Structured Settlements Legal Framework and Court Approval

Question 1

What is the Structured Settlement Protection Act (SSPA)?

Accepted Answer

State laws requiring court approval before a claimant can transfer structured settlement payment rights to a factoring company

Answer

A federal law that bans the sale of structured settlement payment rights

Answer

A federal law regulating annuity pricing

Answer

A law requiring all settlements to be structured

Question 2

What standard must a court apply when approving a structured settlement transfer under most state SSPAs?

Accepted Answer

The transfer must be in the best interest of the payee, considering the welfare of dependents

Answer

The transfer must yield the highest present value for the claimant

Answer

The transfer must be approved by the original defendant

Answer

The transfer must be reviewed by the state insurance commissioner

Question 3

Under IRC §5891, what federal excise tax is imposed on factoring companies that purchase structured settlement payment rights without court approval?

Accepted Answer

40%

Answer

5%

Answer

10%

Answer

25%

Question 4

Which of the following is required to be disclosed to a structured settlement payee before a transfer agreement is signed under most SSPAs?

Accepted Answer

The discounted present value being offered and the effective discount rate (annual percentage rate)

Answer

The payee's full medical history

Answer

The life insurer's internal rate assumptions

Answer

The defendant's current net worth

Question 5

What is the typical waiting period required between the disclosure statement and the signing of a transfer agreement under SSPAs?

Accepted Answer

At least 3 days but commonly 3–10 business days depending on the state

Answer

No waiting period is required

Answer

3 business days

Answer

30 calendar days

Question 6

Which of the following parties must typically be notified when a structured settlement payee seeks court approval to transfer payment rights?

Accepted Answer

The annuity issuer, the qualified assignee, and any other interested parties identified in the settlement documents

Answer

Only the factoring company and the payee

Answer

Only the original defendant

Answer

Only the state insurance commissioner