Structured Settlement Basics 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 Structured Settlement Basics flashcards as text
Which of the following cases does NOT qualify for income-tax-free treatment under IRC §104(a)(2)?
Answer: Employment discrimination (non-physical) settlement
Only damages received on account of personal physical injuries or physical sickness are excluded under §104(a)(2); non-physical claims such as employment discrimination do not qualify.
What is the role of a structured settlement consultant or broker?
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.
What financial strength rating is commonly required of life insurers funding structured settlements?
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.
What is a 'reversionary' structured settlement?
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.
Which professional organization in the US primarily represents structured settlement industry professionals?
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.
What must a structured settlement agreement include to preserve tax-free status under IRC §104(a)(2)?
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.