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Home
For Plaintiffs
For Attorneys & Advisors
Establishing a Trust
Tax Planning
Benefits
More
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Qualified Settlement Funds (QSF’S)

You’ve worked very hard to reach a settlement. However, as you can see from the information on this website, there is a lot more to plan for than just receiving a check or a series of structured payments. Unfortunately, many parties involved in a personal injury lawsuit feel the pressure of various time constraints just as the case is about to close. This “crunch time” can cause adverse decisions to be made which could not only affect the plaintiff, but the lawyers on both sides and the defendant as well. Wouldn’t it be helpful to able to reach settlement terms that all parties agree to in spirit, but then be able press the “pause” button to make sure all the little details are worked out so that everything gets done correctly the first time (and possibly only time you have a shot at this)? Well, that’s what a Qualified Settlement Fund (QSF) allows the parties to a pending lawsuit to accomplish without sacrificing the “deal” that has been struck.Just in the past few years, the IRS has clarified the rules regarding QSF’s that allow all parties involved to maintain flexibility when settling a dispute. These rules can be found in section 468B of the Internal Revenue Code. Basically, the parties to the lawsuit will set up the QSF in advance of paying funds or signing settlement documents. We prepare the QSF as a Trust document that spells out how the settlement funds will be held and distributed in the future based upon the needs and goals of the parties involved. While many people believe that QSF’s were only meant for multi-party cases (i.e. class action suits), the IRS allows single plaintiffs to use this technique which can greatly enhance the overall outcome for the parties to the lawsuit as well as their respective legal counsel.Consider the following issues that can remain unresolved as the case approaches settlement:

  • Medicaid/Medicare claims for past medicals
  • MSA – Medicare Set Aside analysis for future medical costs
  • The establishment of a Special Needs Trust to preserve Medicaid and SSI eligibility
  • Hospital liens
  • Time to establish a plan for a disabled plaintiff to maintain Medicaid and SSI when not choosing to use a Special Needs Trust.

Advantages of using a QSF for Defendants:

  • When Defendant has paid into the QSF, economic performance has occurred and the Defendant can take the tax deduction.
  • Shifts the burden onto an independent fiduciary to settle outstanding Medicare claims.
  • Defendant can disengage from the litigation quickly once paid into QSF.
  • Defendant does not have to wait on the resolution of allocation issues, liens or plaintiff delays in setting up a Special Needs Trust.

Advantages of using a QSF for Plaintiffs:

  • Allows Plaintiffs to hit the “pause” button once a settlement is reached without losing the terms that have been negotiated. In other words, time to handle setting up a Special Needs Trust (which usually requires both DHS and Court approval, especially when a minor or incapacitated plaintiff is involved). Time to consider using a Medicare Set Aside and establishing the MSA fund.
  • The QSF Administrator can assist with allocation or lien resolution.
  • If there is a risk that the Defendant may soon become insolvent, the funds can be paid into the QSF immediately while all the details are worked out. This gives the Plaintiffs great relief that they know the funds are available.
  • Plaintiffs can direct the QSF Administrator to invest the settlement funds, earn interest, etc.
  • Plaintiffs can still choose to establish a structured settlement and receive qualified income tax treatment just as if the structure was established through the normal settlement process.

Advantages of using a QSF for Plaintiff Attorneys:

  • Gives attorneys time to review the distribution options with their client and make recommendations in a more controlled environment with less pressure.
  • Gives attorneys time to work with a Special Needs planning attorney to establish a Special Needs Trust or resolve outstanding liens.
  • Plaintiff attorney can delay recognition of income by leaving the attorney’s fee earned in the case in the QSF for an indefinite period of time, while selecting the terms on which payout to the attorney from the QSF will occur. This is especially powerful for plaintiff’s attorneys who may not want to pay income tax on the entire attorney fee in one calendar tax year. Funds can still be invested as the attorney wishes in the QSF and income from those investments can be paid out to the attorney as drawn up in the QSF trust agreement. 

 In summary, the use of QSF’s in single plaintiff cases continues to increase across the nation and provides more options and control for all parties involved.  If you would like a free analysis of whether a QSF would be helpful to you, please contact us toll free at 888-402-5680. 

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Medicare Set Asides

Medicare Set Asides

While Plaintiff Attorneys play a vital role in securing necessary funds to help compensate their clients who are victims of negligent injuries, there are important considerations that reach far beyond settling the case, and have long term effects on the injured client.  


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Medicare Set Asides

Medicare Set Asides

Medicare Set Asides

The Medicare Secondary Payor Act has always required the determination of a “set aside” of some amount of funds related to paying for future care of an injured worker.




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Julian Gray Associates

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954 Greentree Road

Pittsburgh, PA 15220


866-740-3986

  


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