One of the nations leading experts on the taxation of damages is Attorney Robert Wood of the firm, Wood Porter of San Francisco, CA and he joins Mark Wahlstrom and Scott Drake on Speaking of Settlements this week to discuss his recent article in the Journal of Tax practices and Procedure on the use of 468b trusts.
As regular readers and listeners to The Legal Broadcast Network and The Settlement Channel know, 468b trusts, also know as qualified settlement funds, are one of the single most useful and powerful tools for the management of multi-claimant/multi-defendant litigation. They provide a safe harbor during the management and prosecution of a case into which funds can be received by defendants at various times and amounts, with out taxable receipt by the attorney or the plaintiffs in the case. This allows for a rational, transparent process by which legal fees are paid, expenses are paid, government benefits or liens calculated and accounted for, structured annuities purchased and funded along with other substantial benefits.
However, as these gain in popularity and awareness in the trial practices of leading attorneys, the potential for mistakes or over reaching as to their use looms large and that is the focus of these articles and this two part podcast. Rob and Mark discuss how lawyers can avoid mistakes in the creation of these trusts in the first place, but in the article and podcast they also review the process by which a code sec. 468b trust for a lawyers trust account can potentially be established even after receiving settlement proceeds. This is a very technical area and one that attorneys or settlement professionals should tread carefully in, and only with top quality tax counsel that knows exactly what they are doing.
If you or your firm are considering the use of a 468b trust, or possibly have received funds in a recent case that you think might have been better served by the process of electing status of a 468b trust, then you should listen to these two podcasts or go to Rob Wood's site where you can access the complete articles.