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Settlement Planning Quiz

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. A “Number 3” from McDonald’s. Payment for his part of the rent in a timeshare. Plane ticket to Florida.

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Settlement Planning Quiz

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  1. Settlement Planning Quiz

  2. 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 • A “Number 3” from McDonald’s • Payment for his part of the rent in a timeshare • Plane ticket to Florida D. Plane ticket to Florida E. None of the above Settlement Planning Quiz

  3. When does a Special Needs Trust end? A. In most cases, the death of the beneficiary will end the trust A. In most cases, the death of the beneficiary will end the trust • Special Needs Trusts must always be reviewed by a court before termination to ensure Medicaid’s claim is fully reimbursed before termination • Termination of the trust is left to the discretion of the trustee • When the beneficiary revokes the trust Settlement Planning Quiz

  4. The best time to begin a comprehensive settlement plan is • As soon as possible A. As soon as possible • After the defense makes a settlement offer • As soon as the check clears • During the settlement negotiations Settlement Planning Quiz

  5. Which of the following programs is (are) not needs-based? A. Medicaid • Social Security Disability Income • Social Security Disability Income • Supplemental Security Income • Medicare D. Medicare E. More than one of the above E. More than one of the above Settlement Planning Quiz

  6. “Securing the Financial Needs of Injury Victims and Their Families” www.settlementplanners.org

  7. Settlement Planning Quiz

  8. What is a Medicare Set Aside arrangement? • A mechanism that sets aside money for future medical expenses that would otherwise be covered by Medicare • A mechanism that sets aside money for future medical expenses that would otherwise be covered by Medicare • A mechanism that sets aside money for housing expenses above and beyond what Medicaid will cover • A mechanism that allows recipients to delay receipt of SSI benefits until a specific event occurs • A mechanism that allows recipients to receive benefits early if a qualified triggering event occurs Settlement Planning Quiz

  9. 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? • Workers Compensation • Jones Act • Third party liability settlement under $250,000 • Third party liability settlement under $250,000 D. Third party liability settlement over $250,000 Settlement Planning Quiz

  10. What is the malpractice risk associated with the Ahlborn decision? A. Failing to make an “equitable allocation” and pay Medicaid accordingly A. Failing to make an “equitable allocation” and pay Medicaid accordingly • Not petitioning the court for Medicaid reduction • Lack of expert witnesses D. Attorney is responsible for the “excess” Medicaid lien not paid by client E. All of the above Settlement Planning Quiz

  11. 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? • The casualty insurer The casualty insurer • The named insured • The policy holder’s attorney • All of those named above must agree to settle E. The policy holder Settlement Planning Quiz

  12. 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. www.rspboard.org

  13. 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. www.rspboard.org

  14. 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. www.rspboard.org

  15. Settlement Planning Quiz

  16. 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 A. Physical • Mental • Emotional • Spiritual E. All of the above Settlement Planning Quiz

  17. Qualified structured settlement annuity payments are excluded from all of the following except? A. Federal income tax • Alternative minimum tax • Federal estate tax • Federal estate tax • State income tax Settlement Planning Quiz

  18. 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 A. Punitive damages • Lost past wages • Lost future wages • Wrongful death of another E. Loss of consortium Settlement Planning Quiz

  19. Who pays the taxes on the interest earned in a qualified settlement fund? A. The claimant • Defense casualty company • Defendant • The fund administrator from fund assets • The fund administrator from fund assets E. Earnings in a QSF are excluded under IRC § 468B Settlement Planning Quiz

  20. “Securing the Financial Needs of Injury Victims and Their Families” www.settlementplanners.org

  21. Settlement Planning Quiz

  22. 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 • After the defendant transfers assets to the QSF • After the defendant transfers assets to the QSF • When the judge approves the final motion terminating the QSF • After the final tax return is filed E. None of the above Settlement Planning Quiz

  23. In 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 damages • Train/car wreck results in $850,000 in compensatory damages and $1.5 million in punitive damages • Dog bite results in $150,000 in economic damages • Diving board accident results in wrongful death and loss of consortium claim of $1.2 million • Oilfield accident results in $600,000 in compensatory damages E. All of the above would likely trigger the AMT Settlement Planning Quiz

  24. Based on recent history, which of the following might be a reasonable assumption for the future medical inflation rate? A. 1% • 3% • 6% • 6% • 10% Settlement Planning Quiz

  25. Internal Revenue Code (IRC) § 5891 A. Makes the sale of future periodic payments illegal unless there has been a qualified judicial review • May impose an excise tax on a factoring transaction • May impose an excise tax on a factoring transaction • Renders all state regulation of factoring transactions moot • Allows factoring companies to actively market their services to structured settlement recipients Settlement Planning Quiz

  26. 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. www.rspboard.org

  27. 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. www.rspboard.org

  28. 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

  29. 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. www.rspboard.org

  30. 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

  31. Settlement Planning Quiz

  32. 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 • No, they must have sent the money directly to an annuity company before the settlement agreement is signed • Yes, an attorney can structure fees at any time • No, the attorney fee structure must be part of the settlement agreement • No, the attorney fee structure must be part of the settlement agreement E. None of the above Settlement Planning Quiz

  33. 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 employment • Be disabled with a condition expected to last at least 12 months • Meet the applicable asset and income tests for financial need C. Meet the applicable asset and income tests for financial need • All the above are required to qualify for SSDI Settlement Planning Quiz

  34. 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 rules • 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 • Because Jesse did not create the trust, it will count as a transfer of assets under Medicaid rules • Jessie will not be eligible for any Medicaid benefits until 5 years after the date of the transfer • 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 Settlement Planning Quiz

  35. 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 • The cost to the defendant of the annuity funding the structured settlement • The cost to the defendant of the annuity funding the structured settlement • The present value of the annuity using the IRS Table 1 discount rate • The present value of the settlement using the LIBOR interest rate at the time the case is settled Settlement Planning Quiz

  36. We can help. When someone in your family is injured, you need financial help from someone who is… on your side. “Securing the Financial Needs of Injury Victims and Their Families” www. plaintiffbroker.com

  37. Settlement Planning Quiz

  38. 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? • 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 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 • She will be taxed on the full $1,000,000 and will not be able to deduct the attorney fee • She will have to recognize just $750,000 in gross income • 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 Settlement Planning Quiz

  39. Which of the following is NOT an approved mechanism to establish a Medicare Set Aside (MSA) arrangement? A. MSA Trusts • Self-Administered Accounts • Court Managed Accounts C. Court Managed Accounts • Any of the above may be used if established correctly Settlement Planning Quiz

  40. 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. IRS • Defendant or defendant’s casualty company • Taxpayer C. Taxpayer • Plaintiff attorney E. This would depend upon the context of the injury Settlement Planning Quiz

  41. Which case is most likely to require court approval of the final settlement with a qualified settlement fund (QSF)? A. More than one plaintiff • Defendant is related to the plaintiff • Minor or protected person C. Minor or protected person • Court approval is always required E. None of the above Settlement Planning Quiz

  42. 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

  43. 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

  44. Settlement Planning Quiz

  45. 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? • Absent an agreement with the defense, the plaintiff is responsible for any costs associated with seeking an opinion letter A. Absent an agreement with the defense, the plaintiff is responsible for any costs associated with seeking an opinion letter • Because the opinion letter benefited the defense, they are responsible for the cost • Because the defense can use the letter in future negotiations, they will bear the cost of seeking the opinion letter • The cost will be split equally between the two parties Settlement Planning Quiz

  46. Which 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 reserve • 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 • The seller will pay taxes only on the imputed interest and at the capital gains rate • The seller will usually not be taxed on a factoring transaction • The seller will usually not be taxed on a factoring transaction E. None of the above Settlement Planning Quiz

  47. 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 • Before the close of settlement negotiations, but before the settlement documents are signed, he should document the details of the attorney fee structure 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 D. The attorney may deposit the funds into his escrow account and then determine whether to structure the fee Settlement Planning Quiz

  48. Which of the following must be done to transfer the obligation to make periodic payments through reinsurance? • The claimant must agree to discharge the ceding insurer’s duty to make periodic payments • The ceding insurer must agree to discharge the reinsurer’s duty to indemnify its reinsured • The reinsurer must agree to make periodic payments directly to the claimant • A and C only E. A, B, and C E. A, B, and C Settlement Planning Quiz

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