A qualified settlement fund, or QSF, is an effective tool for both parties in a legal settlement. The qualified portion of the settlement remains protected and the plaintiff does not realize immediate control of the funds preserving government benefits and postponing tax consequences.
A qualified settlement fund allows a defendant to be immediately released from litigation after making their contribution to the fund. The defendant realizes any tax benefits at the time of payment and does not participate in the disbursement of funds, limiting their future liability.
A qualified settlement fund offers similar benefits to the plaintiff attorney. It gives the flexibility to immediately withdraw their portion of the settlement while the plaintiff determines the best use of the remaining funds. Alternatively, the attorney can keep their portion of the proceeds in the qualified settlement fund delaying their taxable event.
Traditionally used in mass tort litigation, a qualified settlement fund can provide a useful tool in multiparty lawsuits due to the complexity of settlement distribution. A qualified settlement fund can also be utilized in a single event case where there are multiple parties that have an interest in the settlement funds.