Securing the Financial Needs of Injury Victims and Their Families

Settlement Planning Quiz


Mark 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. Groceries

E. None of the above

B. A “Number 3” from McDonald’s

C. Payment for his part of the rent in a timeshare

D. Plane ticket to FloridaD. Plane ticket to Florida


When does a Special Needs Trust end?

A. In most cases, the death of the beneficiary will end the trustB. Special Needs Trusts must always be reviewed by a court

before termination to ensure Medicaid’s claim is fully reimbursed before terminationC. Termination of the trust is left to the discretion of the trusteeD. When the beneficiary revokes the trust

A. In most cases, the death of the beneficiary will end the trust


The best time to begin a comprehensive settlement plan is

A. As soon as possible

B. After the defense makes a settlement offer

C. As soon as the check clears

D. During the settlement negotiations

A. As soon as possible


Which of the following programs is (are) not needs-based?

A. Medicaid

E. More than one of the above

B. Social Security Disability Income

C. Supplemental Security Income

E. More than one of the above

B. Social Security Disability Income

D. MedicareD. Medicare

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What is a Medicare Set Aside arrangement?

A. A mechanism that sets aside money for future medical expenses that would otherwise be covered by Medicare

B. A mechanism that sets aside money for housing expenses above and beyond what Medicaid will cover

C. A mechanism that allows recipients to delay receipt of SSI benefits until a specific event occurs

D. A mechanism that allows recipients to receive benefits early if a qualified triggering event occurs

A. A mechanism that sets aside money for future medical expenses that would otherwise be covered by Medicare

Which 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?

A. Workers Compensation

B. Jones Act

C. Third party liability settlement under $250,000C. Third party liability settlement under $250,000

D. Third party liability settlement over $250,000


What is the malpractice risk associated with the Ahlborn decision?

A. Failing to make an “equitable allocation” and pay Medicaid accordingly

E. All of the above

B. Not petitioning the court for Medicaid reduction

C. Lack of expert witnesses

D. Attorney is responsible for the “excess” Medicaid lien not paid by client

A. Failing to make an “equitable allocation” and pay Medicaid accordingly


When 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?

A. The casualty insurer

E. The policy holder

B. The named insured

C. The policy holder’s attorney

D. All of those named above must agree to settle

A. The casualty insurer


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

A. Physical

E. All of the above

B. Mental

C. Emotional

D. Spiritual

A. Physical


Qualified structured settlement annuity payments are excluded from all of the following except?

A. Federal income tax

B. Alternative minimum tax

C. Federal estate tax

D. State income tax

C. Federal estate tax


Which of the following types of damages are most likely to result in taxable income to the claimant in personal injury litigation?

A. Punitive damages

E. Loss of consortium

B. Lost past wages

C. Lost future wages

D. Wrongful death of another

A. Punitive damages


Who pays the taxes on the interest earned in a qualified settlement fund?

A. The claimant

E. Earnings in a QSF are excluded under IRC § 468B

B. Defense casualty company

C. Defendant

D. The fund administrator from fund assetsD. The fund administrator from fund assets


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When 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 formed


B. After the defendant transfers assets to the QSF

C. When the judge approves the final motion terminating the QSFD. After the final tax return is filed

B. After the defendant transfers assets to the QSF


In which of the following cases is the Alternative Minimum Tax (AMT) most likely to apply?

A. Train/car wreck results in $850,000 in compensatory damages and $1.5 million in punitive damages

E. All of the above would likely trigger the AMT

B. Dog bite results in $150,000 in economic damagesC. Diving board accident results in wrongful death and loss of

consortium claim of $1.2 million

D. Oilfield accident results in $600,000 in compensatory damages

A. Train/car wreck results in $850,000 in compensatory damages and $1.5 million in punitive damages


Based on recent history, which of the following might be a reasonable assumption for the future medical inflation rate?

A. 1%

B. 3%

C. 6%

D. 10%

C. 6%


Internal Revenue Code (IRC) § 5891

A. Makes the sale of future periodic payments illegal unless there has been a qualified judicial review

B. May impose an excise tax on a factoring transaction

C. Renders all state regulation of factoring transactions moot

D. Allows factoring companies to actively market their services to structured settlement recipients

B. May impose an excise tax on a factoring transaction


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.

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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.

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Can 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 funds


B. No, they must have sent the money directly to an annuity company before the settlement agreement is signed

C. Yes, an attorney can structure fees at any time

D. No, the attorney fee structure must be part of the settlement agreement

D. No, the attorney fee structure must be part of the settlement agreement


To qualify for Social Security Disability Income (SSDI) a worker must generally meet all of the following conditions, EXCEPT

A. Have sufficient quarters of covered employmentB. Be disabled with a condition expected to last at least 12

monthsC. Meet the applicable asset and income tests for financial needD. All the above are required to qualify for SSDI

C. Meet the applicable asset and income tests for financial need


Jesse 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 Jesse’s benefit and Jesse transfers the funds into the new trust. What are the Medicaid implications?A. 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 rulesB. Because Jesse did not create the trust, it will count as a transfer of assets under Medicaid rules

C. Jessie will not be eligible for any Medicaid benefits until 5 years after the date of the transfer

D. The 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 rule

A. 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 rules


What is the appropriate value of structured settlement future payments for the purpose of setting a plaintiff’s attorney’s contingent fee?

A. The future value of an annuity

B. The cost to the defendant of the annuity funding the structured settlementC. The present value of the annuity using the IRS Table 1 discount rateD. The present value of the settlement using the LIBOR interest rate at the time the case is settled

B. The cost to the defendant of the annuity funding the structured settlement


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Nora just received a $1,000,000 settlement in an employment-related case. Nora’s attorney worked on a 25% contingency fee and there were no expenses. What is the most likely tax result of this settlement?A. She will recognize the full $1,000,000, and the attorney’s

fee of $250,000 will be an above-the-line deduction to her adjusted gross incomeB. She will be taxed on the full $1,000,000 and will not be able to deduct the attorney fee

C. She will have to recognize just $750,000 in gross income

D. She will be taxed on the full $1,000,000 and the attorney’s fee of $250,000 will be an itemized deduction subject to the 2% of AGI floor, limits, and phaseouts

A. She will recognize the full $1,000,000, and the attorney’s fee of $250,000 will be an above-the-line deduction to her adjusted gross income


Which of the following is NOT an approved mechanism to establish a Medicare Set Aside (MSA) arrangement?

A. MSA TrustsB. Self-Administered AccountsC. Court Managed AccountsD. Any of the above may be used if established correctlyC. Court Managed Accounts


According 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. IRSB. Defendant or defendant’s casualty companyC. TaxpayerD. Plaintiff attorneyC. Taxpayer

E. This would depend upon the context of the injury


Which case is most likely to require court approval of the final settlement with a qualified settlement fund (QSF)?

A. More than one plaintiffB. Defendant is related to the plaintiffC. Minor or protected personD. Court approval is always requiredC. Minor or protected person


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.

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GOALS OF THE REGISTRY:1. Prepare settlement planners to provide

competent, timely advice to clients.2. Present attorneys with assurance that their

selected advisor is competent and abides by a code of professional conduct.

3. Provide a measure of accountability to settlement planning practitioners.

4. Promote reliable standards of practice to enable clients and attorneys to know what to expect from a relationship with a settlement planner.

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During 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 counsel’s guarantee so the claimant agrees to the terms of the settlement. Who is responsible for the cost of seeking the opinion letter?A. Absent an agreement with the defense, the plaintiff is

responsible for any costs associated with seeking an opinion letterB. Because the opinion letter benefited the defense, they are responsible for the cost

C. Because the defense can use the letter in future negotiations, they will bear the cost of seeking the opinion letterD. The cost will be split equally between the two parties

A. Absent an agreement with the defense, the plaintiff is responsible for anycosts associated with seeking an opinion letter


Which of the following is true in relation to the taxation of the typical factoring transaction for structured settlements?

A. The seller will recognize ordinary income to the extent there is value in the policy in excess of the interpolated terminal reserve


B. The 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 received

C. The seller will pay taxes only on the imputed interest and at the capital gains rate

D. The seller will usually not be taxed on a factoring transaction

D. The seller will usually not be taxed on a factoring transaction


Which 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 structure

D. The attorney may deposit the funds into his escrow account and then determine whether to structure the fee

B. Before the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structure

C. It makes no difference when the attorney decides to structure as long as there has not been constructive receipt of funds

B. Before the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structure


Which of the following must be done to transfer the obligation to make periodic payments through reinsurance?

A. The claimant must agree to discharge the ceding insurer’s duty to make periodic payments

E. A, B, and C

B. The ceding insurer must agree to discharge the reinsurer’s duty to indemnify its reinsured

C. The reinsurer must agree to make periodic payments directly to the claimantD. A and C only

E. A, B, and C





Where can the plaintiff deduct the attorney fee charged in a bad faith claim arising from a personal physical injury claim?

A. As an above-the-line deduction


B. Itemized deduction to the extent it exceeds 2% of AGI

D. Attorney’s fees are never deductible for the plaintiff

C. Attorney’s fees are not deductible because they are paid from non-taxable damages and not reported as income to the plaintiff

C. Attorney’s fees are not deductible because they are paid from non-taxable damages and not reported as income to the plaintiff


The constructive receipt doctrine is most concerned with

A. Time and delivery

B. Control and legal rights

C. Amount and contracts

D. Wording and arguments

B. Control and legal rights


Who usually obtains the federal Employer Identification Number (tax ID) for the qualified settlement fund (QSF)?

A. The court when the QSF is created

B. The plaintiff attorney

C. The QSF administrator

D. The petitioner who sought creation of the QSF

C. The QSF administrator

E. The bank where the QSF’s assets are held


If a personal physical injury claimant receives a settlement that includes medical expenses that were previously deducted:

A. The entire settlement is taxable

B. The claimant can take another deduction if the amount of the damages allocated to medical expenses is higher than the amount previously deductedC. The claimant must pay taxes on the portion that reimbursed the amount that was deducted

D. The previous deduction does not affect the exclusion of settlement proceeds

C. The claimant must pay taxes on the portion that reimbursed the amount that was deducted

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.

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The settlement planner coordinates these efforts with other professionals including the plaintiff’s 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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This environment places a premium on the ability of the planner to focus on the client’s goals and needs, make the correct recommendations, and help the client implement the plan.

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May a qualified settlement fund (QSF) be established without the defendant’s knowledge, involvement or consent?

A. Yes, an ex parte petition may be filed to protect claimant privacy rights B. Yes, an in camera petition can be filed to enforce the settlement agreementC. No, the defendant must be included in all judicial determinations

E. No, the defendant’s involvement is required by the Internal Revenue Code

A. Yes, an ex parte petition may be filed to protect claimant privacy rights

D. No, the defendant will be able to sue if a QSF is established without his knowledge, involvement or consent


What is usually the final duty of a qualified settlement fund (QSF) administrator

A. Apply for a federal tax ID number

B. Pay the attorneys

C. Pay the plaintiffs

D. File the fund’s tax returnsD. File the fund’s tax returns

E. Obtain a dismissal with prejudice for the defendant


Is there a possible problem establishing the QSF bank account at a bank where the plaintiff attorney serves on the Board of Directors?

A. No, as long as I is an arm’s-length transaction

B. Yes, it could be perceived as nepotism on behalf of the plaintiffC. No, because the court maintains oversight of the QSF

D. Yes, it could be viewed as exercise of control of the QSF funds on behalf of the plaintiff

D. Yes, it could be viewed as exercise of control of the QSF funds on behalf of the plaintiff


Which of the following is an appropriate reason for a plaintiff to use a QSF?

A. A financially unstable defendant

B. For a plaintiff to take more control over the settlement transactionsC. So that a plaintiff-loyal structured settlement consultant can keep his defense counterpart out

D. To secure the best interest rate for the client

E. All of the above are appropriate reasons a QSF may be usedE. All of the above are appropriate reasons a QSF may be used

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 obligor’s 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

member’s 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.





Taxable income generated by the qualified settlement fund (QSF) is taxed to

A. The plaintiff

B. The defendant

C. The QSF

D. The judge

C. The QSF

E. The QSF is not a taxable entity


Which of the following is the best definition of settlement planning? A. 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 lives

B. A profession focused on investing tort recoveries to maximize after-tax rates of return

C. A 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 annuities

D. A profession that helps a claimant preserve and maintain needed government entitlements to ensure the claimant meets his or her personal obligations

A. 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 lives


Benefits received from qualified structured settlement annuities are

A. Tax-exempt or income tax-free

B. Tax-deferred

C. Taxed at preferential low rates as received

D. Taxed upfront, but only on their present value

A. Tax-exempt or income tax-free

E. Taxed as ordinary income when received


The following allow(s) a client to continue to qualify for government entitlements after receiving a substantial judgment

A. Special needs trust

B. Marital trust

C. Charitable remainder trust

D. All of the above

A. Special needs trust


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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.


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.

www.rspboard.org


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

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Securing the Financial Needs of Injury Victims and Their Families