Qualified Settlement Funds (QSFs)
Many claimants and plaintiffs involved in personal injury negotiations and settlements, encounter defendants and/or their insurers (including the U.S. Government) that want to restrict or control your choice of annuity and/or trust companies used to fund your future payments, and your choice of expert to analyze and acquire those financial products.
A possible solution is to establish a Qualified Settlement Fund.
What Is a Qualified Settlement Fund?
A qualified settlement fund is a special “interim” temporary trust account, court approved and created so that the defendant and/or their insurance company can pay the entire amount of the agreed personal injury settlement immediately, and receive a full, complete and irrevocable release from your lawsuit…
… while you (and the other plaintiffs or claimants in your case, if any) settle allocation, lien and other similar issues, all the while preserving the tax exemption on the settlement funds.
Why Use a Qualified Settlement Fund?
By having the defendants pay the full settlement amount into this short-lived trust, the claimant(s) will avoid what is known as constructive receipt of the funds.
Avoiding constructive receipt means that you (and the other claimants, if applicable) can all then decide on appropriate settlement plans, and agree to structured settlements (if appropriate for your situation) with the trustee of the qualified settlement fund.
Basically, it allows you as the claimant more protection and flexibility when planning your settlement.
Below are three instances where Qualified Settlement Funds are a very powerful strategy for the plaintiff.
- To protect government benefits such as Social Security, Medicare, and Medicaid for the injury victim while waiting for court approval for certain strategies (i.e. - supplemental-needs trust, special needs trust, etc.)
- When a dispute arises over the allocation of benefits between claimants.
- When the defense will not cooperate with the Structured Settlement desired by the claimant. From time to time, the defense attempts to limit the choices of the claimant and/or requires the use of their own defense oriented Structured Settlement Broker.As you can imagine, anytime the defense attempts to dictate what the claimant does, it shifts the power back to the defense. A QSF, when used correctly, can be a good tool to combat abusive or limiting insurance carriers who try to force the claimant into using their own Structured Settlement company to issue the annuity.
What Happens to the Qualified Settlement Fund?
Once all funds have been cleared out of the OSF, the trustee closes the trust and wraps up its operations.
What is Your First Step?
To understand more fully, how a Qualified Settlement Fund might benefit your personal injury settlement, please contact us.
