Structured Settlements Legal Framework and Court Approval 2

Question 1

What is a 'qualified assignment' under IRC §130?

Accepted 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

Answer

An assignment of settlement proceeds to a qualified retirement plan

Answer

An IRS-approved payment schedule for workers' compensation claims

Answer

A court-ordered transfer of annuity rights

Question 2

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

Accepted Answer

IRC §104(a)(1)

Answer

IRC §104(a)(2)

Answer

IRC §130

Answer

IRC §72

Question 3

What is a 'structured settlement factoring transaction'?

Accepted Answer

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

Answer

An IRS audit of a structured settlement annuity

Answer

The process by which an insurer prices a structured settlement annuity

Answer

A court-ordered modification of payment amounts

Question 4

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

Accepted Answer

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

Answer

Payments must be tied to a market index

Answer

Payments must be determined by a court each year

Answer

Payments must be identical in amount throughout the term

Question 5

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

Accepted Answer

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

Answer

Federal district court

Answer

The original settlement court regardless of where the payee now lives

Answer

Only courts in the state where the annuity was issued

Question 6

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

Accepted Answer

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

Answer

To generate court filing fees for the state

Answer

To ensure the IRS receives tax revenue on the transaction

Answer

To allow the original defendant to object to the transfer