Qualified Settlement Funds

WHAT IS A QUALIFIED SETTLEMENT FUND?

The Qualified Settlement Fund (QSF) concept was enacted in 1993 under Section 468B of the Internal Revenue Code (IRC).  A Qualified Settlement Fund can be a valuable tool in resolving multi-plaintiff lawsuits, especially when an agreement about the total settlement amount has been reached, but not for the individual plaintiff's allotments.

HOW DO PLAINTIFF'S BENEFIT?

Plaintiff attorneys favor a QSF because this type of funding agreement allows them to construct a settlement without the defendant's further involvement.  This allows the plaintiff's attorney to concentrate on important aspects concerning the final settlement, such as:

- Medical Leins

- Distribution amounts to their clients (in cash and in structured settlements)

- Special Needs Trusts to preserve Medicaid and Supplemental Security Income

- Estate needs

- Attorney fee structuring

WHEN IS A QUALIFIED SETTLEMENT FUND APPROPRIATE?

A QSF should be considered in tort, class action, or environmental (CERCLA) lawsuits involving one or more plaintiffs when an exact allocation among the plaintiffs has not been established, and the defendant and/or insurance carrier is willing to provide the settlement amount for a complete release of liability.

A QSF can be a simple checking account or a more complex trust agreement using a bank trust department.  The settlement proceeds remain in the QSF subject to the continuing jurisdiction of the court.  After the dispute is resolved, the court approves the allocation and orders the payment of the settlement proceeds to the individual plaintiffs.