A Qualified Settlement Fund or QSF is a “tax-qualified” account managed by an independent and neutral third party. Typically, plaintiffs prefer not to have the defendant hold onto the settlement funds for long. Thus, QSFs are established to prevent conflicts of interest, provide interest earnings to plaintiffs during disputes, protect attorneys from liability for unpaid government liens, and allow defendants to be released while outstanding issues are resolved.
A QSF holds the associated settlement or judgment proceeds and manages the process and disputes over fund allocation and payment of any liens. These accounts can remain active for varying durations depending on the case’s complexity.
In cases involving wrongful death, some states have distribution requirements for allocating proceeds. Some jurisdictions follow laws governing intestate succession for distribution, while others use formulas to prevent disputes. Qualified Settlement Fund can hold the settlement proceed tax deferred until such issues are resolved.
Liens
Determining and settling liens is essential, and utilizing a QSF can effectively handle this task, mitigating risks for the parties involved. Moreover, the QSF can distribute payments to parties without liens and adjust payments as lien issues arise.
Eligibility for Using a QSF
Tort cases, environmental liability disputes, breach of contract, and discrimination lawsuits qualify for using a QSF. Once approved by the “governmental authority,” the funds are transferred into a QSF for distribution among the plaintiffs after defendants receive releases and dismissals.
Conclusion
A QSF is a unique and powerful tool, and platforms like QSF 360 provide quick, easy, and turnkey solutions to create and administer a QSF. For more information on QSFs click here.
