Client’s niece had moved from Texas to St. Louis to live.  When niece was a young child (she is now 19), she was in a car accident and suffered a severe head injury.  As a result of an insurance settlement, she was to receive millions of dollars in insurance payments throughout her life.  The payments began when she was a child, increasing in size as she became older.

Client operates a residential home building business in St. Louis.  When the niece arrived, his business was in dire need of working capital.  The niece (who was a higher functioning person than initial assessments predicted) was starting to receive significant payments in furtherance of her settlement.

Client identified a company that would purchase the niece’s payment stream in exchange for a discounted up-front payment.  He proceeded to facilitate the transaction and, upon her receipt of the funds, permitted his company to borrow the funds.  Over a period of the next year, he used the money to help with the cash-flow of his business.  He also repaid a portion of the money back to the niece and/or used funds to satisfy her financial obligations.

Client’s niece decided to return to Texas.  Upon her return, her family began to ask her where her payments were.  She claimed she did not know.  Family hired counsel in Texas to investigate.  Ultimately, the insurance company was directed to begin making payments to the family.   The company which bought the annuity sued the niece.  The niece filed a counterclaim and sued our client claiming she was not sufficiently competent to enter into the advance payment contract.  The authorities got involved.


A forensic accountant was hired to trace the money received by our client and then loaned to his business.  Accounting demonstrated that client had properly accounted for all the money borrowed from the niece and confirmed that a large portion of the loan had already been paid back.  This satisfied the legal authorities that the money was not stolen.  The remaining issue between the parties related to whether the agreement to receive an advance payment was void considering one party was not sufficiently competent to enter into contract.


After months of litigation, a settlement was reached whereby our client agreed to continue repaying the loan it received from the niece.  The annuity company settled with the niece and effectively voided the original agreement.  Thus, the company would not receive the benefit of its original bargain.

Lessons Learned:

Doing business with family is tricky.  There is often a tremendous amount of trust present that, once violated, can impair everyone’s ability to settle a matter on reasonable terms.  In this instance, had our client consulted with legal counsel prior to entering the transaction, we could have taken steps to assure the enforceability of the contract.  Legal incompetence can make an agreement unenforceable.  However, measures could have been taken to officially declare her competent and a lot of this could have been avoided.