Structured Settlements Structured Settlement Basics 2

Question 1

Who typically serves as the 'qualified assignee' in a structured settlement qualified assignment?

Accepted Answer

A special-purpose assignment company affiliated with a life insurer

Answer

A qualified assignee is usually a special-purpose company set up by a life insurer to assume the payment obligation from the defendant or its insurer.

Question 2

Under IRC §130, what happens when a defendant assigns its structured settlement obligation to a qualified assignee?

Accepted Answer

The defendant excludes from income any amount received for assuming the periodic payment liability

Answer

IRC §130 allows the defendant (or its insurer) to exclude from gross income amounts received from the assignment of the periodic payment obligation to a qualified assignee.

Question 3

What does 'present value' mean in the context of structured settlements?

Accepted Answer

The current worth of future payments discounted at an assumed interest rate

Answer

Present value is the current dollar value of a stream of future payments, calculated by discounting them at an appropriate interest rate.

Question 4

Which of the following is NOT a typical type of structured settlement payment schedule?

Accepted Answer

Declining government bond yields

Answer

Structured settlement payment schedules include level, increasing, or decreasing periodic payments and future lump sums, but bond yield curves are not a payment schedule type.

Question 5

What is a 'life-contingent' structured settlement payment?

Accepted Answer

A payment that is made only if the claimant is still alive

Answer

Life-contingent payments cease upon the claimant's death, so the payment obligation is contingent on the claimant remaining alive.

Structured Settlements Practice Test

Structured Settlements Practice Test

Structured Settlements Structured Settlement Basics 2