WHEN DO LAWYERS NEED AN ACTUARY?
Actuaries are experts in calculations involving time value of money and uncertain events in virtue of their financial and mathematical knowledge. Marriage breakdowns, personal injury, fatality and estate cases for example may require the help of an actuary.
In cases of marriage breakdowns, when one or both parties are part of a defined benefit pension plan (i.e. a pension plan that promises to pay a specific dollar amount when the member retires), it may be beneficial for both parties to have one of the party pay out the other party with a lump sum amount immediately, rather than having the pension divided at source when the parties retire later on. Actuaries are able to determine the lump sum value equivalent to the future monthly pension payments, by making assumptions regarding the life expectancy of the member and the interest income that may be able to be generated from the lump sum.
In cases of personal injury, the injured person may be unable to work or work only in a different position resulting in a salary loss and may also need medical care that he/she would not have otherwise needed. Actuaries can estimate the salary losses of the injured person based on available statistical data and calculate the lump sum present value of those salary losses and of the future medical expenses of the injured person. Such calculations require estimating the future losses of the injured person and discounting them to the present while considering his/her current and potentially reduced life expectancy.
The role of actuaries in fatality cases is similar. They can estimate the present value of the loss of support to the other family members, which would include the portion of the salary that the deceased would have otherwise earned during his lifetime that would have benefited other family members as well as the value of the household activities that the deceased would have performed.
In cases of estate litigation, an actuary may be needed to value a life estate. When a family member can use a property for free for the remainder of his/her life without being the owner, he/she has a life estate. An actuary can estimate the value of the life estate by estimating the future value that such family member will be receiving from the free use of the property and discounting it to the present while considering his/her life expectancy.
Among other cases, actuaries can also be involved in cases of wrongful dismissal especially when a pension is at stake as well as alleged cases of criminal interest rate charges.