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Settlement Planning Quiz

1Settlement Planning QuizMark is a 32-year-old disabled man with a special needs trust. Which of the following expenses would be allowed distributions from his trust?

A. GroceriesE. None of the aboveA Number 3 from McDonaldsPayment for his part of the rent in a timesharePlane ticket to FloridaD.Plane ticket to Florida2Settlement Planning QuizWhen does a Special Needs Trust end?

A. In most cases, the death of the beneficiary will end the trustSpecial Needs Trusts must always be reviewed by a court before termination to ensure Medicaids claim is fully reimbursed before terminationTermination of the trust is left to the discretion of the trusteeWhen the beneficiary revokes the trustA. In most cases, the death of the beneficiary will end the trust3Settlement Planning QuizThe best time to begin a comprehensive settlement plan is

A. As soon as possibleAfter the defense makes a settlement offerAs soon as the check clearsDuring the settlement negotiationsAs soon as possible

4Settlement Planning QuizWhich of the following programs is (are) not needs-based?

A. MedicaidE. More than one of the aboveSocial Security Disability IncomeSupplemental Security IncomeE. More than one of the aboveSocial Security Disability IncomeMedicareD.Medicare5

Securing the Financial Needs of Injury Victims and Their Familieswww.settlementplanners.orgSettlement Planning Quiz

8Settlement Planning QuizWhat is a Medicare Set Aside arrangement?

A mechanism that sets aside money for future medical expenses that would otherwise be covered by MedicareA mechanism that sets aside money for housing expenses above and beyond what Medicaid will coverA mechanism that allows recipients to delay receipt of SSI benefits until a specific event occursA mechanism that allows recipients to receive benefits early if a qualified triggering event occursA mechanism that sets aside money for future medical expenses that would otherwise be covered by Medicare9Which of the following types of cases is least likely to require a Medicare Set Aside (MSA) arrangement for a client who is currently receiving Medicare benefits?

Workers Compensation

Jones ActThird party liability settlement under $250,000Third party liability settlement under $250,000D. Third party liability settlement over $250,000Settlement Planning Quiz10What is the malpractice risk associated with the Ahlborn decision?

A.Failing to make an equitable allocation and pay Medicaid accordinglyE. All of the aboveNot petitioning the court for Medicaid reductionLack of expert witnessesD.Attorney is responsible for the excess Medicaid lien not paid by clientA. Failing to make an equitable allocation and pay Medicaid accordinglySettlement Planning Quiz11When a defendant who is a named insured in a casualty insurance policy is sued for a covered incident, which party usually has the exclusive right to settle a claim within the insurance limits?

The casualty insurerE. The policy holderThe named insuredThe policy holders attorneyAll of those named above must agree to settleThe casualty insurerSettlement Planning Quiz12

RSP DESIGNATION:The Registered Settlement Planner (RSP) designation is a professional certification awarded by the Registry of Settlement Planners (the Registry). The designation is awarded to those settlement planners who meet the high standards required of professional settlement planners and agree to abide by the ethical standards adopted by the Registry.

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RSP CURRICULUM:The Settlement Planning curriculum is the product of collaboration between the RSP Board and the Personal Financial Planning Division at Texas Tech University. Although these classes do not carry degree credit, the rigor and quality of the coursework is intended to be at the master level and meant to challenge professionals with settlement planning experience.

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Prerequisite , ENROLLMENT AND INSTRUCTION:Current employment as a settlement planner or closely associated field with settlement planning. Enrollment and instruction are through Texas Tech University, all by way of the Internet. No campus visits are required.

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Settlement Planning Quiz16To be tax exempt under Internal Revenue Code (IRC) 104(a)(2), the origin of a tort claim must involve which type of injury?

A. PhysicalE. All of the aboveMentalEmotionalSpiritualA. PhysicalSettlement Planning Quiz17Qualified structured settlement annuity payments are excluded from all of the following except?

A. Federal income taxAlternative minimum taxFederal estate taxState income taxFederal estate taxSettlement Planning Quiz18Which of the following types of damages are most likely to result in taxable income to the claimant in personal injury litigation?

A. Punitive damagesE. Loss of consortiumLost past wagesLost future wagesWrongful death of anotherA. Punitive damagesSettlement Planning Quiz19Who pays the taxes on the interest earned in a qualified settlement fund?

A. The claimantE. Earnings in a QSF are excluded under IRC 468BDefense casualty companyDefendantThe fund administrator from fund assetsThe fund administrator from fund assetsSettlement Planning Quiz20

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Settlement Planning Quiz23When does a defendant receive a full release when a typical qualified settlement fund is established to resolve or satisfy claims?

A. When the QSF is formedE. None of the aboveAfter the defendant transfers assets to the QSFWhen the judge approves the final motion terminating the QSFAfter the final tax return is filedAfter the defendant transfers assets to the QSFSettlement Planning Quiz24In which of the following cases is the Alternative Minimum Tax (AMT) most likely to apply?

Train/car wreck results in $850,000 in compensatory damages and $1.5 million in punitive damagesE. All of the above would likely trigger the AMT Dog bite results in $150,000 in economic damagesDiving board accident results in wrongful death and loss of consortium claim of $1.2 millionOilfield accident results in $600,000 in compensatory damagesTrain/car wreck results in $850,000 in compensatory damages and $1.5 million in punitive damagesSettlement Planning Quiz25Based on recent history, which of the following might be a reasonable assumption for the future medical inflation rate?

A. 1%3%6%10%6%Settlement Planning Quiz26Internal Revenue Code (IRC) 5891

A. Makes the sale of future periodic payments illegal unless there has been a qualified judicial reviewMay impose an excise tax on a factoring transactionRenders all state regulation of factoring transactions mootAllows factoring companies to actively market their services to structured settlement recipientsMay impose an excise tax on a factoring transactionSettlement Planning Quiz27

RSP EDUCATION REQUIREMENT:The program consists of two courses. Each course is offered on a continuous basis and may be completed at the pace of the student. Successful completion of these two courses will meet the education requirement of the RSP designation.

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Financial Planning and Law for Settlement Planners:This course explores the theoretical and practical environmental framework of settlement planning. The most relevant parts of the legal and financial planning environment to settlement planning are discussed.

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Financial Planning and Law for Settlement Planners:Topics include: principles of financial planning, financial institutions, time value of money, trial procedure, property law, alternative dispute resolution, torts, wills and trusts, planning for incapacity, income and estate tax systems, investment principles, life insurance, annuities, and estate planning.www.rspboard.org

SETTLEMENT PLANNING SEMINAR:This course explores the emerging profession of settlement planning. Settlement planning is personal financial planning for a recipient of a legal settlement.

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COMPREHENSIVE SETTLEMENT PLAN:Following completion of the two academic courses through Texas Tech University, the RSP candidate must prepare a comprehensive settlement plan, which is reviewed by a panel of peers. Upon successful completion of this requirement, including acceptance by the review panel, the candidate is awarded the Registered Settlement Planner (RSP) designation.www.rspboard.org

Settlement Planning Quiz33Can an attorney defer taxes by structuring fees after a final settlement agreement has been signed by both parties?

A. Yes, if there has not been actual receipt of the fundsE. None of the aboveNo, they must have sent the money directly to an annuity company before the settlement agreement is signedYes, an attorney can structure fees at any timeNo, the attorney fee structure must be part of the settlement agreementNo, the attorney fee structure must be part of the settlement agreementSettlement Planning Quiz34To qualify for Social Security Disability Income (SSDI) a worker must generally meet all of the following conditions, EXCEPT

A. Have sufficient quarters of covered employmentBe disabled with a condition expected to last at least 12 monthsMeet the applicable asset and income tests for financial needAll the above are required to qualify for SSDIC. Meet the applicable asset and income tests for financial needSettlement Planning Quiz35Jesse is 27, disabled, and living from the income provided by a structured settlement. Jesse was recently diagnosed with cancer and has only a short time to live. With the help of his parents, Jessie contacts a factoring company and receives a lump sum of $500,000 for his remaining periodic payments. His parents establish a special needs trust for Jesses benefit and Jesse transfers the funds into the new trust. What are the Medicaid implications?

The lump sum will be treated as income in the month received and, if the trust is irrevocable, it will be exempt from the Medicaid transfer of assets rulesBecause Jesse did not create the trust, it will count as a transfer of assets under Medicaid rulesJessie will not be eligible for any Medicaid benefits until 5 years after the date of the transferThe lump sum will not count against his Medicaid benefits because it came from a structure and the transfer will be exempt from the Medicaid transfer of assets ruleA.The lump sum will be treated as income in the month received and, if the trust is irrevocable, it will be exempt from the Medicaid transfer of assets rulesSettlement Planning Quiz36What is the appropriate value of structured settlement future payments for the purpose of setting a plaintiffs attorneys contingent fee?

A. The future value of an annuityThe cost to the defendant of the annuity funding the structured settlementThe present value of the annuity using the IRS Table 1 discount rateThe present value of the settlement using the LIBOR interest rate at the time the case is settledThe cost to the defendant of the annuity funding the structured settlementSettlement Planning Quiz37

We can help.Securing the Financial Needs of Injury Victims and Their Familieswww. plaintiffbroker.comWhen someone in your family is injured, you need financial help from someone who ison your side.Settlement Planning Quiz

39Settlement Planning QuizNora just received a $1,000,000 settlement in an employment-related case. Noras attorney worked on a 25% contingency fee and there were no expenses. What is the most likely tax result of this settlement?

She will recognize the full $1,000,000, and the attorneys fee of $250,000 will be an above-the-line deduction to her adjusted gross incomeShe will be taxed on the full $1,000,000 and will not be able to deduct the attorney feeShe will have to recognize just $750,000 in gross incomeShe will be taxed on the full $1,000,000 and the attorneys fee of $250,000 will be an itemized deduction subject to the 2% of AGI floor, limits, and phaseoutsA. She will recognize the full $1,000,000, and the attorneys fee of $250,000 will be an above-the-line deduction to her adjusted gross income40Settlement Planning QuizWhich of the following is NOT an approved mechanism to establish a Medicare Set Aside (MSA) arrangement?

A. MSA TrustsSelf-Administered AccountsCourt Managed AccountsAny of the above may be used if established correctlyC.Court Managed Accounts41Settlement Planning QuizAccording to federal tax law, who has the burden of proof to meet all the requirements for an exclusion under Internal Revenue Code (IRC) 104(a)(2)?

A. IRSDefendant or defendants casualty companyTaxpayerPlaintiff attorneyC.TaxpayerE.This would depend upon the context of the injury42Settlement Planning QuizWhich case is most likely to require court approval of the final settlement with a qualified settlement fund (QSF)?

A. More than one plaintiffDefendant is related to the plaintiffMinor or protected personCourt approval is always requiredC.Minor or protected personE. None of the above43

THE MISSION OF THE REGISTRY:To train, educate and certify settlement planning professionals who are uniquely qualified to competently and ethically assist injury victims, claimants and attorneys in resolving their legal financial claims. To further this mission the RSP Board will seek to promote recognition and awareness of the mark and to establish standards of competence and practice for the Registry. www.rspboard.org

GOALS OF THE REGISTRY: Prepare settlement planners to provide competent, timely advice to clients. Present attorneys with assurance that their selected advisor is competent and abides by a code of professional conduct. Provide a measure of accountability to settlement planning practitioners.Promote reliable standards of practice to enable clients and attorneys to know what to expect from a relationship with a settlement planner.www.rspboard.org

Settlement Planning Quiz

46Settlement Planning QuizDuring negotiation, defense counsel guarantees that the settlement will be tax free for the claimant. The claimant is wary of trusting the defense counsel and seeks an opinion letter from a tax lawyer. The opinion letter concurs with the defense counsels guarantee so the claimant agrees to the terms of the settlement. Who is responsible for the cost of seeking the opinion letter?

Absent an agreement with the defense, the plaintiff is responsible for any costs associated with seeking an opinion letterBecause the opinion letter benefited the defense, they are responsible for the costBecause the defense can use the letter in future negotiations, they will bear the cost of seeking the opinion letterThe cost will be split equally between the two partiesA. Absent an agreement with the defense, the plaintiff is responsible for anycosts associated with seeking an opinion letter47Settlement Planning QuizWhich of the following is true in relation to the taxation of the typical factoring transaction for structured settlements?

The seller will recognize ordinary income to the extent there is value in the policy in excess of the interpolated terminal reserveE. None of the aboveThe seller will pay taxes only on the portion of the payment above their tax basis determined by subtracting the value at settlement less the payments already receivedThe seller will pay taxes only on the imputed interest and at the capital gains rateThe seller will usually not be taxed on a factoring transactionThe seller will usually not be taxed on a factoring transaction48Settlement Planning QuizWhich of the following procedures reflects the best practice for an attorney seeking to defer a fee? (choose the best option)

A.After the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structureD.The attorney may deposit the funds into his escrow account and then determine whether to structure the feeBefore the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structureC.It makes no difference when the attorney decides to structure as long as there has not been constructive receipt of fundsB.Before the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structure49Settlement Planning QuizWhich of the following must be done to transfer the obligation to make periodic payments through reinsurance?

The claimant must agree to discharge the ceding insurers duty to make periodic paymentsE.A, B, and CThe ceding insurer must agree to discharge the reinsurers duty to indemnify its reinsuredThe reinsurer must agree to make periodic payments directly to the claimantA and C onlyE.A, B, and C50

Securing the Financial Needs of Injury Victims and Their Families

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52Settlement Planning QuizWhere can the plaintiff deduct the attorney fee charged in a bad faith claim arising from a personal physical injury claim?

As an above-the-line deductionE.None of the aboveItemized deduction to the extent it exceeds 2% of AGIAttorneys fees are never deductible for the plaintiffC.Attorneys fees are not deductible because they are paid from non-taxable damages and not reported as income to the plaintiffC.Attorneys fees are not deductible because they are paid from non-taxable damages and not reported as income to the plaintiff53Settlement Planning QuizThe constructive receipt doctrine is most concerned with

Time and deliveryControl and legal rightsAmount and contractsWording and argumentsB.Control and legal rights54Settlement Planning QuizWho usually obtains the federal Employer Identification Number (tax ID) for the qualified settlement fund (QSF)?

The court when the QSF is createdThe plaintiff attorneyThe QSF administratorThe petitioner who sought creation of the QSFC.The QSF administratorE.The bank where the QSFs assets are held55Settlement Planning QuizIf a personal physical injury claimant receives a settlement that includes medical expenses that were previously deducted:

The entire settlement is taxableThe claimant can take another deduction if the amount of the damages allocated to medical expenses is higher than the amount previously deductedThe claimant must pay taxes on the portion that reimbursed the amount that was deductedThe previous deduction does not affect the exclusion of settlement proceedsC.The claimant must pay taxes on the portion that reimbursed the amount that was deducted56

SETTLEMENT PLANNING:Settlement planners help clients use their settlement proceeds to attain their financial goals. The settlement planner guides clients through financial decisions that they need to make at settlement. Settlement planning often involves helping clients avoid loss of government entitlements while protecting their recovery from dissipation risk, taxes, liens, and other hazards. www.rspboard.org

SETTLEMENT PLANNING:The settlement planner coordinates these efforts with other professionals including the plaintiffs legal team, special needs trust attorneys, trust officers, CPAs, and others. Settlement planning most often occurs within a unique and pressure-packed planning environment where clients must make decisions likely to impact the rest of their lives.

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SETTLEMENT PLANNING:This environment places a premium on the ability of the planner to focus on the clients goals and needs, make the correct recommendations, and help the client implement the plan.

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Settlement Planning Quiz

60Settlement Planning QuizMay a qualified settlement fund (QSF) be established without the defendants knowledge, involvement or consent?

Yes, an ex parte petition may be filed to protect claimant privacy rights Yes, an in camera petition can be filed to enforce the settlement agreementNo, the defendant must be included in all judicial determinationsE.No, the defendants involvement is required by the Internal Revenue CodeA.Yes, an ex parte petition may be filed to protect claimant privacy rightsNo, the defendant will be able to sue if a QSF is established without his knowledge, involvement or consent61Settlement Planning QuizWhat is usually the final duty of a qualified settlement fund (QSF) administrator

Apply for a federal tax ID numberPay the attorneysPay the plaintiffsFile the funds tax returnsD.File the funds tax returnsE.Obtain a dismissal with prejudice for the defendant62Settlement Planning QuizIs there a possible problem establishing the QSF bank account at a bank where the plaintiff attorney serves on the Board of Directors?

No, as long as I is an arms-length transactionYes, it could be perceived as nepotism on behalf of the plaintiffNo, because the court maintains oversight of the QSFYes, it could be viewed as exercise of control of the QSF funds on behalf of the plaintiffD.Yes, it could be viewed as exercise of control of the QSF funds on behalf of the plaintiff63Settlement Planning QuizWhich of the following is an appropriate reason for a plaintiff to use a QSF?

A financially unstable defendantFor a plaintiff to take more control over the settlement transactionsSo that a plaintiff-loyal structured settlement consultant can keep his defense counterpart outTo secure the best interest rate for the clientE.All of the above are appropriate reasons a QSF may be usedE.All of the above are appropriate reasons a QSF may be used64

The Standards of Professional Conduct for Settlement Planners are rules of reason and are intended to impose high standards of conduct on professional settlement planners who are providing settlement planning services to a claimant or obligor, or to an attorney acting on the claimant or obligors behalf.

They are, however, also intended to provide guidance to other professionals as they seek to ascertain their responsibilities when, in connection with the practice of their profession, they participate in the settlement planning process.

The Standards of Professional Conduct for Settlement Planners are subscribed to by members of the Society of Settlement Planners as a condition of joining and maintaining good standing in this organization.

Non-members who provide settlement planning services are not required to subscribe to the Society of Settlement Planners mission statement or to these standards, but they are encouraged to do so.

Compliance with these Rules depends upon voluntary adherence and, secondarily, upon reinforcement by peer and public opinion. A settlement planner is also guided by personal conscience.

Membership in this organization, including display of its logo on a members letterhead and business cards, is intended to convey to others that the member is committed to the high standards of conduct specified in these Rules.

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72Settlement Planning QuizTaxable income generated by the qualified settlement fund (QSF) is taxed to

The plaintiffThe defendantThe QSFThe judgeC.The QSFE.The QSF is not a taxable entity73Settlement Planning QuizWhich of the following is the best definition of settlement planning?

A profession that empowers recipients of tort settlements to use the funds to achieve their post-loss goals and to transition into their post-settlement financial livesA profession focused on investing tort recoveries to maximize after-tax rates of returnA profession that represents the plaintiff in the placement of structured settlement annuities by meeting with the claimant, explaining the benefits, designing an appropriate annuity, and obtaining the best of all available annuitiesA profession that helps a claimant preserve and maintain needed government entitlements to ensure the claimant meets his or her personal obligationsA.A profession that empowers recipients of tort settlements to use the funds to achieve their post-loss goals and to transition into their post-settlement financial lives74Settlement Planning QuizBenefits received from qualified structured settlement annuities are

Tax-exempt or income tax-freeTax-deferredTaxed at preferential low rates as receivedTaxed upfront, but only on their present valueA.Tax-exempt or income tax-freeE.Taxed as ordinary income when received75Settlement Planning QuizThe following allow(s) a client to continue to qualify for government entitlements after receiving a substantial judgment

Special needs trustMarital trustCharitable remainder trustAll of the aboveA.Special needs trustE.None of the above76

www.rspboard.orgBENEFITS OF MEMBERSHIP:Professionals with the RSP mark have set themselves apart from competitors with their educational attainment and commitment to the stringent ethical and professional standards of conduct set forth by the RSP Board. These practitioners demonstrate their commitment to furthering this profession. Members are encouraged to seek one another out and share resources and knowledge.

BENEFITS OF MEMBERSHIP:Completing the education requirement helps settlement planners develop and sharpen their skills and provides a firm foundation in the basic knowledge required to practice planning competently.

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BENEFITS OF MEMBERSHIP:Professionals with the RSP mark have set themselves apart from competitors with their educational attainment and commitment to the stringent ethical and professional standards of conduct set forth by the RSP Board. These practitioners demonstrate their commitment to furthering this profession. Members are encouraged to seek one another out and share resources and knowledge.www.rspboard.org