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What Is a Qualified Settlement Fund (QSF)?
IRS Section 468B Explained
A Qualified Settlement Fund (QSF), or 468B trust, is a statutory trust authorized under IRC § 468B and Treasury Regulation § 1.468B-1. A QSF holds settlement or judgment proceeds pending claim resolution. Defendants deduct immediately upon transfer; plaintiffs defer tax until distribution. Eastern Point Trust Company establishes QSFs in one business day through QSF 360.
A Qualified Settlement Fund (QSF), established under IRC § 1.468B-1 as a 468B Trust, is a statutory trust that covers a wide range of litigation types, from large and complex cases to single event and single plaintiff cases. A QSF, sometimes referred to as a qualified settlement trust, qualified settlement fund trust, QSF account, QSF trust, or 468B trust, preserves tax advantages and provides tax deferral and the benefit of extra planning time.
A QSF holds the proceeds of a judicial award or settlement. The defendant’s obligations are held in the QSF until claimants become eligible for a disbursement. Law firms of all sizes utilize QSFs in cases involving multiple plaintiffs arising from an event or related series of events and in single-plaintiff matters.
Benefits of a QSF
QSFs benefit all parties by providing tax benefits, expediting the administration and distribution of settlement payments, and assisting in resolving liens and post-settlement secondary disputes.
• Benefits of a QSF for the Plaintiff
Plaintiffs gain the advantages of extra time to conduct financial planning and tax deferral while the funds are in the QSF, as well as the preservation of beneficial tax options that may otherwise be lost.
• Benefits of a QSF for the Defendant
With a QSF, the defendant is afforded an immediate tax deduction and extracts themselves from the post-settlement and settlement administration process.
• Benefits of a QSF for the Attorney
Attorneys benefit from reduced settlement administration, reduced risks by not having the funds in the firm’s IOLTA, and tax and financial planning benefits for themselves.
QSF Creation
The outdated process of waiting months for a QSF to be created and spending thousands in legal fees is no longer necessary. QSF creation has moved into the 21st century with online same-day creation powered by QSF 360’s quick, easy, and affordable Qualified Settlement Fund platform.
QSF Administration
A crucial role is that of the QSF administrator and QSF trustee (when applicable) in overseeing the QSF fund and managing the recordkeeping, division, vesting, and disbursement process. However, most importantly, the QSF administrator’s role is to ensure compliance with applicable laws and regulations and the associated tax reporting, tax payments, and coordinating with legal counsel.
QSF 360 is your resource for a quick, easy, and turnkey Qualified Settlement Fund administration and creation solution.
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