Structured Settlement Basics Flashcards
6 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 6 Structured Settlement Basics flashcards as text
What is a structured settlement?
Answer: A series of periodic payments made to a plaintiff following a legal settlement
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.
Structured settlements are most commonly established as a result of which type of case?
Answer: Personal injury lawsuits
Structured settlements are most frequently created to resolve personal injury lawsuits, providing long-term financial security to the injured party.
Which financial instrument is typically used to fund a structured settlement?
Answer: Annuity contract
An annuity purchased from a life insurance company is the standard funding mechanism for structured settlements, guaranteeing the periodic payments.
Who typically purchases the annuity that funds a structured settlement?
Answer: The defendant or their insurer
The defendant or their liability insurance carrier purchases the annuity from a life insurance company to fund the structured settlement payments.
Structured settlement payments are generally treated how under US federal tax law?
Answer: Tax-free to the recipient
Under IRC Section 104(a)(2), periodic payments from structured settlements for physical injury or sickness are excluded from the recipient's gross income.
The Periodic Payment Settlement Act of 1982 did which of the following?
Answer: Provided federal tax incentives encouraging the use of structured settlements
The Periodic Payment Settlement Act of 1982 codified federal tax exclusions for structured settlement payments, making them attractive as a settlement tool.