What is a special kind of single-premium annuity, non-assignable, non-commutable and non-transferrable that is accorded special tax treatment?

• A. Structured settlements
• B. Immediate annuity
• C. Annuity with refund
• D. Variable annuity

Answer: (A)

Structured settlements are a special use of a single-premium annuity designed specifically to fund a court settlement for personal injuries or similar damages. The payer funds the arrangement with one lump-sum premium, and the claimant receives guaranteed, periodic payments over time. The contract is set up to be non-assignable, non-transferable, and non-commmutable, protecting the recipient from cashing out or selling the rights to future payments. The appealing tax aspect is that these payments are treated as compensation for damages rather than ordinary income, so they can be tax-advantaged for the recipient, avoiding tax on the settlement itself while providing steady income. Other annuities don’t combine this non-assignable structure with the same tax treatment tied to a damages settlement, which is why structured settlements are the best fit in this scenario.