Structured Settlements Annuities and Funding Mechanisms 3

Question 1

What is a 'substandard age' rating in structured settlement annuity pricing?

Accepted Answer

An actuarial adjustment that rates an impaired claimant as if they were older, reducing annuity cost

Answer

A penalty applied to claimants under age 18

Answer

A discount given to healthy claimants

Answer

A regulatory classification for high-risk annuities

Question 2

What does 'annuity certain' mean in structured settlement planning?

Accepted Answer

An annuity that pays for a fixed period regardless of the annuitant's survival

Answer

An annuity backed by the federal government

Answer

An annuity with a guaranteed minimum return

Answer

An annuity with no surrender charges

Question 3

What is the effect of multiple life insurers funding a single structured settlement?

Accepted Answer

It diversifies insolvency risk by spreading payments among multiple highly rated carriers

Answer

It increases the claimant's tax liability

Answer

It is prohibited by the Periodic Payment Settlement Act

Answer

It reduces the guaranteed payment amounts

Question 4

Under what circumstances can the claimant's estate receive remaining structured settlement payments after the claimant's death?

Accepted Answer

Only when the payments were guaranteed for a period that has not yet expired

Answer

Always — all payments pass to the estate

Answer

Never — all payments cease at the claimant's death

Answer

Only if the claimant purchased a separate life insurance policy

Question 5

What is 'constructive receipt' and why does it matter in structured settlements?

Accepted Answer

It is a tax doctrine holding that income is taxable when the claimant has the right to receive it, even if not yet received — structured settlements are designed to avoid it

Answer

It is the physical receipt of a check from the insurer

Answer

It is the acknowledgment that the annuity has been funded

Answer

It refers to the defendant's receipt of the release

Question 6

Which of the following would cause a structured settlement to lose its income-tax-free status?

Accepted Answer

Allowing the claimant to accelerate, commute, or assign payments at will

Answer

Including a COLA clause in the annuity

Answer

Using a qualified assignee to assume the payment obligation

Answer

Naming a beneficiary for guaranteed payments