Sell Structured Settlement Structured Settlement Basics

Question 1

What is a structured settlement?

Accepted Answer

A series of periodic payments made to a plaintiff following a legal settlement

Answer

A structured settlement is an arrangement where a defendant pays a plaintiff through a series of scheduled periodic payments rather than a single lump sum.

Question 2

Structured settlements are most commonly established as a result of which type of case?

Accepted Answer

Personal injury lawsuits

Answer

Structured settlements are most frequently created to resolve personal injury lawsuits, providing long-term financial security to the injured party.

Question 3

Which financial instrument is typically used to fund a structured settlement?

Accepted Answer

Annuity contract

Answer

An annuity purchased from a life insurance company is the standard funding mechanism for structured settlements, guaranteeing the periodic payments.

Question 4

Who typically purchases the annuity that funds a structured settlement?

Accepted Answer

The defendant or their insurer

Answer

The defendant or their liability insurance carrier purchases the annuity from a life insurance company to fund the structured settlement payments.

Question 5

Structured settlement payments are generally treated how under US federal tax law?

Accepted Answer

Tax-free to the recipient

Answer

Under IRC Section 104(a)(2), periodic payments from structured settlements for physical injury or sickness are excluded from the recipient's gross income.

Sell Structured Settlement Practice Test

Sell Structured Settlement Practice Test

Sell Structured Settlement Structured Settlement Basics