive myself and my associates forward in our work more than ever.

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