The Basics about Qualified Settlement Funds
What is a Qualified Settlement Fund?
Qualified Settlement Funds (QSF) were enacted under Section 468B of the Internal Revenue Code to allow the settlement of lawsuits with more than one claim before they there is an agreement on how these amounts will be allocated.Links to Internal Revenue Service (IRS) and Tax Related Sites
Why Do Insurance Carriers and Defendants Favor it?
Qualified Settlement Funds can allow a defendant to pay its policy limits or negotiate a settlement while other defendants remain in litigation. It gives the defendant a simple and complete release in multi party litigation.
Information for Adjusters, Insurance Companies and their Attorneys
Why Do Plaintiff Attorneys Favor it?
Plaintiff attorneys favor Qualified Settlement Funds because they can control the settlement funds while negotiating medical liens, determining appropriate distribution amounts to their clients (in cash and in structured settlements), in Supplemental Needs Trusts to preserve Medicaid and Supplemental Security Income (SSI), structuring attorney fees, and planning for estate needs.
It also eliminates risk of insolvency by the defendant or its insurer and avoids interference or refusal of the defendant to participate in the structured settlement placement.
Information for Trial Attorneys and their clients
What claims are eligible for a Qualified Settlement Fund?
A qualified settlement fund must meet three requirements:
One: The fund can be any fund, account, or trust that is established pursuant to an order of, or approved by, a governmental entity.
Two: it must be a trust under applicable state law or the assets must be otherwise segregated from the other assets of the transferor.
Three: the claim must be an eligible claim, namely damages arising out of tort, breach of contract or violation of laws; damages arising under the Comprehensive Environmental Response Compensation Liability Act; or any claim designated in an IRS revenue ruling or revenue procedure.
What Steps Must be Taken to set up a Qualified Settlement Fund?
Links to Internal Revenue Service (IRS) and Tax Related Sites
Is a Qualified Settlement Fund Right for Your Clients?
January, 2002 Trial Magazine