The Settlement Alliance

What is a Qualified Settlement Fund and Why is it Useful?

What is a Qualified Settlement Fund and Why is it Useful?

Dec 18, 2017

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Each individual involved in a multi-claimant case has unique medical needs, financial circumstances, and issues that could potentially delay the resolution of the settlement. A qualified settlement fund (QSF) is a financial tool that provides a systematic approach to resolving multi-claimant settlements. Here’s how:

  1. It offers time to handle settlement decisions properly: Some claimants may simply want to take a lump sum payment and walk away, while others want to know more about their settlement options. Claimants who receive needs-based government benefits (e.g., Medicaid, SSI, etc.), those with anticipated long-term medical needs, and those with outstanding medical liens or probate issues may benefit from more detailed information. Sitting down with an experienced settlement professional who can walk them through all of their options may help ensure that claimants are making informed decisions about how to handle their allocation of the settlement proceeds. Additionally, plaintiff attorneys may want time to discuss their attorney fee deferral options.
  2. It avoids constructive receipt: Claimants who want to utilize structured settlements and attorneys who want to set up fee deferrals must avoid constructive receipt of their settlement proceeds. If the defendant pays the settlement funds into a QSF, the QSF can pay those claimants and attorneys who want their funds in a lump sum while avoiding constructive receipt for others who want to explore the use of structured settlement annuities and attorney fee deferrals.
  3. It is approved for use by the IRS: 26 U.S.C. §468B lays out a framework for how the IRS treats QSFs, including income tax implications (the defendant(s) payment(s) to the fund are not taxable, but any growth via interest or dividends is) and allowable deductions (certain administrative and incidental expenses).
  4. It benefits all parties: In addition to the benefits provided for claimants and their attorneys, defendants may also favor using QSFs because once the money is paid into the QSF, the defendant is released from liability and can claim their tax deduction from the payment. It is a key tool for efficient dispute resolution.

Contact our experienced QSF team today

The Settlement Alliance has served as the court-appointed qualified settlement fund administrator for many mass tort and class action settlements. To learn more, contact our experienced team today at 800-464-2500 or info@settlement-alliance.com.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential