Qualified Settlement Funds, Their time has come

Attorney Rob Wood's recent article in the LosAngeles Daily Journal explains why qualified settlement funds can be an invaluable time-saver for lawyers and, as the headline says, "their time has come."

"Whatever you choose to call it, a qualified settlement fund, called a QSF or a Section 468B trust, is a flexible dispute-resolution mechanism whose time has come. QSFs are enabled by Section 468B of the Internal Revenue Code, which was enacted in 1986, but they really didn’t exist until 1993, when the IRS published regulations detailing their operation. They’ve really taken off only in the last few years. In essence, a QSF allows for a tax-free way-station. It is a simple trust that serves as a stopping point after one or more defendants pay money to settle a case but before the plaintiffs receive it."

As you know, The Settlement Channel has done a lot of commentary and education on this topic. I firmly believe the qualified settlement fund, or 468B trust, should be used in the vast majority of all multi-claimant cases. Until recently, the two major obstacles to the growth and widespread application of this remarkably useful planning tool have been: (1) needless objections by defense brokers who fear loss of their ability to structure settlements; and (2) the excessive expense of some lawyers and trustees in putting these in place.

These dual roadblocks -- defense broker paranoia and greed by the gatekeepers and trustees -- are finally being eroded through the use of quality corporate trustees who know and understand this business, together with widespread education on how brokers work cooperatively while still using a 468B Trust. In my opinion, QSFs are the single most important tool to increase the sale and use of structured settlements and settlement planning over the next decade.

Check out the article and Rob's appearance on Speaking of Justice last week to discuss qualified settlement funds.

Article PDF

Scott Drake interviews the host of the Tax Law Channel and partner at Wood & Porter in San Francisco, Robert Wood.

Comments

[Jack]

You forgot one more roadblock: plaintiff broker greed. If this tool had been used in a better fashion, instead of as a club beating the defense in the head, you wouldn't have such strong resistence to using them on the defense side. I agree, they are a valuable tool in the right situation, it's just unfortunate its use as an offensive weapon has turned the defense off to them.

[The Settlement Channel]

Jack,

I totally agree. If there is one big and growing obstacle to the use of the QSF it is the misguided and greedy application of the QSF by certain brokers and trustees to enrich themselves and cut out any other professional who has worked on the file and brings value to the transaction. At first it was easy to dismiss this as plaintiffs trying to protect themselves but I have seen too many examples lately of plaintiff experts and some of the trustees using these to lock out other professionals, take excessive fee's and commissions and in short do many of the things they decried when defense brokers did them.

Greed is ugly regardless of which ever side of the transaction it is on.