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Section 1.468B-1 of the Internal Revenue Code provides a framework for establishing Qualified Settlement Funds (QSF). This section of the IRS Code was originally enacted to simplify the settlement of mass tort cases. However, it has also become a popular vehicle to settle all kinds of cases, including those involving a single personal injury claimant. A QSF is an ideal tool to help resolve Medicare/Medicaid liens, legal and experts' fees and costs, and provide time for the injured party to make sound decisions regarding the financial aspects of the settlement.
So, what are the mechanics? After a settlement or judgment is reached, either the plaintiff or the defendant may petition the court to establish a QSF. The court approves the creation of the QSF and the full amount of the judgment/settlement is paid by the defendant/insurer into the QSF, releasing the defendant from litigation and any further liability. A QSF allows the defendant or insurer to be removed from the often lengthy lien resolution process and/or complications between multiple claimants. A structured settlement annuity can still be negotiated with the QSF administrator if desired. A QSF pays no tax on the settlement funds placed into it (other than the interest earned while in the QSF), and preserves the ability to structure payments to claimants and their attorneys.
Why should attorneys consider a QSF?
- Allows plaintiff "breathing room" after mediation to create a financial settlement plan.
- Allows time to negotiate liens.
- Alleviates concern over financially unstable defendants.
- Does not trigger constructive receipt of the settlement funds (allowing qualified structured annuities, if desired).
- Attorney's fees and other expenses can be paid immediately from QSF.
- Attorneys can structure their fees without defense having to be involved.
How does a QSF benefit the defendant?
- Defendant is disengaged from litigation - cuts one check to QSF.
- Defendant receives a release from liability and case dismissed with prejudice
A QSF is a great tool that can benefit the needs for both plaintiff(s) and defendant(s). However, it is not something that is appropriate for every case. A QSF can be ideal for cases involving multiple claimants, complex single claimant cases, or when defendants want to move forward quickly after settlement. It is also an ideal tool when a defendant is trying to force a plaintiff to use a particular structured settlement provider or settlement broker. QSF's effectively transfer the control over the settlement planning process back to the plaintiff, where it rightfully belongs.
To learn more about Qualified Settlement Funds or to get one established in your case, please contact Amicus Planners at (888) 826-4287.