Structured Settlements Structured Settlement Basics 3

Question 1

Which of the following cases does NOT qualify for income-tax-free treatment under IRC §104(a)(2)?

Accepted Answer

Employment discrimination (non-physical) settlement

Answer

Slip-and-fall physical injury settlement

Answer

Car accident bodily injury settlement

Answer

Medical malpractice physical injury settlement

Question 2

What is the role of a structured settlement consultant or broker?

Accepted Answer

To design and negotiate the structured settlement payment plan on behalf of the plaintiff

Answer

To represent the defendant in litigation

Answer

To underwrite the annuity contract

Answer

To serve as the qualified assignee

Question 3

What financial strength rating is commonly required of life insurers funding structured settlements?

Accepted Answer

At least an A- rating from A.M. Best or equivalent

Answer

At least a B rating from A.M. Best

Answer

Any investment-grade rating

Answer

No minimum rating is required

Question 4

What is a 'reversionary' structured settlement?

Accepted Answer

A settlement where unused guaranteed payments revert to the defendant upon the claimant's early death

Answer

A settlement that reverts to the defendant if the claimant recovers

Answer

A settlement that can be converted to a lump sum at any time

Answer

A settlement paid in reverse chronological order

Question 5

Which professional organization in the US primarily represents structured settlement industry professionals?

Accepted Answer

National Structured Settlements Trade Association (NSSTA)

Answer

National Association of Insurance Commissioners (NAIC)

Answer

American Bar Association (ABA)

Answer

Securities Industry and Financial Markets Association (SIFMA)

Question 6

What must a structured settlement agreement include to preserve tax-free status under IRC §104(a)(2)?

Accepted Answer

Language clearly establishing that payments are on account of personal physical injury and are not acceleratable, transferable, or subject to the claimant's control

Answer

An investment provision allowing the claimant to redirect payments

Answer

A clause allowing annual lump-sum conversions

Answer

A requirement that payments be invested in US Treasury bonds