Mixed Deck — All Sell Structured Settlement Topics Flashcards
100 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 20 Mixed Deck — All Sell Structured Settlement Topics flashcards as text
How long does the typical structured settlement transfer process take from agreement to receiving funds?
Answer: About 45–90 days
The transfer process usually takes 45–90 days because it requires court hearings, mandatory waiting periods, and notification to all interested parties.
A structured settlement with 'increasing payments' typically adjusts by what method?
Answer: A fixed percentage or cost-of-living index each year
Increasing payment structures commonly apply a fixed annual percentage or tie adjustments to a cost-of-living index such as the CPI.
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.
What does an 'independent professional advice' requirement in an SSPA obligate the payee to do?
Answer: Obtain advice from an independent attorney, financial advisor, or accountant before completing the transfer
Several states' SSPAs require that the payee receive — or at minimum be offered — independent legal or financial advice before the transfer is executed.
Which entity issues the annuity contract underlying most structured settlements?
Answer: Life insurance company
Life insurance companies are the issuers of annuity contracts that back structured settlements, and they must meet state insurance regulatory requirements.
Which of the following structured settlement payment types typically commands the highest lump-sum offer from factoring companies?
Answer: Guaranteed monthly payments beginning immediately and backed by a highly rated insurer
Near-term, guaranteed payments backed by a strong insurer command the highest values because they combine low credit risk, low mortality risk, and minimal time discounting.
What information must be disclosed to the payee under most state Structured Settlement Protection Acts before a transfer can proceed?
Answer: The discount rate, fees, net payment amount, and total value of payments being sold
SSPAs require factoring companies to disclose the discount rate, all fees and expenses, the net lump sum the payee will receive, and the total dollar amount of payments being transferred.
What role does the payee's attorney typically play in a structured settlement transfer proceeding?
Answer: The payee's attorney independently advises the payee about the transaction's terms and implications
An independent attorney for the payee reviews the transfer terms, explains the consequences, and advises the payee on whether the deal is in their best interest — separate from the factoring company's legal team.
Which of the following is a major red flag indicating a potentially predatory structured settlement buyer?
Answer: The buyer discourages the payee from seeking independent legal or financial advice
Legitimate factoring companies encourage independent advice; a buyer who pressures the payee not to consult an attorney or advisor is trying to prevent informed decision-making.
Which federal law specifically governs the assignment of structured settlement payment rights to a factoring company?
Answer: The Internal Revenue Code Section 5891
IRC Section 5891 imposes a 40% excise tax on factoring companies that purchase structured settlement payments without obtaining a qualifying court order.
In a structured settlement, what is a 'lump-sum deferral'?
Answer: A single large payment scheduled at a future date within the payment stream
A lump-sum deferral is a single large payment built into the settlement to be paid at a specific future date, such as for a college education or retirement.
What does a 'bid sheet' from a factoring company typically include?
Answer: The proposed lump sum, the discount rate applied, fees, and a breakdown of payments being purchased
A bid sheet (or quote sheet) breaks down the offer — showing which payments are included, the discount rate, all fees and closing costs, and the net cash to be received by the payee.
What must a factoring company provide to the payee at least 3 business days before the payee signs the purchase agreement under most SSPAs?
Answer: A written disclosure statement showing the discount rate, fees, net payment, and total payment value being sold
SSPAs mandate that factoring companies deliver a written disclosure — often called the required disclosure statement — at least 3 business days before the payee executes the transfer agreement.
Which parties are generally required to receive notice of a structured settlement transfer petition?
Answer: The annuity issuer, obligor, and any other interested parties identified by the court
SSPAs require that the annuity issuer, the obligor (insurance company), and other interested parties receive formal notice of the transfer petition so they can appear and object if warranted.
What is the primary financial risk to a payee who sells all of their structured settlement payments?
Answer: Losing a guaranteed, reliable long-term income stream that may have been essential for living expenses
Selling all payments eliminates the stable, long-term income the settlement was designed to provide, which can leave the payee without financial support in the future.
What tax reporting form does a factoring company use to report a structured settlement transfer payment to the IRS?
Answer: Form 1099 (typically 1099-MISC or 1099-OTHER)
Factoring companies typically issue a Form 1099 to report the lump-sum payment made to a payee in a structured settlement transfer, reflecting it as potentially taxable income.
How must the transfer agreement be written under most SSPAs to protect the seller?
Answer: In plain language that clearly explains all terms and the seller's rights
Most SSPAs require transfer agreements to be written in plain language so sellers can readily understand the terms, their rights, and the full implications of what they are agreeing to.
What is the 'present value' of a structured settlement payment stream?
Answer: The current worth of future payments discounted at a given rate
Present value is the current lump-sum equivalent of future payments, calculated by discounting each payment back to today's value using a specified discount rate.
What is the consequence if a structured settlement transfer is completed WITHOUT a qualifying court order?
Answer: The factoring company owes a 40% federal excise tax under IRC Section 5891
IRC Section 5891 imposes a 40% excise tax on transfers that do not obtain a qualifying court order, effectively making non-court-approved transfers financially unviable.
If a payee is offered $50,000 today in exchange for payments totaling $100,000 over the next 10 years, what does this imply about the discount rate?
Answer: The discount rate is very high, significantly reducing the present value
Receiving only $50,000 for $100,000 in future payments indicates the discount rate applied is quite high, reducing the present value to half the nominal amount.