Consumer Protections and Rights Flashcards
7 cards from real Sell Structured Settlement practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Consumer Protections and Rights flashcards as text
Under most state SSPAs, which parties must be notified when a structured settlement transfer petition is filed with the court?
Answer: The annuity issuer, the original defendant or liability insurer, and other interested parties
Most SSPAs require notice to all interested parties — including the annuity issuer, the original defendant or insurer, and any government benefit agencies — to give them opportunity to object.
If a structured settlement transfer receives a qualified court order, how does IRC Section 5891 treat the transaction?
Answer: The 40% excise tax does not apply to the transfer
IRC Section 5891 exempts transfers that receive a qualified court order from the 40% excise tax, directly incentivizing factoring companies to seek proper court approval.
What does 'independent professional advice' mean under most SSPAs?
Answer: Guidance from a licensed attorney or financial advisor with no connection to the transaction
Independent professional advice must come from a qualified professional who has no financial interest in or connection to the transfer, ensuring the seller receives truly unbiased guidance.
A seller signs a structured settlement transfer agreement but then changes their mind within the statutory period. What right do most SSPAs give the seller?
Answer: The right to rescind the agreement within a specified cooling-off period
Most SSPAs include a mandatory rescission period allowing sellers to cancel the agreement within a set number of days after signing without facing any penalty.
What is the typical role of the annuity issuer during a structured settlement transfer process?
Answer: The annuity issuer must be notified and may provide acknowledgment of the transfer
Annuity issuers do not approve or deny transfers, but they must be notified of the pending transfer and typically provide an acknowledgment for administrative purposes.
Which consumer protection concern was the primary motivation behind the passage of SSPAs in most states?
Answer: Factoring companies charging unfair discount rates and providing insufficient disclosures
SSPAs were enacted largely in response to factoring companies that applied steep discount rates and provided minimal disclosures, leaving uninformed sellers with far less than the fair value of their payments.
Under federal law (IRC Section 104), how are structured settlement payments treated for the original injured payee?
Answer: Excluded from gross income and therefore tax-exempt
IRC Section 104 excludes structured settlement payments from the gross income of the original injured payee, preserving the full intended value of the personal injury compensation.