By using this site, you agree to our Privacy Policy and our Terms of Use.
An assorted collection of letter press stamps

Qualified Settlement Fund (QSF) Creation - List of Key Points Lawyers Need to Know

a stunning cinematic shot of a bus speeding by wit - QSF-administration

1. Court Approval is Not Mandatory

  • Court approval to create a Qualified Settlement Fund is NOT required.
  • IRC § 468B-1(c)(1) allows non-court “governmental authorities” to approve the creation.

2. Governmental Authority Approval

  • QSFs can be approved by various governmental entities, including federal, state, or local agencies.
  • The approving authority oversees QSF administration to ensure compliance with the judicial award terms and associated regulations.

3. IRS Involvement in Approval Process

  • The IRS plays a role in supervising QSFs through tax regulations, rules, and EIN issuance.
  • The QSF administrator must ensure compliance with IRS requirements for QSF establishment and administration.

4. Establishing

  • Parties must petition a governmental authority to create and approve establishment.
  • The authority reviews the proposed trust agreement for qualification requirement compliance.

5. Advantages Beyond Tax Benefits

  • QSFs provide tax benefits for both the plaintiff and defendant, provide timing flexibility, and reduce administrative burdens.
  • They also facilitate lien satisfaction and the resolution of any secondary disputes.

6. Streamlined Creation Options

  • Traditional court-established methods can be time-consuming and costly.
  • Platforms like QSF 360 offer quicker, more affordable solutions with experienced, qualified settlement fund administration.

7. IRS Filing Requirements

  • The qualified settlement fund administrator must file annually Form 1120-SF (U.S. Income Tax Return for Settlement Funds).
  • Form 1041 (U.S. Income Tax Return for Estates and Trusts) is not applicable.

8. Life Cycle

  • QSFs operate on a calendar year basis and begin life upon the governmental authority’s approval.
  • The fund administrator must ensure that the fund fulfills all IRS requirements regardless of whether the funding has occurred.

This listicle provides a summary overview. Always consult with experienced QSF administration professionals for specific guidance on Qualified Settlement Fund administration.

Rachel McCrocklin
Rachel McCrocklin
Author

Rachel McCrocklin

Ms. Rachel McCrocklin, MBA is a settlement industry and trust professional specializing in creating, operating, and administering 468B Qualified Settlement Funds (QSFs). Additionally, she provides insights on advanced settlement optimization solutions such as the Plaintiff Recovery Trust (PRT) while working with litigants, plaintiff counsel, and defendants to implement tax-efficient solutions and maximize settlement outcomes for all stakeholders.

Ms. McCrocklin oversees Eastern Point's QSF and PRT client services operations and communications while participating in developing new and innovative advantaged tax structures.

She is a prolific author of articles, including for the American Bar Association; she regularly presents at the Federal Bar Association, Practicing Law Institute, and settlement industry events; and is frequently cited in financial industry publications such as USAToday and Finance Digest.

Additional Sources

Article Archive

Contact Us

Get support from one of our experienced trust experts by submitting this form.
Phone
(855) 222-7513
Join the Newsletter
Sign Up
By submitting this form, you agree to be contacted by Eastern Point Trust company, as well as agree to our Terms of Use, and our Privacy Policy.
Your submission has been received.
A member of our team will be in touch with you soon.
Something went wrong while submitting the form. Please see our Contact Us page for more options to connect with us.
Your submission has been received.
A member of our team will be in touch with you soon.
Something went wrong while submitting the form.
Please see our Contact Us page for more options to connect with us.
Soporte Dedicado para Nuestros Clientes de Habla Hispana
(Dedicated Support for Our Spanish-Speaking Clients)

Eastern Point Trust Company se complace en ofrecer a los clientes de habla hispana un número gratuito exclusivo, así como acceso a un equipo de servicios al cliente compuesto por personal hispanohablante nativo profesional y de alto nivel.
 
Para obtener más información, comuníquese con el equipo al (855) 412-5100, esperamos trabajar con usted.