Settlement Planning and Needs Analysis Flashcards
6 cards from real Structured Settlements practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Settlement Planning and Needs Analysis flashcards as text
What is a 'structured settlement consultant's' primary ethical obligation to the claimant?
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.
Why is it important to consider a claimant's eligibility for government benefits when designing a structured settlement?
Answer: Settlement funds or assets may disqualify the claimant from needs-based programs like Medicaid and SSI unless special planning tools are used
Claimants receiving needs-based government benefits could lose eligibility if the settlement creates assets above program thresholds, making coordination with an SNT or other planning tools essential.
What does 'inflation risk' mean in the context of a level-payment structured settlement?
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.
What is the advantage of including 'large future lump sums' in a structured settlement payment schedule?
Answer: They can be timed to coincide with anticipated large expenses such as vehicle purchases, home modifications, or educational costs
Future lump sums allow the payment schedule to be tailored to predictable large expenses, ensuring funds are available exactly when needed without requiring the claimant to save from periodic payments.
What is a 'secondary market' in the context of structured settlements?
Answer: The market in which factoring companies purchase structured settlement payment rights from claimants for lump-sum payments
The secondary market consists of factoring companies and investors that buy (discount) future structured settlement payment rights from payees who need immediate cash, subject to state SSPA court approval.
What is the typical effective annual discount rate charged in secondary market structured settlement transactions?
Answer: 9–18% or higher
Secondary market discount rates are often in the range of 9–18% annually or higher, meaning claimants receive significantly less than the present value of their payments when selling to factoring companies.