The History of Qualified Settlement Funds (QSFs)

Qualified Settlement Funds (QSFs) have revolutionized the way settlements are handled, offering significant tax benefits and financial advantages for both defendants and plaintiffs. In this video, we explore the importance of QSFs, their history, and how they function in the settlement process.

QSFs emerged in the 1980s to address the tax concerns of insurance companies, allowing them to deduct payments in the year of settlement rather than when the payments are distributed. This change was solidified by the enactment of Section 468B of the Internal Revenue Code in 1986.

With a QSF, defendants can transfer settlement funds, receive an immediate tax deduction, and obtain a release of claims. Plaintiffs benefit by having the flexibility to finalize settlement terms without immediate tax implications, as the funds remain in the QSF until they are disbursed. This arrangement allows the QSF administrator to manage and allocate the settlement among claimants effectively.

- Learn how QSFs provide immediate tax deductions for defendants.
- Understand how plaintiffs can avoid immediate tax implications on settlement funds.
- Discover the criteria and legal requirements for establishing a QSF.
- Explore the financial benefits and strategic advantages of using QSFs in settlements.

Despite initial opposition from some insurance companies and large businesses, recent favorable court rulings have solidified the use of QSFs. To qualify, a QSF must be established by a government authority and must address claims arising from a specific event or series of related events. The fund must be created as a trust under state laws, ensuring the assets are segregated from the parties involved.

Contact Eastern Point Trust Company to learn more about Qualified Settlement Funds and how they can streamline your settlement process.

Read more: https://www.easternpointtrust.com/articles/what-is-a-qualified-settlement-fund

Learn about Qualified Settlement Funds: https://www.easternpointtrust.com/qsf-360-qualified-settlement-fund