Then an industry sprang up that offered to turn structured settlements into quick cash on the barrel, a choice that many lawsuit beneficiaries might be tempted to make (or might make after being leaned on by family members). Although laws often require that conversions of this sort be submitted for review to a court, judicial review may be cursory in the absence of adversary process to call attention to the potential drawbacks of a conversion. Not only has the structured-settlement-conversion industry managed to thrive, but somehow, as Shaun Martin notes, Congress has even been prevailed on to bestow favorable tax treatment on its doings — the same doings that tend to undermine the public benefits thought to arise from the original tax-favored structured settlement. More details are to be found in this decision, PDF, in which an appeals court recently sided with the factoring companies in a series of Fresno, California disputes (also discussed at this new blog on structured settlements, via Dan Schwartz).

Tax incentives that encourage lottery-winner syndrome? To paraphrase what Martin says, it’s almost as if someone was managing to work the system.

Taxes and structured settlements is a post from Overlawyered - Chronicling the high cost of our legal system