Structured Settlements Annuities and Funding Mechanisms 2

Question 1

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

Accepted Answer

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

Answer

Any annuity purchased by an individual for retirement

Answer

An annuity sold directly to the claimant

Answer

A government-issued payment plan

Question 2

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

Accepted Answer

Cost-of-living adjustments (COLA) tied to CPI

Answer

Adjustments based on stock market performance

Answer

Early withdrawal options at the claimant's request

Answer

Automatic conversion to a lump sum after 10 years

Question 3

What is a 'split-funded' structured settlement?

Accepted Answer

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

Answer

A settlement split between two plaintiffs

Answer

A settlement funded by two separate life insurers

Answer

A settlement that splits payments between taxable and tax-free portions

Question 4

What is the significance of the 'free-look' period for annuity contracts used in structured settlements?

Accepted Answer

It allows the qualified assignee to review the annuity contract terms before finalizing the purchase

Answer

It allows the claimant to cancel the annuity and receive a refund

Answer

It is the period during which the insurer can decline coverage

Answer

It allows the defendant to adjust payments without penalty

Question 5

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

Accepted Answer

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

Answer

The risk that the claimant outlives the guaranteed payment period

Answer

The risk that the defendant will die before completing payments

Answer

The risk that the annuity will be voided due to fraud

Question 6

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

Accepted Answer

The qualified assignment agreement

Answer

The annuity contract

Answer

The court order approving the settlement

Answer

The release and settlement agreement