Certified Structured Settlement Consultant (CSSC) — Questions and Answers

Question 1: A structured settlement for emotional distress claims with no underlying physical injury would result in:

Fully taxable periodic payments as ordinary income (Correct answer)
Fully tax-free periodic payments under IRC 104(a)(2)
A 50% exclusion under IRS Notice 95-45
Capital gains treatment on the growth portion only

Correct answer: Fully taxable periodic payments as ordinary income

Without an underlying physical injury or physical sickness, emotional distress damages do not qualify for the IRC Section 104(a)(2) exclusion and are taxable as ordinary income.

Question 2: Which federal agency reviews Workers' Compensation Medicare Set-Aside proposals?

Centers for Medicare & Medicaid Services (CMS) (Correct answer)
Social Security Administration (SSA)
IRS
Department of Labor (DOL)

Correct answer: Centers for Medicare & Medicaid Services (CMS)

CMS reviews WCMSA proposals when they meet certain review thresholds to ensure that the set-aside adequately protects Medicare's interests before approving the settlement.

Question 3: What is the effect of multiple life insurers funding a single structured settlement?

It reduces the guaranteed payment amounts
It is prohibited by the Periodic Payment Settlement Act
It increases the claimant's tax liability
It diversifies insolvency risk by spreading payments among multiple highly rated carriers (Correct answer)

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

Using more than one life insurer to fund portions of a structured settlement spreads the insolvency risk, providing added security to the claimant over long payment periods.

Question 4: Why is the effective discount rate in a factoring transaction often higher than the nominal rate disclosed?

Because the annuity issuer charges transfer fees that increase the effective rate
Because the court adds interest to the factoring company's rate
Because fees, closing costs, and the timing of payment receipts mean the true cost to the payee exceeds the nominal discount rate (Correct answer)
Because the IRS adds a surcharge to the disclosed rate

Correct answer: Because fees, closing costs, and the timing of payment receipts mean the true cost to the payee exceeds the nominal discount rate

Transaction costs and fees reduce the net amount the payee receives below what the nominal discount rate alone would suggest, making the effective (APR) rate higher than the stated rate.

Question 5: When minors are claimants in a structured settlement, what additional legal requirement typically applies?

The IRS must issue a ruling confirming tax-free status
Court approval of the settlement is required to protect the minor's interests (Correct answer)
A guardian must purchase the annuity directly
The minor must wait until age 18 to begin receiving payments

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

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 6: What recourse does a structured settlement payee have if a factoring company violates SSPA disclosure requirements?

The payee may rescind the transfer agreement and potentially seek damages under state consumer protection laws (Correct answer)
The payee can only seek damages in federal court
The payee must pay back any advance received
No recourse is available — signed agreements are final

Correct answer: The payee may rescind the transfer agreement and potentially seek damages under state consumer protection laws

Failure to comply with SSPA disclosure requirements can render the transfer agreement voidable, entitling the payee to rescind and potentially recover attorney fees and damages under state law.

Question 7: Under IRC §5891, to avoid the 40% excise tax, a factoring company must obtain what?

A qualified order — a court order approving the transfer that meets all applicable state SSPA requirements (Correct answer)
Approval from the original defendant's insurer
A waiver from the annuity issuer
IRS pre-approval of the discount rate used

Correct answer: A qualified order — a court order approving the transfer that meets all applicable state SSPA requirements

IRC §5891 requires a 'qualified order' — defined as a final court order approving the transfer that satisfies state SSPA requirements — to avoid the 40% excise tax on the discount amount.

Question 8: For a qualified assignment under IRC Section 130 to be valid, the assigned obligation must require periodic payments that:

Are fixed and determinable as to amount and time of payment, and cannot be accelerated, deferred, increased, or decreased (Correct answer)
Cannot exceed the original settlement amount
Can be accelerated or deferred at the claimant's election
Must begin within 90 days of the assignment and continue for at least 10 years

Correct answer: Are fixed and determinable as to amount and time of payment, and cannot be accelerated, deferred, increased, or decreased

IRC Section 130(c) requires that the periodic payments under a qualified assignment be fixed and determinable, with no right of the recipient to accelerate, defer, increase, or decrease the payments.

Question 9: What is the typical legal structure used by factoring companies to resell purchased structured settlement payment rights to investors?

Securitization — pooling payment rights into asset-backed securities sold to institutional investors (Correct answer)
A mutual fund investing in structured settlement annuities
A limited partnership interests offering to retail investors
Direct sale of the annuity contract

Correct answer: Securitization — pooling payment rights into asset-backed securities sold to institutional investors

Factoring companies commonly pool acquired payment rights and issue asset-backed securities, allowing institutional investors to purchase interests in the diversified pool of structured settlement cash flows.

Question 10: The 'constructive receipt' doctrine is relevant to structured settlements because it:

Sets the interest rate used to discount future payments
Requires the defendant to fund the annuity before signing the settlement agreement
Would cause payments to be taxable if the claimant had the right to demand a lump sum at any time (Correct answer)
Determines which state law governs the settlement

Correct answer: Would cause payments to be taxable if the claimant had the right to demand a lump sum at any time

If a claimant could demand immediate receipt of funds, constructive receipt would make those funds taxable; structured settlements are carefully designed so the claimant never has control over the funds.

Question 11: Which document formally transfers the periodic payment obligation from the defendant to the qualified assignee?

The court order approving the settlement
The release and settlement agreement
The annuity contract
The qualified assignment agreement (Correct answer)

Correct answer: The qualified assignment agreement

The qualified assignment agreement is the contract by which the defendant (or its insurer) transfers its periodic payment obligation to the qualified assignee under IRC §130.

Question 12: To preserve the tax-free status of structured settlement payments under IRC Section 104(a)(2), the annuity used to fund payments must be purchased by:

The defendant, insurer, or a qualified assignment company — not the claimant (Correct answer)
A government-approved trustee designated by the court
The claimant's attorney on behalf of the claimant
The claimant using proceeds from a separate investment account

Correct answer: The defendant, insurer, or a qualified assignment company — not the claimant

If the claimant purchases the annuity directly, they have constructive receipt of the settlement funds and lose the tax exclusion; the annuity must be purchased by the defendant's side.

Question 13: What is 'constructive receipt' and why does it matter in structured settlements?

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 (Correct answer)
It is the physical receipt of a check from the insurer
It refers to the defendant's receipt of the release
It is the acknowledgment that the annuity has been funded

Correct 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

Constructive receipt means the IRS treats income as received when the taxpayer has an unrestricted right to it; structured settlements preserve tax-free status by ensuring the claimant never has control over the funds.

Question 14: What is the typical timeline from application to court approval of a structured settlement transfer?

45–90 days, depending on state procedural requirements and court calendars (Correct answer)
2 weeks in all states
6–12 months
1–3 days

Correct answer: 45–90 days, depending on state procedural requirements and court calendars

State SSPA procedural requirements, including mandatory waiting periods and court scheduling, typically make the approval process take 45–90 days from application to final order.

Question 15: What distinguishes a 'direct purchase' factoring model from a 'broker' model in the structured settlement secondary market?

Direct purchasers can offer higher discount rates; brokers cannot
Direct purchasers require no court approval; brokers do
Direct purchasers buy payment rights with their own capital; brokers match payees with investors and earn a fee without taking ownership (Correct answer)
Direct purchasers are regulated by the SEC; brokers are not

Correct answer: Direct purchasers buy payment rights with their own capital; brokers match payees with investors and earn a fee without taking ownership

In a direct purchase model, the factoring company uses its own funds to buy payment rights; in a broker model, the company connects sellers with third-party funders and earns a fee without itself owning the payments.

Question 16: What is a 'split-funded' structured settlement?

A settlement that splits payments between taxable and tax-free portions
A settlement split between two plaintiffs
A settlement that uses both an annuity for future periodic payments and an immediate cash component (Correct answer)
A settlement funded by two separate life insurers

Correct answer: A settlement that uses both an annuity for future periodic payments and an immediate cash component

A split-funded settlement combines a lump-sum cash payment at closing with a structured annuity providing periodic payments, addressing both immediate and long-term needs.

Question 17: What is 'apportionment' in a workers' compensation context involving a structured settlement?

The split of the settlement between indemnity and medical components
The proportional share of the annuity premium borne by each party
The division of annuity payments among multiple claimants
The allocation of disability between a current work injury and a pre-existing condition or prior injury (Correct answer)

Correct answer: The allocation of disability between a current work injury and a pre-existing condition or prior injury

Apportionment determines what portion of the worker's current disability is attributable to the new work injury versus prior conditions, affecting the amount the employer or insurer owes.

Question 18: What is a 'Medicare Set-Aside' (MSA) and how does it relate to structured settlements?

An IRS rule limiting structured settlement amounts for Medicare recipients
A portion of a workers' compensation or liability settlement set aside to cover future Medicare-covered medical expenses, sometimes structured as periodic payments (Correct answer)
A state program that funds structured settlements for Medicaid patients
A type of annuity that invests in Medicare bonds

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

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 19: For a workers' compensation structured settlement, which IRC section governs the tax exclusion?

IRC §104(a)(1) (Correct answer)
IRC §104(a)(2)
IRC §72
IRC §130

Correct answer: IRC §104(a)(1)

Workers' compensation payments, including those structured as periodic payments, are excluded from gross income under IRC §104(a)(1), not §104(a)(2).

Question 20: What is the 'second injury fund' in workers' compensation?

A state fund that reimburses employers or insurers when a worker's prior disability combines with a new injury to cause a greater total disability than the new injury alone would have (Correct answer)
A supplemental annuity for workers who suffer a second on-the-job injury
A federal fund that reimburses employers for catastrophic claims
A savings fund maintained by the employer for self-insured WC claims

Correct answer: A state fund that reimburses employers or insurers when a worker's prior disability combines with a new injury to cause a greater total disability than the new injury alone would have

Second injury funds encourage employers to hire workers with pre-existing disabilities by reimbursing the employer or insurer for the portion of disability attributable to the prior condition.

Question 21: What standard must a court apply when approving a structured settlement transfer under most state SSPAs?

The transfer must be approved by the original defendant
The transfer must yield the highest present value for the claimant
The transfer must be in the best interest of the payee, considering the welfare of dependents (Correct answer)
The transfer must be reviewed by the state insurance commissioner

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

State SSPAs require courts to find that the transfer is in the best interest of the structured settlement payee, taking into account the payee's financial needs and the welfare of any dependents.

Question 22: What is a 'compromise and release' (C&R) settlement in workers' compensation?

A court order compelling the employer to pay WC benefits
A release of the insurer from annuity obligations
A regulatory requirement for employers to post WC insurance
A final settlement agreement in which the worker accepts a lump sum (or structured payments) in exchange for releasing all future WC claims (Correct answer)

Correct answer: A final settlement agreement in which the worker accepts a lump sum (or structured payments) in exchange for releasing all future WC claims

A C&R is a final settlement that closes out all aspects of the WC claim — indemnity and medical — in exchange for an agreed amount, which can be structured as periodic payments.

Question 23: Under IRC §130, what happens when a defendant assigns its structured settlement obligation to a qualified assignee?

The defendant owes capital gains tax on the assignment proceeds
The assignee must pay estate taxes on future payments
The defendant excludes from income any amount received for assuming the periodic payment liability (Correct answer)
The assignment invalidates the original settlement agreement

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

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 24: Can a factoring company acquire structured settlement payment rights without a transfer agreement signed by the payee?

No — a voluntary transfer agreement signed by the payee is a prerequisite to any court approval process under SSPAs (Correct answer)
Yes, if the court approves the transfer independently
Yes, if the annuity issuer consents
Yes, if the transaction is below $10,000

Correct answer: No — a voluntary transfer agreement signed by the payee is a prerequisite to any court approval process under SSPAs

SSPAs require a voluntary, written transfer agreement from the payee as the foundation of the court approval process — involuntary transfers are prohibited.

Question 25: What is the 'face value' of a structured settlement payment stream in factoring transactions?

The annuity's surrender value
The insurance company's reserve for future payments
The lump sum offered by the factoring company
The sum of all future payments without any discounting (Correct answer)

Correct answer: The sum of all future payments without any discounting

Face value (or gross value) is the simple arithmetic total of all future periodic payments, before any time-value discounting.

Question 26: What financial strength rating is commonly required of life insurers funding structured settlements?

At least a B rating from A.M. Best
At least an A- rating from A.M. Best or equivalent (Correct answer)
Any investment-grade rating
No minimum rating is required

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

Industry best practices require life insurers funding structured settlements to carry at least an A- or A rating from A.M. Best to ensure long-term payment security.

Question 27: A plaintiff receives a structured settlement for a physical injury claim. Their attorney's contingency fee is paid directly from the settlement. How is this treated for tax purposes?

The attorney fee reduces the claimant's excludable amount dollar-for-dollar
The claimant must include the attorney fee in gross income under the assignment of income doctrine
The attorney fee is tax-free to the attorney as part of the physical injury exclusion
The attorney fee is taxable income to the attorney, and the claimant's full settlement remains excluded (Correct answer)

Correct answer: The attorney fee is taxable income to the attorney, and the claimant's full settlement remains excluded

Attorney fees from a physical injury structured settlement are taxable income to the attorney, while the client's entire settlement — including the portion paid as attorney fees — remains excluded from the client's gross income under IRC 104(a)(2).

Question 28: What is a structured settlement?

A series of periodic payments made to a claimant over time as part of a legal settlement (Correct answer)
A lump-sum payment made immediately to a claimant
A government benefit program for injured workers
A court-ordered fine paid by a defendant

Correct answer: A series of periodic payments made to a claimant over time as part of a legal settlement

A structured settlement is an arrangement in which a defendant agrees to make periodic payments to a plaintiff over a set period instead of a single lump sum.

Question 29: Who owns the annuity contract in a typical structured settlement qualified assignment?

The qualified assignee (Correct answer)
The state insurance guaranty association
The claimant
The plaintiff's attorney

Correct answer: The qualified assignee

In a qualified assignment, the qualified assignee owns the annuity contract and is both the owner and annuitant-beneficiary controller, while the claimant is simply the payee.

Question 30: What is the primary advantage of a structured settlement over a lump-sum payment for a physical injury claimant in the US?

Payments are backed by the US Treasury
No need for a settlement agreement
All periodic payments are income-tax-free under IRC §104 (Correct answer)
Higher total payout guaranteed by law

Correct answer: All periodic payments are income-tax-free under IRC §104

Under IRC §104(a)(2), all periodic payments from a properly structured personal physical injury settlement are excluded from federal income tax.

Question 31: Which of the following is required to be disclosed to a structured settlement payee before a transfer agreement is signed under most SSPAs?

The life insurer's internal rate assumptions
The payee's full medical history
The defendant's current net worth
The discounted present value being offered and the effective discount rate (annual percentage rate) (Correct answer)

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

State SSPAs mandate pre-contract disclosures to the payee including the gross advance amount, the present value of payments being sold, and the effective annual discount rate so the payee understands the true cost.

Question 32: What entity typically funds the periodic payments in a structured settlement?

The plaintiff's attorney
A mutual fund company
The federal government
A life insurance company through an annuity contract (Correct answer)

Correct answer: A life insurance company through an annuity contract

A life insurance company issues an annuity contract that funds the periodic payments guaranteed under the structured settlement.

Question 33: What is the typical waiting period required between the disclosure statement and the signing of a transfer agreement under SSPAs?

At least 3 days but commonly 3–10 business days depending on the state (Correct answer)
3 business days
30 calendar days
No waiting period is required

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

Most SSPAs require a waiting period (often 3 business days, sometimes longer) between the mandatory disclosure and the payee signing the transfer agreement, allowing time for reflection and independent advice.

Question 34: What is the role of a structured settlement consultant or broker?

To represent the defendant in litigation
To serve as the qualified assignee
To underwrite the annuity contract
To design and negotiate the structured settlement payment plan on behalf of the plaintiff (Correct answer)

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

A structured settlement consultant advises the plaintiff on payment design options and negotiates terms with the defendant and its insurer.

Question 35: What does 'inflation risk' mean in the context of a level-payment structured settlement?

The risk that fixed payments will lose purchasing power over time as prices rise (Correct answer)
The risk that the insurer will increase payment amounts unexpectedly
The risk that the annuity premium will increase after purchase
The risk that inflation will reduce the defendant's tax deduction

Correct answer: The risk that fixed payments will lose purchasing power over time as prices rise

Level payments that do not include a COLA will buy progressively less over time due to inflation, potentially leaving the claimant with insufficient funds in later years.

Question 36: Which of the following best describes why structured settlement payment rights are attractive to institutional investors?

They are guaranteed by the US government
They offer equity-like returns with no risk
They offer tax-free returns to all institutional investors
They provide predictable, fixed cash flows backed by highly rated life insurers, offering portfolio diversification with low correlation to market volatility (Correct answer)

Correct answer: They provide predictable, fixed cash flows backed by highly rated life insurers, offering portfolio diversification with low correlation to market volatility

Institutional investors value structured settlement payment streams for their predictability, investment-grade insurer backing, and non-correlation with stock or bond market movements.

Question 37: What is a 'special needs trust' (SNT) and how does it interact with a structured settlement?

A trust that holds settlement funds for a disabled claimant without disqualifying them from needs-based government benefits like Medicaid or SSI (Correct answer)
An IRS-approved vehicle for deferring taxes on structured settlement payments
A trust required by law for all minor claimants
A trust that holds the annuity contract on behalf of the claimant

Correct answer: A trust that holds settlement funds for a disabled claimant without disqualifying them from needs-based government benefits like Medicaid or SSI

An SNT (also called a supplemental needs trust) allows a disabled claimant to receive settlement funds without losing eligibility for Medicaid, SSI, or other needs-based programs that have asset limits.

Question 38: What is the 'anti-assignment' clause in a structured settlement agreement?

A clause prohibiting the attorney from assigning fee rights
A clause preventing the defendant from assigning the payment obligation
A clause barring the insurer from assigning the annuity to another carrier
A clause prohibiting the claimant from transferring or assigning the right to receive periodic payments (Correct answer)

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

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).

Question 39: What is a 'substandard age' rating in structured settlement annuity pricing?

A penalty applied to claimants under age 18
A discount given to healthy claimants
An actuarial adjustment that rates an impaired claimant as if they were older, reducing annuity cost (Correct answer)
A regulatory classification for high-risk annuities

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

A substandard age (or rated age) treats an impaired claimant as actuarially older, reflecting reduced life expectancy and thereby lowering the premium needed to fund life-contingent payments.

Question 40: Under which IRC section are workers' compensation periodic payments excluded from federal income tax?

IRC §104(a)(1) (Correct answer)
IRC §72(e)
IRC §104(a)(2)
IRC §130

Correct answer: IRC §104(a)(1)

Workers' compensation payments, including structured periodic payments, are excluded from gross income under IRC §104(a)(1), which specifically covers workers' compensation acts.

Question 41: What is 'mortality risk' in the context of life-contingent structured settlement annuities?

The risk that the defendant will die before completing payments
The risk assumed by the life insurer that the claimant will live longer than expected, requiring more payments (Correct answer)
The risk that the annuity will be voided due to fraud
The risk that the claimant outlives the guaranteed payment period

Correct answer: The risk assumed by the life insurer that the claimant will live longer than expected, requiring more payments

With life-contingent payments, the insurer bears mortality risk: if the claimant lives longer than actuarially predicted, the insurer must pay more than anticipated.

Question 42: Which party is typically referred to as the 'claimant' in a structured settlement?

The insurance company
The defense attorney
The defendant
The injured plaintiff receiving payments (Correct answer)

Correct answer: The injured plaintiff receiving payments

The claimant is the injured party (plaintiff) who receives the periodic payments agreed upon in the structured settlement.

Question 43: What is a 'guaranteed' structured settlement payment?

A payment that will be made for a fixed number of years regardless of the claimant's survival (Correct answer)
A payment contingent on the defendant's solvency
A payment that increases with the CPI each year
A payment backed by the US government

Correct answer: A payment that will be made for a fixed number of years regardless of the claimant's survival

Guaranteed payments are made for a specified period (e.g., 20 years certain) regardless of whether the claimant is alive, often paid to a beneficiary upon the claimant's death.

Question 44: Under IRC §130, the periodic payments in a qualified assignment must be 'fixed and determinable.' What does this mean?

Payments must be determined by a court each year
The amount and timing of each payment must be ascertainable at the time the assignment is made (Correct answer)
Payments must be tied to a market index
Payments must be identical in amount throughout the term

Correct answer: The amount and timing of each payment must be ascertainable at the time the assignment is made

Fixed and determinable means the amount and timing of every future payment can be calculated at the time the assignment is executed, ensuring certainty for all parties.

Question 45: Why might a claimant prefer increasing payments over level payments in a structured settlement?

Increasing payments reduce the cost to the defendant
Increasing payments help offset inflation and rising medical costs over time (Correct answer)
Increasing payments are always tax-free, while level payments are taxable
Increasing payments require no annuity contract

Correct answer: Increasing payments help offset inflation and rising medical costs over time

An increasing payment schedule (e.g., with a 3% annual COLA) helps ensure that the purchasing power of the payments keeps pace with inflation and anticipated rising costs.

Question 46: What is a 'life-contingent' structured settlement payment?

A payment that adjusts for inflation annually
A payment funded by life insurance death benefits
A payment that is made only if the claimant is still alive (Correct answer)
A payment guaranteed regardless of the claimant's survival

Correct answer: A payment that is made only if the claimant is still alive

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

Question 47: What is a 'reversionary interest' from the defendant's perspective?

The defendant's right to recover payments if the claimant commits fraud
The right to revert to a lump-sum settlement if the annuity insurer fails
The defendant's ability to modify payment amounts after settlement
The defendant's right to receive back annuity funds not paid out because the claimant died before the end of a guaranteed period — if the settlement is structured that way (Correct answer)

Correct answer: The defendant's right to receive back annuity funds not paid out because the claimant died before the end of a guaranteed period — if the settlement is structured that way

In a reversionary structure, if the claimant dies before all guaranteed payments are made, the remaining annuity value reverts to the defendant or its insurer rather than going to the claimant's estate.

Question 48: What type of annuity is most commonly used to fund structured settlements?

Variable annuity
Equity-indexed annuity
Fixed annuity issued by a life insurance company (Correct answer)
Immediate variable annuity

Correct answer: Fixed annuity issued by a life insurance company

Fixed annuities issued by highly rated life insurance companies are the standard funding vehicle because they guarantee the exact payment amounts specified in the settlement.

Question 49: Under IRC §5891, what federal excise tax is imposed on factoring companies that purchase structured settlement payment rights without court approval?

5%
10%
25%
40% (Correct answer)

Correct answer: 40%

IRC §5891 imposes a 40% excise tax on the factoring discount amount for any transfer of structured settlement payment rights that does not comply with the applicable state SSPA and obtain court approval.

Question 50: What is a 'Section 32 waiver' in the context of federal workers' compensation?

An IRS waiver allowing taxable workers' comp payments
A Medicare waiver allowing workers to keep settlement funds
A waiver of the court approval requirement for structured settlements
A settlement of a federal workers' compensation claim under the LHWCA or FECA, approved by the Department of Labor (Correct answer)

Correct answer: A settlement of a federal workers' compensation claim under the LHWCA or FECA, approved by the Department of Labor

Under the Longshore and Harbor Workers' Compensation Act (LHWCA), Section 32 allows parties to settle claims with Department of Labor approval, often resulting in a structured settlement.

Question 51: What does 'annuity certain' mean in structured settlement planning?

An annuity backed by the federal government
An annuity that pays for a fixed period regardless of the annuitant's survival (Correct answer)
An annuity with a guaranteed minimum return
An annuity with no surrender charges

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

An annuity certain (or period certain) pays for a defined number of years regardless of whether the annuitant is alive, with remaining payments going to a beneficiary.

Question 52: What is a 'structured settlement protection order' (SSPO)?

A court order approving a transfer of structured settlement payment rights as compliant with the applicable SSPA (Correct answer)
An insurance regulatory order preventing insurer insolvency
An IRS ruling protecting the tax-free status of a structured settlement
A probate court order managing a deceased claimant's estate

Correct answer: A court order approving a transfer of structured settlement payment rights as compliant with the applicable SSPA

An SSPO is the court's order granting approval for a factoring transfer, confirming that the transaction satisfies the state SSPA requirements and is in the payee's best interest.

Question 53: A structured settlement annuity is purchased by a qualified assignment company to fund periodic payments. The investment earnings generated by the life insurer on reserves backing this annuity are:

Taxable annually to the claimant as passive income
Passed through to the claimant and taxed as ordinary income
Tax-free to both the life insurer and the claimant under IRC 104
Taxable to the life insurer but excluded from the claimant's income (Correct answer)

Correct answer: Taxable to the life insurer but excluded from the claimant's income

The life insurance company pays ordinary corporate taxes on the investment earnings from its reserves, but the claimant's periodic payments remain fully excluded from income under IRC Section 104(a)(2).

Question 54: Which of the following would cause a structured settlement to lose its income-tax-free status?

Allowing the claimant to accelerate, commute, or assign payments at will (Correct answer)
Naming a beneficiary for guaranteed payments
Using a qualified assignee to assume the payment obligation
Including a COLA clause in the annuity

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

If the claimant has the ability to accelerate or transfer payments, the IRS may find constructive receipt, causing all payments to become taxable income.

Question 55: What is a 'partial transfer' in structured settlement factoring?

A transaction in which the payee sells only some of the future payments (e.g., every other payment) while retaining others (Correct answer)
A factoring transaction in which two buyers share the purchase
A transfer that has been partially approved by the court
A transfer involving only part of the payments from one of multiple annuities

Correct answer: A transaction in which the payee sells only some of the future payments (e.g., every other payment) while retaining others

A partial transfer allows a payee to sell a subset of future payments — such as a few years' worth or alternating payments — while retaining the remaining payment stream for ongoing income security.

Question 56: What happens to a structured settlement factoring transaction if the court denies the transfer petition?

The annuity issuer must pay the factoring company directly
The transfer does not occur, the payee retains all future payment rights, and any advance must be repaid if already disbursed (Correct answer)
The IRS automatically imposes the 40% excise tax
The factoring company can immediately refile the petition in another state

Correct answer: The transfer does not occur, the payee retains all future payment rights, and any advance must be repaid if already disbursed

A denied transfer petition means the transaction is void; the payee keeps all future payments and typically must return any advance funds already received from the factoring company.

Question 57: When comparing a $1 million structured settlement to a $1 million lump sum invested in taxable accounts, the structured settlement's primary tax advantage is:

A one-time tax credit equal to 10% of the settlement amount
All earnings growth within the annuity accumulates and is paid out tax-free, whereas investment income on a lump sum is taxable each year (Correct answer)
The claimant pays only long-term capital gains rates on structured settlement growth
Structured settlement payments are exempt from state income taxes in all 50 states

Correct answer: All earnings growth within the annuity accumulates and is paid out tax-free, whereas investment income on a lump sum is taxable each year

The core tax advantage is that all structured settlement payments — including the internal growth component — are tax-free, whereas a lump sum investor pays annual taxes on dividends, interest, and capital gains, significantly reducing net returns.

Question 58: What is a 'settlement agreement' in the context of structured settlements?

The IRS ruling confirming tax-free status
The annuity contract between the insurer and the assignee
The court order approving the settlement
The binding contract between the plaintiff and defendant that specifies the terms of the periodic payments (Correct answer)

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

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 59: Under current IRS guidance, structured settlement payments for wrongful death claims are generally:

Tax-free under IRC Section 104(a)(2) because they arise from a personal physical injury or physical sickness of the deceased (Correct answer)
Taxable to the extent they exceed the decedent's final medical expenses
Exempt from federal tax but subject to state inheritance taxes
Fully taxable as the claimant is not the injured party

Correct answer: Tax-free under IRC Section 104(a)(2) because they arise from a personal physical injury or physical sickness of the deceased

Wrongful death structured settlements qualify for the IRC Section 104(a)(2) exclusion because they are paid on account of the personal physical injury or death of the decedent, making payments to survivors tax-free.

Question 60: What is a 'structured attorney fee'?

An IRS-mandated fee schedule for structured settlement brokers
An arrangement in which a plaintiff's attorney defers receipt of their contingency fee by having it paid as periodic structured payments, which may allow tax deferral (Correct answer)
A fee paid by the claimant to the structured settlement consultant
A flat fee charged by the court for approving a structured settlement

Correct answer: An arrangement in which a plaintiff's attorney defers receipt of their contingency fee by having it paid as periodic structured payments, which may allow tax deferral

A structured attorney fee allows a plaintiff's attorney to receive their contingency fee as periodic future payments rather than a lump sum, potentially deferring income tax on those amounts.

Question 61: What is a 'reversionary' structured settlement?

A settlement where unused guaranteed payments revert to the defendant upon the claimant's early death (Correct answer)
A settlement that reverts to the defendant if the claimant recovers
A settlement paid in reverse chronological order
A settlement that can be converted to a lump sum at any time

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

In a reversionary structure, any guaranteed payments remaining at the claimant's death revert to the defendant or its insurer rather than to the claimant's estate.

Question 62: Which IRC section exempts personal physical injury structured settlement payments from federal income tax?

IRC §101
IRC §72
IRC §1031
IRC §104(a)(2) (Correct answer)

Correct answer: IRC §104(a)(2)

IRC §104(a)(2) excludes from gross income damages received on account of personal physical injuries or physical sickness, including structured settlement payments.

Question 63: What is a 'general release' in a structured settlement?

A legal document in which the claimant releases the defendant from all claims in exchange for the structured settlement consideration (Correct answer)
A court order releasing annuity funds to the claimant
A document releasing the life insurer from liability
An IRS form releasing the tax exclusion

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

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 64: Workers' compensation structured settlements derive their tax-free status from which IRC section?

IRC Section 104(a)(1) (Correct answer)
IRC Section 105(a)
IRC Section 130(c)
IRC Section 104(a)(2)

Correct answer: IRC Section 104(a)(1)

Workers' compensation benefits are excluded from gross income under IRC Section 104(a)(1), which specifically covers amounts received under workers' compensation acts, not tort-based personal injury claims.

Question 65: What is 'double-dipping' in the context of structured settlement factoring?

A practice where a factoring company applies the discount to the gross rather than net payments, inflating the effective rate
A claimant selling the same payments to two different factoring companies (Correct answer)
Applying for court approval in two states simultaneously
A claimant receiving both a lump sum and continued periodic payments

Correct answer: A claimant selling the same payments to two different factoring companies

Double-dipping refers to a claimant (fraudulently) selling the same future payment rights to more than one factoring company, which is why title searches of prior transfers are conducted.

Question 66: What does 'temporary total disability' (TTD) mean in a workers' compensation claim?

A psychological condition not covered by workers' comp
A permanent partial loss of a body function
A disability causing the worker to reduce hours but remain employed
A temporary condition in which the worker cannot perform any work while recovering from the injury (Correct answer)

Correct answer: A temporary condition in which the worker cannot perform any work while recovering from the injury

TTD benefits replace a portion of wages during the period the worker is completely unable to work due to the injury but is expected to eventually recover.

Question 67: The 'economic benefit doctrine' is relevant to structured settlement design because it:

Mandates that structured settlements outperform alternative lump sum investments
Sets minimum payment amounts to satisfy the economic benefit test
Could cause the present value of future payments to be taxable if the claimant has a secured, vested economic interest (Correct answer)
Requires payments to provide a measurable economic benefit to the claimant

Correct answer: Could cause the present value of future payments to be taxable if the claimant has a secured, vested economic interest

The economic benefit doctrine taxes a benefit when it is received, even if not yet paid; structured settlements use qualified assignments and unfunded promises to avoid triggering this doctrine.

Question 68: What is a 'rated age' in the context of structured settlement annuities?

The legal minimum age to receive a structured settlement
An older age assigned to a claimant based on medical impairment, reducing the cost of the annuity (Correct answer)
The age at which payments must begin
The rating assigned by A.M. Best to the insurer

Correct answer: An older age assigned to a claimant based on medical impairment, reducing the cost of the annuity

A rated age is an actuarially assigned older age given to an impaired claimant, reflecting shorter life expectancy and lowering the annuity premium needed to fund a given payment stream.

Question 69: What is the Structured Settlement Protection Act (SSPA)?

A law requiring all settlements to be structured
State laws requiring court approval before a claimant can transfer structured settlement payment rights to a factoring company (Correct answer)
A federal law that bans the sale of structured settlement payment rights
A federal law regulating annuity pricing

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

SSPAs are state statutes (enacted in all 50 states and DC) that require judicial approval of any transfer of structured settlement payment rights to protect claimants from unfair factoring transactions.

Question 70: Which of the following payment features can be included in a structured settlement annuity?

Cost-of-living adjustments (COLA) tied to CPI (Correct answer)
Automatic conversion to a lump sum after 10 years
Adjustments based on stock market performance
Early withdrawal options at the claimant's request

Correct answer: Cost-of-living adjustments (COLA) tied to CPI

Fixed annuities for structured settlements may include a COLA provision that increases payments annually by a set percentage or tied to the CPI.

Question 71: Under IRC Section 130, a qualified assignment allows the original obligor (defendant) to transfer settlement payment obligations to an assignment company. The assignment company receives:

An income exclusion for amounts received to fund the assigned obligation (Correct answer)
A federal subsidy for each payment made
A tax credit equal to the present value of payments
A deduction equal to the full face value of future payments

Correct answer: An income exclusion for amounts received to fund the assigned obligation

IRC Section 130 allows the assignment company to exclude from income the amounts received from the defendant to fund the qualified assignment, making the transaction economically viable.

Question 72: Which of the following parties must typically be notified when a structured settlement payee seeks court approval to transfer payment rights?

Only the factoring company and the payee
The annuity issuer, the qualified assignee, and any other interested parties identified in the settlement documents (Correct answer)
Only the original defendant
Only the state insurance commissioner

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

SSPA procedures require advance notification to all interested parties — including the annuity issuer and qualified assignee — so they can object if the transfer would violate the settlement terms.

Question 73: What is a 'qualified assignment' under IRC §130?

An assignment of settlement proceeds to a qualified retirement plan
A transaction in which the defendant assigns its periodic payment obligation to a third party, allowing the defendant to exclude the assignment proceeds from income (Correct answer)
An IRS-approved payment schedule for workers' compensation claims
A court-ordered transfer of annuity rights

Correct answer: A transaction in which the defendant assigns its periodic payment obligation to a third party, allowing the defendant to exclude the assignment proceeds from income

Under IRC §130, a qualified assignment allows a defendant (or its liability insurer) to transfer the periodic payment obligation to a qualified assignee and exclude the consideration received from gross income.

Question 74: Who typically serves as the 'qualified assignee' in a structured settlement qualified assignment?

A special-purpose assignment company affiliated with a life insurer (Correct answer)
The state court
The defendant's employer
The plaintiff

Correct answer: A special-purpose assignment company affiliated with a life insurer

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 75: Which federal law, enacted in 1982, specifically encouraged the use of structured settlements by codifying their tax-advantaged status?

The Structured Settlement Protection Act of 2002
The Periodic Payment Settlement Act of 1982 (Correct answer)
The Tax Reform Act of 1986
The Employee Retirement Income Security Act of 1974

Correct answer: The Periodic Payment Settlement Act of 1982

The Periodic Payment Settlement Act of 1982 amended the Internal Revenue Code to clarify that structured settlement payments for personal injury are tax-free and authorized qualified assignments under IRC Section 130.

Question 76: What is a 'needs analysis' in the context of structured settlement planning?

An assessment of the claimant's current and future financial, medical, and lifestyle needs used to design an appropriate payment schedule (Correct answer)
A defendant's financial analysis to determine settlement capacity
An IRS audit of the claimant's income needs
A court-ordered financial review of the claimant's assets

Correct answer: An assessment of the claimant's current and future financial, medical, and lifestyle needs used to design an appropriate payment schedule

A needs analysis evaluates the claimant's immediate cash requirements, ongoing living expenses, medical costs, and long-term financial security to tailor the structured settlement payment schedule.

Question 77: Which of the following structured settlement features specifically prevents the claimant from triggering the constructive receipt doctrine?

Using a life insurance annuity instead of a trust
Having the settlement approved by a federal court
The claimant's complete inability to accelerate, transfer, or borrow against the payment stream (Correct answer)
Requiring all payments to be made by direct deposit

Correct answer: The claimant's complete inability to accelerate, transfer, or borrow against the payment stream

Constructive receipt requires that the taxpayer have the right to demand funds; by permanently restricting the claimant's ability to accelerate or borrow against payments, structured settlements ensure the claimant never has constructive receipt.

Question 78: What is a 'structured settlement consultant's' primary ethical obligation to the claimant?

To provide objective advice in the claimant's best interest, recommending a structure that meets the claimant's financial needs (Correct answer)
To maximize commission income from annuity sales
To represent the defendant's insurer in negotiations
To ensure the highest possible annuity cost to the defendant

Correct answer: To provide objective advice in the claimant's best interest, recommending a structure that meets the claimant's financial needs

A structured settlement consultant has a professional and ethical duty to act in the claimant's best interest, designing a payment plan that addresses the claimant's unique financial and medical needs.

Question 79: Which of the following is a primary consideration when designing a payment schedule for a catastrophically injured claimant?

Maximizing the defendant's tax deduction
Investing the settlement in equities for growth
Ensuring sufficient funds for lifetime medical care, rehabilitation, and living expenses (Correct answer)
Minimizing the number of payment periods

Correct answer: Ensuring sufficient funds for lifetime medical care, rehabilitation, and living expenses

For catastrophically injured claimants, the payment design must cover projected lifetime medical costs, attendant care, and living expenses, often requiring large and long-duration payments.

Question 80: What happens to the annuity funding a structured settlement if the claimant files for bankruptcy?

The annuity is immediately liquidated to pay creditors
Future structured settlement payment rights are generally protected from creditors under federal bankruptcy law (Correct answer)
The payments are suspended until the bankruptcy is resolved
The insurer is required to pay creditors directly

Correct answer: Future structured settlement payment rights are generally protected from creditors under federal bankruptcy law

Under 11 U.S.C. §522(d)(11)(D) and many state exemptions, the right to receive structured settlement payments is protected from creditors in bankruptcy.

Question 81: Which of the following is NOT a typical type of structured settlement payment schedule?

Lump-sum payments at set future dates
Increasing periodic payments
Level periodic payments
Declining government bond yields (Correct answer)

Correct answer: Declining government bond yields

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 82: What does 'cost of the annuity' represent in structured settlement negotiations?

The present-value premium the defendant or insurer pays to the life company to fund the payment stream (Correct answer)
The face value of the policy
The claimant's attorney fees
The total of all future periodic payments

Correct answer: The present-value premium the defendant or insurer pays to the life company to fund the payment stream

The annuity cost is the one-time premium paid to the life insurance company to purchase the annuity contract that will fund all future periodic payments.

Question 83: The IRC Section 130 deduction available to the assignment company is equal to:

The face value of all future payments to be made
The present value of future payments at the prevailing discount rate
The original gross settlement amount before attorney fees
The amount paid to purchase the annuity funding the assigned obligation (Correct answer)

Correct answer: The amount paid to purchase the annuity funding the assigned obligation

Under IRC Section 130, the assignment company excludes from income (effectively deducting) the amount it pays for the annuity contract that will fund the periodic payment obligation, not the present value or face value of future payments.

Question 84: Which court generally has jurisdiction to approve a structured settlement transfer in the US?

A court of competent jurisdiction in the state where the payee resides, as specified by the applicable SSPA (Correct answer)
The original settlement court regardless of where the payee now lives
Federal district court
Only courts in the state where the annuity was issued

Correct answer: A court of competent jurisdiction in the state where the payee resides, as specified by the applicable SSPA

Most SSPAs confer jurisdiction on a court (typically a superior or circuit court) in the payee's state of residence at the time of the transfer application.

Question 85: What is the role of the independent professional advisor (IPA) in structured settlement transfer transactions in some states?

The IPA certifies the discount rate to the court
The IPA selects the annuity insurer on behalf of the payee
The IPA provides the payee with independent legal or financial advice about the proposed transfer before it is executed (Correct answer)
The IPA is the court-appointed guardian for minor payees

Correct answer: The IPA provides the payee with independent legal or financial advice about the proposed transfer before it is executed

Some SSPAs require the payee to receive advice from an independent attorney or financial advisor who has no financial interest in the transaction, ensuring the payee understands the consequences.

Question 86: Which professional organization in the US primarily represents structured settlement industry professionals?

American Bar Association (ABA)
National Association of Insurance Commissioners (NAIC)
National Structured Settlements Trade Association (NSSTA) (Correct answer)
Securities Industry and Financial Markets Association (SIFMA)

Correct answer: National Structured Settlements Trade Association (NSSTA)

The NSSTA is the primary trade organization representing consultants, life insurance companies, and other professionals involved in the structured settlement industry.

Question 87: Why might a claimant receiving workers' compensation choose to structure a settlement rather than take a lump sum?

To maximize the workers' compensation offset on SSDI
To avoid mandatory SSDI offset rules that only apply to lump sums
To ensure long-term income stability, avoid rapid depletion of funds, and maintain tax-free payment status under IRC §104(a)(1) (Correct answer)
Because state law mandates structuring for all WC claims over $100,000

Correct answer: To ensure long-term income stability, avoid rapid depletion of funds, and maintain tax-free payment status under IRC §104(a)(1)

Structuring a WC settlement provides a guaranteed, tax-free income stream that protects against financial mismanagement of a lump sum and supports long-term financial security.

Question 88: What information must a factoring company typically disclose to a structured settlement payee before the payee signs a transfer agreement?

Only the annuity issuer's name
Only the court in which approval will be sought
Only the lump sum being offered
The gross advance amount, the present value of payments sold (at a standard rate), the net amount payable, and the effective annual discount rate (Correct answer)

Correct answer: The gross advance amount, the present value of payments sold (at a standard rate), the net amount payable, and the effective annual discount rate

State SSPAs mandate comprehensive disclosure so the payee can evaluate the true economic cost of the transaction, including all fees and the effective annual percentage rate.

Question 89: What is a 'best interest' finding in the context of structured settlement factoring?

A court's finding that the transfer of payment rights is in the best interest of the payee, considering financial needs and dependent welfare (Correct answer)
The annuity issuer's consent to the transfer
The factoring company's determination that the transaction is profitable
The IRS's determination that the transaction is tax-compliant

Correct answer: A court's finding that the transfer of payment rights is in the best interest of the payee, considering financial needs and dependent welfare

State SSPAs require the approving court to make an affirmative finding that the transfer serves the payee's best interest, acting as a safeguard against exploitative transactions.

Question 90: What does 'present value' mean in the context of structured settlements?

The total of all future payments without discounting
The original settlement demand amount
The current worth of future payments discounted at an assumed interest rate (Correct answer)
The inflation-adjusted value of the annuity

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

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

Question 91: What is a 'structured settlement factoring transaction'?

The process by which an insurer prices a structured settlement annuity
A court-ordered modification of payment amounts
A transaction in which a claimant sells some or all future structured settlement payment rights to a third party for a lump sum (Correct answer)
An IRS audit of a structured settlement annuity

Correct answer: A transaction in which a claimant sells some or all future structured settlement payment rights to a third party for a lump sum

A factoring transaction occurs when a payee sells the right to receive future structured settlement payments to a factoring company in exchange for an immediate (discounted) lump-sum payment.

Question 92: What is a 'workers' compensation Medicare Set-Aside' (WCMSA)?

A state fund that pays workers' comp claims when an employer is uninsured
A mandatory insurance policy for employers
A retirement account funded by workers' compensation benefits
A portion of a workers' compensation settlement set aside to pay for future Medicare-covered medical expenses related to the work injury (Correct answer)

Correct answer: A portion of a workers' compensation settlement set aside to pay for future Medicare-covered medical expenses related to the work injury

A WCMSA allocates part of the WC settlement to cover future medical costs that Medicare would otherwise pay, protecting Medicare's secondary payer interests.

Question 93: What is the purpose of state insurance guaranty associations in the context of structured settlements?

To regulate the amount of periodic payments
To provide a safety net covering claimant payments if the issuing life insurer becomes insolvent (Correct answer)
To underwrite new structured settlement annuities
To approve all structured settlement agreements

Correct answer: To provide a safety net covering claimant payments if the issuing life insurer becomes insolvent

State life and health insurance guaranty associations protect claimants by covering periodic payments up to statutory limits if the issuing insurer becomes insolvent.

Question 94: What is the primary purpose of requiring court approval for structured settlement transfers?

To ensure the IRS receives tax revenue on the transaction
To allow the original defendant to object to the transfer
To generate court filing fees for the state
To protect vulnerable claimants from selling future income streams at exploitative discount rates (Correct answer)

Correct answer: To protect vulnerable claimants from selling future income streams at exploitative discount rates

Court approval requirements were enacted to protect claimants — often injury victims — from factoring companies that might pressure them into selling long-term income at unfavorably high discount rates.

Question 95: Under what circumstances can the claimant's estate receive remaining structured settlement payments after the claimant's death?

Only when the payments were guaranteed for a period that has not yet expired (Correct answer)
Only if the claimant purchased a separate life insurance policy
Never — all payments cease at the claimant's death
Always — all payments pass to the estate

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

Guaranteed (period-certain) payments continue to the claimant's designated beneficiary or estate for the remainder of the guaranteed period after the claimant's death.

Question 96: What is 'present value' as used by factoring companies when pricing a purchase of structured settlement payments?

The IRS-approved value of the payment stream
The lump sum a factoring company will pay today, which equals the future payments discounted back at the factoring company's required rate of return (Correct answer)
The total of all future payments being purchased
The original cost of the annuity to the defendant

Correct answer: The lump sum a factoring company will pay today, which equals the future payments discounted back at the factoring company's required rate of return

The factoring company calculates the present value of the payment stream at its own discount rate (profit margin included) to arrive at the purchase price it will offer the payee.

Question 97: What is a 'structured settlement annuity' as distinguished from other annuities?

Any annuity purchased by an individual for retirement
An annuity sold directly to the claimant
A specific annuity contract issued to fund periodic payments in a tort or workers' compensation settlement, qualifying for favorable tax treatment (Correct answer)
A government-issued payment plan

Correct answer: A specific annuity contract issued to fund periodic payments in a tort or workers' compensation settlement, qualifying for favorable tax treatment

A structured settlement annuity is a specialized contract issued to a qualified assignee or defendant to fund tax-favored periodic payments arising from a personal physical injury settlement.

Question 98: What must a structured settlement agreement include to preserve tax-free status under IRC §104(a)(2)?

An investment provision allowing the claimant to redirect payments
Language clearly establishing that payments are on account of personal physical injury and are not acceleratable, transferable, or subject to the claimant's control (Correct answer)
A clause allowing annual lump-sum conversions
A requirement that payments be invested in US Treasury bonds

Correct 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

To maintain tax-free status, the agreement must restrict the claimant from accelerating, deferring, or transferring payments, ensuring the claimant has no constructive receipt of the funds.

Question 99: What is a 'life care plan' and how is it used in structured settlement planning?

An insurance product that covers end-of-life expenses
A comprehensive document prepared by a life care planner that projects the claimant's lifetime medical and support costs, used to size the structured settlement (Correct answer)
A legal document naming guardians for a minor claimant
A retirement planning document for injured workers

Correct answer: A comprehensive document prepared by a life care planner that projects the claimant's lifetime medical and support costs, used to size the structured settlement

A life care plan is a professional assessment of the claimant's future medical, therapeutic, and attendant care needs and costs, which directly informs the amount and timing of structured settlement payments.

Question 100: How does the structuring of workers' comp indemnity payments affect the claimant's Social Security Disability Insurance (SSDI) benefits?

Workers' comp structured payments have no effect on SSDI
SSDI benefits automatically increase when WC structured payments begin
Structured WC payments permanently eliminate SSDI eligibility
Workers' comp payments, including structured ones, can reduce SSDI benefits under the workers' compensation offset provision until the claimant reaches retirement age (Correct answer)

Correct answer: Workers' comp payments, including structured ones, can reduce SSDI benefits under the workers' compensation offset provision until the claimant reaches retirement age

Under the Social Security offset rule, combined WC and SSDI benefits cannot exceed 80% of the worker's average current earnings, so WC structured payments can reduce the SSDI benefit.

Certified Structured Settlement Consultant (CSSC)

The CSSC, administered by the National Structured Settlements Trade Association (NSSTA), tests professionals on structured settlement planning, annuity funding mechanisms, legal frameworks, and secondary market transactions. It is the premier credential for structured settlement brokers and consultants in the United States.

100

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180 min

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70%

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