Qualified Settlement Funds

A Qualified Settlement Fund (QSF) is a court-created fund, account, or trust that holds settlement earnings before it is decided how the money would be allocated. Generally speaking, the QSF acts as an intermediary party to a lawsuit. The QSF is a powerful settlement tool that presents a degree of valuable “elbow room” and helps ensure that the proper counseling for the plaintiff will transpire throughout the settlement process by addressing pre and post settlement related issues. 

Originally the QSF was enacted to simplify the settlement of mass tort cases, but it has found favor as a flexible vehicle to settle cases involving multiple claims of a single claimant, as well as, allowing plaintiff attorneys to have a greater control over the settlement fund while determining appropriate distribution amounts to their clients. Essentially, while the settlement money is momentarily parked in the QSF, the QSF is able to extend the settlement planning window past the release of the defendant(s) from the litigation, which allows more time to determine the appropriate role, underwriting of a structured settlement annuity and evaluate the need to preserve the clients’ government benefits. 

The QSF must meet three criteria in order to exist: 
  • Court ordered and subject to it’s continuing supervision
  • Established to resolve or satisfy one or more contested claims that have resulted or may result from an event that has occurred giving rise to at least one claim asserting liability arising out of a tort, breach of contract, or violation of law
  • The fund, account, or trust is a trust under applicable state law or its assets are segregated from other assets of the transferor (and related persons)
Why Use Qualified Settlement Funds:
  • Facilitate placement of structure settlement annuity
  • Ensure settlement options are maximized
  • Resolves any and all reimbursement issues and liens against plaintiff’s settlement money
  • Addresses tax liability that might arise
  • Properly evaluate the need for the allocation of settlement money to be placed in a Medicare Set-Aside
Qualified Settlement Funds Benefits:

Advantages for Defendants

  • Receive immediate tax benefits once litigation is concluded
  • Allows defendants to disengage after litigation
  • Protects defendants from allocation issues

Advantages for Plaintiff

  • Flexible and may be structured to meet plaintiff’s unique needs
  • Gives breathing space, which allows settlement to move forward while preserving all distribution options for individual plaintiffs
  • Obtaining the settlement award early eliminates risk of insolvency of the defendant or its insurer
  • Provides more time to resolve Medicare and Medicaid liens
  • Plaintiffs can accumulate interest if the distributions are not timely

Advantages for Plaintiff Attorneys

  • Helps the plaintiff attorney resolve issues between claimants
  • Provides plaintiff attorneys with a QSF administrator to help assist in making appropriate choices for distribution of the settlement in cash, in structure settlement that provides steady stream of secure income, or in special (supplemental) needs trust to preserve Medicaid or Supplemental Security Income (SSI).
  • The plaintiff attorney has greater control of the settlement funds while determining appropriate distribution amounts to their clients