Sell Structured Settlement Consumer Protections and Rights 2

Question 1

Under most state SSPAs, which parties must be notified when a structured settlement transfer petition is filed with the court?

Accepted Answer

The annuity issuer, the original defendant or liability insurer, and other interested parties

Answer

Only the seller and the factoring company

Answer

The IRS and state tax authorities only

Answer

The seller's attorney and the seller's financial advisor only

Question 2

If a structured settlement transfer receives a qualified court order, how does IRC Section 5891 treat the transaction?

Accepted Answer

The 40% excise tax does not apply to the transfer

Answer

The 40% excise tax still applies but at a reduced rate of 20%

Answer

The tax obligation shifts from the factoring company to the seller

Answer

The tax is deferred until the future payments would have been received

Question 3

What does 'independent professional advice' mean under most SSPAs?

Accepted Answer

Guidance from a licensed attorney or financial advisor with no connection to the transaction

Answer

Advice provided by the factoring company's in-house legal counsel

Answer

Information included in the required transfer disclosure document

Answer

Advice from a government-appointed consumer protection advocate

Question 4

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?

Accepted Answer

The right to rescind the agreement within a specified cooling-off period

Answer

No right to cancel once a valid agreement has been signed

Answer

The right to cancel only if the court has not yet been petitioned

Answer

The right to reduce the amount sold but not cancel the entire agreement

Question 5

What is the typical role of the annuity issuer during a structured settlement transfer process?

Accepted Answer

The annuity issuer must be notified and may provide acknowledgment of the transfer

Answer

The annuity issuer has sole authority to approve or deny all transfers

Answer

The annuity issuer sets the discount rate applied to the transfer

Answer

The annuity issuer plays no role whatsoever in the transfer process

Question 6

Which consumer protection concern was the primary motivation behind the passage of SSPAs in most states?

Accepted Answer

Factoring companies charging unfair discount rates and providing insufficient disclosures

Answer

Excessive delays in the court approval process

Answer

Annuity issuers refusing to honor their structured settlement payment obligations

Answer

Government agencies improperly seizing structured settlement funds

Question 7

Under federal law (IRC Section 104), how are structured settlement payments treated for the original injured payee?

Accepted Answer

Excluded from gross income and therefore tax-exempt

Answer

Taxable as ordinary income in the year each payment is received

Answer

Taxable only to the extent payments exceed the original settlement principal

Answer

Subject to capital gains tax when the payment rights are transferred