Structured Settlements Legal Framework and Court Approval 3

Question 1

What is a 'settlement agreement' in the context of structured settlements?

Accepted Answer

The binding contract between the plaintiff and defendant that specifies the terms of the periodic payments

Answer

The settlement agreement is the master contract between plaintiff and defendant (and their insurers) that documents the payment terms, releases, and all conditions of the structured settlement.

Question 2

When minors are claimants in a structured settlement, what additional legal requirement typically applies?

Accepted Answer

Court approval of the settlement is required to protect the minor's interests

Answer

Because minors cannot legally contract, settlements on their behalf must be approved by a court (usually a probate or civil court), which acts to protect the minor's best interests.

Question 3

What is a 'general release' in a structured settlement?

Accepted Answer

A legal document in which the claimant releases the defendant from all claims in exchange for the structured settlement consideration

Answer

A general release is the plaintiff's written relinquishment of all claims against the defendant, which is exchanged for the structured settlement payment stream.

Question 4

What is a 'Medicare Set-Aside' (MSA) and how does it relate to structured settlements?

Accepted Answer

A portion of a workers' compensation or liability settlement set aside to cover future Medicare-covered medical expenses, sometimes structured as periodic payments

Answer

An MSA allocates a portion of a settlement to pay for future medical expenses that Medicare would otherwise cover, protecting Medicare's interests; this MSA portion can itself be structured as periodic payments.

Question 5

What is the 'anti-assignment' clause in a structured settlement agreement?

Accepted Answer

A clause prohibiting the claimant from transferring or assigning the right to receive periodic payments

Answer

The anti-assignment clause bars the claimant from voluntarily transferring payment rights, which is essential to maintaining the tax-free status of the payments under IRC §104(a)(2).

Structured Settlements Practice Test

Structured Settlements Practice Test

Structured Settlements Legal Framework and Court Approval 3