Settlement: Strategies & Solutions

One question persistently surfaces in the intricate realm of legal settlements and taxation: Are compensatory damages taxable? This seemingly straightforward inquiry often leads us into a maze of legal terminology and tax code complexities. Let’s unravel this topic in terms that don’t require a law degree to comprehend.

Understanding Compensatory Damages

Before delving into the tax implications, we must first grasp the concept of compensatory damages. Courts award these damages to individuals who have suffered harm, injury, or loss due to another party’s actions. The primary purpose is to “make the plaintiff whole” by providing monetary compensation that, ideally, restores them to their financial position before the incident occurred.

The General Rule: Taxability Depends on the Nature of the Damages

The taxability of compensatory damages hinges on the nature of the harm for which they’re compensating. Generally, the Internal Revenue Service (IRS) considers compensatory damages taxable income unless they fall under specific exceptions.

Physical Injuries or Sickness

Compensatory damages are typically not taxable when received for claims of physical injuries or physical sickness. This exclusion extends to emotional distress damages resulting from physical injuries or sickness. For instance, if you receive damages for medical expenses, lost W-2 wages, or pain and suffering related to a car accident that caused physical harm, these would generally be tax-free.

Non-Physical Injuries

Here’s where it gets tricky. Damages awarded for non-physical injuries, such as defamation, breach of contract, or employment discrimination (unless it led to physical symptoms), are usually taxable and include emotional distress damages not stemming from physical injuries.

Property Damage: A Special Category

Compensatory damages for property damage occupy a unique position in the tax landscape. The IRS treats these damages differently depending on the specifics of the case:

1. Compensation Equal to Basis: If the compensation you receive is equal to the adjusted basis of your property (typically what you paid for it, plus improvements minus depreciation), you generally don’t have to report it as income.
2. Compensation Exceeding Basis: You may have a taxable gain if the compensation exceeds your adjusted basis. However, you might be able to defer this gain by purchasing replacement property within a specific timeframe.
3. Compensation Less Than Basis: You may have a deductible loss if the compensation is less than your adjusted basis.

The IRS provides detailed guidance on compensatory damages in Publication 547, “Casualties, Disasters, and Thefts.”

Environmental Damages: A Growing Concern

Increasing environmental awareness has made compensatory damages for environmental harm more common. The tax treatment of these damages can be complex:

1. Restoration Damages: If the damages are specifically for restoring your property to its pre-contamination state, they might not be taxable if you use them.
2. Diminution in Value: Damages for the decrease in your property’s value due to environmental factors are generally treated similarly to other property damage compensation.
3. Health-Related Damages: If environmental damage leads to physical health issues, the compensation for these might be tax-free under the IRS section 104(a)(2) physical injury exception.

The IRS addresses some aspects of environmental damage compensation in Publication 525, “Taxable and Nontaxable Income.”

The Gray Areas

As with many legal matters, there are gray areas that complicate the issue:

1. Emotional Distress: While damages for emotional distress resulting from physical injuries are not taxable, standalone emotional distress damages typically are. However, any portion of these damages used for medical care related to emotional distress may be tax-free.
2. Lost Wages: If your compensatory damages include lost wages, this portion is typically taxable, as it replaces the income you would have earned (and paid taxes on) in any other manner.
3. Punitive Damages: Although not strictly compensatory, it’s worth noting that punitive damages—those intended to punish the defendant—are almost always taxable, regardless of the nature of the case. The IRS clarifies this precedence in Publication 4345, “Settlements – Taxability.”

The Importance of Documentation and Allocation

Given these complexities, it’s crucial to maintain detailed records of your settlement or court award. Drafting the settlement agreement or court order can significantly impact its tax treatment. Ideally, the document should allocate the damages among different categories (e.g., physical injuries, property damage, emotional distress, lost wages) to help determine their taxability.

The IRS again emphasizes this allocation’s importance in IRS Publication 4345, stating that the payor’s intent in making the payment is critical in determining its taxability.

Recent Developments and Ongoing Debates

The landscape of compensatory damages taxation is not static. Recent court cases and IRS rulings continue to shape the interpretation of tax laws in this area. For instance, there’s ongoing debate about the taxability of damages received for violations of statutory rights, with some arguing that these should be tax-free “personal” damages. However, without a “violation of law,” electing such tax treatment may carry risk and result in an audit flag for the IRS. Be prepared to have the IRS vigorously challenge this tax election.

Attorney Fee Taxation

If your settlement or court award is taxable, and your attorney represents you on a “contingency fee” basis, you will have an additional tax burden. Current tax law requires you (the plaintiff) to pay taxes on 100% of the settlement proceeds without deducting the attorney fee portion. If this seems unfair to you, rest assured, you are not alone. The good news is that Eastern Point Trust Company provides the only known solution – the Plaintiff Recovery Trust, which eliminates your need to pay taxes on the attorney fee portion.

Seek Professional Advice

While this overview provides a general understanding, tax law is notoriously complex and subject to change. What’s more, individual circumstances can significantly affect the taxability of compensatory damages. Therefore, consulting with an experienced and competent tax professional or an attorney specializing in settlement tax law is always advisable when dealing with substantial compensatory damages.

The IRS itself recommends seeking professional help in IRS Publication 4345, acknowledging the complexity of these issues.

Conclusion

In conclusion, while the taxability of compensatory damages isn’t always black and white, understanding the basic principles can help you navigate this complex area of law and taxation. The key takeaways are:

Remember, the IRS takes a keen interest in large settlements and awards. Proper handling of these funds from a tax perspective can save you from headaches—and potentially significant financial consequences—down the road. By staying informed, utilizing the Plaintiff Recovery Trust, and seeking expert advice, you can ensure you comply with tax laws, minimizing the “tax bite” while maximizing your rightful compensation.

Qualified Settlement Funds (QSFs) are a legal mechanism established under Section 468B of the Internal Revenue Code, designed to hold settlement proceeds in trust for plaintiffs in a lawsuit. It allows for the efficient management and distribution of funds in complex litigation, particularly in cases involving multiple claimants.

The primary benefits of a QSF include deferring taxation for plaintiffs until they receive their settlement funds, providing flexibility in distributing the settlement proceeds, and allowing time to address lien resolution, claims administration, or other post-settlement issues. Additionally, defendants benefit by obtaining an immediate release from liability upon transferring the settlement funds into the QSF.

Approval Process

Navigating the world of QSFs can be complex, but understanding the approval process is crucial. We examine here the primary legal requirements and misconceptions surrounding the approval process:

Establishment by Court Order

§ 1.468B-1(c)(1) requires that a QSF obtain the approval of a “Governmental Authority,” which establishes the fund’s legitimacy. There is no requirement that the approval MUST come from a court; such suggestions demonstrate a lack of applicable experience and knowledge of IRC § 468B. Without such authorization, the fund is not “qualified” and will confer the associated tax benefits.

Establishing Before Appeals

Establishing and obtaining governmental approval before the appeals process related to the underlying lawsuit is resolved is possible. However, post-settlement disputes amongst the claimants may continue after establishing the QSF.

Extinguishment of Defendant’s Liability

The 468B settlement fund and the associated settlement agreement of judicial order should completely extinguish the defendant’s liability – resulting in no tail liability.

Qualified Settlement Fund Administrator Appointment

A QSF administrator must be appointed, which is critical in managing the Qualified Settlement Fund administration. Always look for a licensed fiduciary with vast experience and demonstrated knowledge.

Jurisdiction Retention

The approving 468B Governmental Authority must retain jurisdiction over the fund. This ongoing oversight ensures proper management and distribution. However, when applicable, the court approving the settlement terms or issuing the judicial award retains jurisdiction over the settlement/judicial order terms.

Resolving Claims Against Defendants

§ 1.468B-1(c)(3) requires The QSF must be established “to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred, and that has given rise to at least one claim asserting liability.” So-called “Firmwide QSFs” which comingle unrelated claims do not meet the requirements of § 1.468B-1(c)(3).

Meeting IRC § 468B Requirements

The fund must meet IRC § 468B requirements and related Treasury Regulations (1.468B-1 et seq.).

Each of the preceding requirements is crucial. Failing to meet even one could jeopardize the entire process. And the associated tax treatment. As legal and settlement professionals, we must ensure compliance.

Don’t let the complexities of QSFs intimidate you. With this knowledge, you’re better equipped to navigate the court approval process successfully. Stay informed, stay compliant, and ensure your Qualified Settlement Fund stands up to legal scrutiny!

To learn more details, see the detailed article on QSF approval requirements.

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.

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Embarking on the journey of Qualified Settlement Fund Administration can be challenging, but it’s also an opportunity to improve the settlement outcomes. By grasping these ten (10) essential elements, you’ll confidently navigate administering your Qualified Settlement Fund trust, whether you’re an experienced professional or just starting.

1. Understanding the Legal Requirements: The Foundation of QSF Administration and Your Key to Success

What is a Qualified Settlement Fund (QSF)? It is a tax-advantaged statutory “purpose trust” established by the approving governmental authority, pursuant to 26 CFR § 1.468B-1 et seq., to receive and distribute settlement or judicial award proceeds. It allows defendants to claim tax deductions immediately upon funding while providing time for plaintiffs to resolve allocation and financial planning issues. § 468B trusts are commonly used in mass tort, class action, environmental cleanup settlements, and single-event cases.

At the center of a settlement fund account lies an array of legal and tax requirements to ensure the qualified settlement account’s integrity and protect the tax benefits for all parties involved.

Key Considerations:

• Proper establishment as a 468B trust under 26 CFR § 1.468B-1(c)
• Adherence to judicial awards and settlement agreements
• Maintaining independence from all parties to the litigation

Pro Tip: The documents should clearly state which party is classified as the "administrator" within the meaning of Treasury Regulation Section 1.468B­2(k)(3) Partner.

Pro Tip: With a trusted and licensed Qualified Settlement Fund Administrator, like Eastern Point Trust Company, they can ensure compliance with all related administration and tax requirements, provide expert guidance, and offer a range of cost-effective services to simplify and streamline the management of your QSF.

2. Compliance Issues: Staying on the Right Side of the Law

Compliance in Qualified Settlement Fund administration isn’t just about following rules—it’s about leveraging experience to fulfill the fund’s purpose and settlement terms, ensuring a secure and confident journey for all involved.

Critical Compliance Areas:

• Statutory compliance
• KYC/AML compliance
• Protection of privacy and confidentiality
• Regular reporting to relevant tax authorities
• Transparent record-keeping
• Speedy funds disbursement

Action Step: Schedule a Compliance Check-Up with a “QSF administration” expert to ensure your fund meets all regulatory requirements.

3. Disbursement Processes: Ensuring Fair and Timely Payouts

The heart of a Qualified Settlement Fund’s purpose lies in (i) the tax benefit it provides to all parties and (ii) its ability to disburse funds to claimants promptly and efficiently. A well-managed and proven disbursement process can distinguish between a smooth settlement and a logistical nightmare.

Best Practices:

• Utilize highly experienced and licensed fiduciaries
• Implement transparent and fair allocation methodologies
• Establish timely payment processes
• Maintain transparent and real-time reporting
• Communicate effectively with all parties throughout the process

Remember: A trustworthy Qualified Settlement Fund administrator can streamline your disbursement process, ensuring accuracy and timeliness.

4. Tax Implications: Navigating the Fiscal Maze

Understanding the qualified settlement fund tax treatment is crucial for special masters, attorneys, and claimants. Proper tax management can significantly impact the fund’s overall value and the benefits received by claimants.

Key Tax Considerations:

• Tax qualification, status, and filing requirements
• Potential tax liabilities for distributions
• Correct tax reporting

Did You Know? Expert settlement administrators can help optimize your fund’s tax strategy, potentially increasing the long-term value of distribution.

5. Licensed, Honest, and Unconflicted Administration

Effective settlement administration involves eliminating the conflicts of interest that arise from product placement by the QSF administrator.

Critical Elements:

• Utilize only a licensed fiduciary
• Avoid providers that also sell financial products

6. Compliance with Judicial Awards and Settlement Agreements

Strict adherence to Judicial awards and settlement agreements is non-negotiable:

• Maintain a compliance checklist based on all relevant orders and agreements
• Regularly review and update compliance measures
• When applicable, be prepared to provide detailed compliance reports to the court or parties

Practical Tip: Implement a system of internal audits to ensure ongoing compliance throughout the life of the trust.

7. Handling of Disputed or Unclaimed Funds

Proper management of disputed or unclaimed funds is crucial:

• Develop clear procedures for handling disputes aligned with the settlement agreement and judicial awards
• Establish protocols for locating and communicating with non-responsive claimants
• Plan for the disposition of unclaimed funds, which may include cy pres distributions or reversion to the defendant

‍Legal Update: Recent case law has emphasized the importance of proactive measures in locating claimants before considering alternative distributions.

8. Coordination with Related Parties

Effective QSF administration often requires seamless coordination with various parties:

• Maintain clear lines of communication with plaintiffs’ counsel, defense counsel, and when applicable, the court
• Coordinate with lien resolution administrators, if applicable
• Manage relationships with financial institutions, auditors, and other service providers

Best Practice: Regular stakeholder meetings can help ensure alignment and address potential issues proactively.

9. Documentation and Record-Keeping

Meticulous documentation is essential:

• Maintain comprehensive records of all fund activities, including financial transactions, claimant communications, and administrative decisions
• Implement a secure, easily accessible document management system
• Ensure all records comply with relevant retention policies and privacy laws

Regulatory Note: Under IRC Section 468B, QSFs must maintain sufficient records to support items reported on tax returns.

10. Winding Down and Termination

Proper closure is as critical as its establishment:

• Develop a termination plan that addresses final distributions, tax filings, and asset disposition
• Ensure all claims have been resolved and all liabilities satisfied
• Obtain necessary approvals for termination when required

Legal Consideration: The termination process must comply with Treas. Reg. § 1.468B-2(k) outlines specific requirements for termination.

Summary

In conclusion, administering a Qualified Settlement Fund requires a comprehensive understanding of several critical elements, along with ongoing attention to legal updates and best practices. By mastering these aspects, legal professionals and administrators can ensure the smooth functioning of QSFs, ultimately serving the best interests of all parties involved.

While mastering these ten aspects of QSF administration may seem overwhelming, you don't have to navigate this process alone. Professional trustees and financial institutions specializing in QSF account management can provide the expertise and support you need to navigate these complex waters successfully.

Contact a QSF 360 specialist today to learn how their experience can significantly impact administering your Qualified Settlement Fund.

Qualified Settlement Funds (QSF) – Listicle of 12 Things to Know:

FOR IMMEDIATE RELEASE

[7/8/24] Joe Sharpe, ETPC President, explained, “QSFs are powerful financial tools to streamline and manage settlements, especially in complex cases. They provide tax benefits, flexibility, and efficient administration for all parties involved. With platforms like QSF 360™, creating and managing a QSF is quick, easy, and fully compliant. From establishing a QSF to understanding the roles of administrators, tax implications, and investment options, our comprehensive listicle covers all you need to know about these financial mechanisms.”

Learn the advantages of QSFs over other settlement structures, QSF regulatory oversight, and best practices for effective management. Make the most of your settlements with QSFs and ensure a smooth, compliant, and beneficial process.

Eastern Point Trust Company invites legal professionals, plaintiffs, and all interested parties to explore more and discover the transformative potential of QSFs in post-settlement dispute resolution. To read the complete listicle and learn more about the advantages of QSFs, visit https://www.easternpointtrust.com/articles/qualified-settlement-funds-listicle-of-12-things-to-know.

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The co-designer of the Plaintiff Recovery Trust, Lawrence Eisenberg, a tax attorney and founder of Forward Giving, Inc., a 501(c)(3) charity, publishes in Tax Notes an article addressing the double taxation of settlements.

[7/16/2024] — In a thought-provoking article published in Tax Notes* Lawrence J. Eisenberg, an experienced tax attorney, describes the perplexing issues affecting individual plaintiffs in litigation recoveries and considers how those issues can be addressed, including by using a charitably-based trust-based solution. The article “The Individual Plaintiff Tax Trap — A Conundrum and a Solution” delves into the intricacies of the taxation of litigation recoveries and addresses methods to mitigate the adverse tax consequences some individual plaintiffs face.

Background

Eisenberg’s article highlights the strange and often inconsistent tax treatment of individual plaintiff litigation recoveries under the Internal Revenue Code. Despite the Supreme Court’s 2005 decision in “Commissioner v. Banks”, which held that plaintiffs must report the entire recovery as taxable income—including the portion payable to attorneys—many plaintiffs (and their attorneys and advisors) remain unaware of the potential tax pitfalls when such recoveries do not fall under tax-free categories, e.g., damages for physical injuries.

The Individual Plaintiff Tax Trap

The crux of the issue lies in the deductibility of attorney’s fees. Some recoveries are tax-free, so attorney fee deductibility is not relevant, or allow for an above-the-line deduction of these fees. Other recoveries can result a “double tax”, because in those situations, the attorney fee portion of the recovery is taxable, but the attorney fee itself is not deductible. This leads to significantly diminished net recoveries. Eisenberg’s article includes a detailed example demonstrating how a plaintiff’s net recovery can be less than 10% of the total amount, with the government and attorneys each receiving several times more than the plaintiff!

A Trust-Based Solution

To address this inequity, Eisenberg proposes that a plaintiff affected by the double tax create a Plaintiff Recovery Trust (PRT). A PRT allows plaintiffs to transfer their litigation claims to a specially designed split-interest charitable trust. By doing so, the litigation claim becomes an asset of the trust, and any recovery is received by the trust, which then pays the net recovery to the trust beneficiaries, including the plaintiff. The PRT uses ordinary trust law principles and aims to achieve fairer tax treatment by separating the ownership of the litigation claim from the individual plaintiff.

Key Benefits of the Plaintiff Recovery Trust

- Equitable Tax Treatment: By treating the litigation claim as a trust asset, a Plaintiff Recovery Trust results in the plaintiff not being taxed on the portion of the recovery paid to their attorneys.

- Structured recovery: The PRT trust structure allows for a more organized and potentially tax-efficient distribution of recoveries. (It also permits the use of structured settlements as part of the solution.)

- Charitable Component: The PRT includes a charitable beneficiary, adding a philanthropic dimension to the solution.

Conclusion

Eisenberg’s article is a call to action for tax professionals and litigation attorneys to recognize and address the unfair tax treatment many individual plaintiffs face. The PRT trust-based solution offers a way to alleviate the financial burden imposed by current tax law, so that plaintiffs retain a fair share of their recoveries.

See the full article on the taxation of settlement proceeds.

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Eastern Point Trust Company Unveils Comprehensive Guide on Navigating Post-Settlement Disputes and Complexities with Qualified Settlement Funds

[5/17/2024] — Eastern Point Trust Company is pleased to announce the release of a new guide designed to address the challenging intricacies of post-settlement litigation disputes. The guide focuses on utilizing Qualified Settlement Funds (QSFs), also known as 468B trusts, as a streamlined solution for efficient settlement fund management and dispute resolution.

It is not uncommon for secondary disputes to arise following a litigation settlement or court award. These disputes can range from family disagreements over their "fair share" to lawyers disputing fee splits, plaintiffs contesting attorney fees, and third-party lien holders emerging to stake claims against the litigation proceeds. Such complexities often hinder the settlement process and prolong the resolution.

Eastern Point Trust Company's newly released guide provides detailed insights into how QSFs can be employed to manage these disputes effectively. By offering a structured approach to fund management and tax compliance and providing the necessary time for informed decision-making, QSFs present a viable solution to post-settlement challenges.

Sam Kott, Vice President of Eastern Point Trust Company, emphasized the significance of the guide, stating, "This guide explores the advantages of QSFs, specifically their ability to address complex issues such as post-settlement disputes, secondary litigation, and lien resolution. The guide also provides direction on navigating post-settlement challenges and highlights the benefits of QSFs in achieving the best possible outcomes for all parties involved."

The guide delves into the various advantages of utilizing QSFs, including:

• Efficient Fund Management: QSFs ensure that settlement funds are FDIC-insured, reduce misallocation risks, and ensure fair distribution.
• Tax Compliance: QSFs help maintain compliance with tax regulations, thereby minimizing potential tax liabilities for the parties involved.
• Informed Decision-Making: By providing time and space for thoughtful decision-making, QSFs help to resolve disputes amicably and equitably.

Eastern Point Trust Company invites legal professionals, plaintiffs, and all interested parties to explore the guide and discover the transformative potential of QSFs in post-settlement dispute resolution. To read the complete guide and learn more about the advantages of QSFs, visit here.

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Eastern Point is proud to announce the release of its latest publication, Unveiling the Complex World of Taxable and Tax-Free Settlements.

FOR IMMEDIATE RELEASE

[5/17/2024] — Eastern Point is proud to announce the release of its latest publication, Unveiling the Complex World of Taxable and Tax-Free Settlements. This comprehensive guide delves into the intricate workings of taxable and non-taxable settlements, offering invaluable insights into compensatory damages, punitive damages, and the tax treatment of various settlement types.

Ms. Rachel McCrocklin, Eastern Point’s Chief Trust Officer, commented, “The guide provides a detailed understanding of the pivotal role of IRS Section 104 and the taxability of various settlement types. Our goal is to equip readers with the knowledge to make informed decisions and minimize potential tax liabilities.”

The guide explores strategic methods to minimize tax obligations on settlements, including leveraging structured settlement annuities, Plaintiff Recovery Trusts, and proper allocation in settlement agreements. It is an essential resource for individuals and businesses navigating the complex landscape of settlement taxation.

Arm yourself with knowledge, make informed decisions, and minimize potential tax liabilities with Eastern Point's newest guide.

For more information on Unveiling the Complex World of Taxable and Tax-Free Settlements, please visit https://www.easternpointtrust.com/articles/unveiling-tax-free-settlements-what-you-need-to-know or contact 855-222-7513.

CTRO

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A new comprehensive guide has emerged catering to those seeking to conduct private placements. This guide outlines the pivotal role of escrow accounts in private placements, providing a secure, regulated structure that safeguards investor assets and boosts investor confidence.

FOR IMMEDIATE RELEASE

[5/2/2024] — A new comprehensive guide has emerged catering to those seeking to conduct private placements. This guide outlines the pivotal role of escrow accounts in private placements, providing a secure, regulated structure that safeguards investor assets and boosts investor confidence.

It reviews the advantages of choosing a trust company over a traditional bank account for escrow services, emphasizing active independent oversight that enhances transaction security and integrity.

Ned Armand, CEO, noted, “The guide also highlights the critical role of an escrow agent in managing funds prudently, ensuring a smooth progression of transactions under the regulatory frameworks.” Offerors of private equity and Reg D, Reg A, Reg A+, Reg CF, and Reg S offerings are encouraged to explore this guide, available on Eastern Point Trust Company.

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In today's dynamic business landscape, where environmental liabilities pose significant challenges, the Qualified Settlement Fund (QSF) emerges as a beacon of efficiency and reliability. Contrasting against traditional Environmental Remediation Trusts (ERT), Eastern Point’s QSF offers unparalleled advantages, revolutionizing the approach towards environmental liability management.

FOR IMMEDIATE RELEASE

[2/27/2024] — In today's dynamic business landscape, where environmental liabilities pose significant challenges, the Qualified Settlement Fund (QSF) emerges as a beacon of efficiency and reliability. Contrasting against traditional Environmental Remediation Trusts (ERT), Eastern Point’s QSF offers unparalleled advantages, revolutionizing the approach towards environmental liability management.

The Qualified Settlement Fund stands as a testament to expediency, with the capability to be established and funded within a mere business day, a stark contrast to the lengthy processes associated with ERTs. By swiftly assuming environmental liabilities from present and future claims under CERCLA, state, and local law, QSF ensures immediate action and resolution.

One of the most compelling aspects of QSF is its affordability, with establishment costs as low as $500. This cost-effectiveness, coupled with the tax advantages it provides over ERTs, makes QSF an attractive proposition for businesses seeking prudent financial solutions.

Flexibility is another hallmark of QSF, allowing for single-year or multi-year funding without any maximum duration constraints, ensuring adaptability to diverse business needs. Furthermore, the ability to hold real estate expands the horizons of asset management within the fund.

The benefits extend to tax optimization, with QSF accelerating the transferor's tax deduction for funds transferred to the current tax year, thereby enhancing financial planning and efficiency. Moreover, by shifting liability and associated funding transfers irrevocably to the QSF, businesses can streamline their balance sheets, mitigating risks and enhancing transparency.

In addition to these financial advantages, QSF facilitates seamless settlement agreements to capitate and resolve environmental liabilities, assuring regulators and interested parties of the irrevocable availability of funds for amelioration.

The transition to QSF not only eliminates future administrative burdens but also entrusts the fund's administration to a dedicated trustee, relieving businesses of operational complexities and enhancing focus on core activities.

In conclusion, the Qualified Settlement Fund stands as a beacon of innovation in environmental liability management, offering unmatched advantages over traditional Environmental Remediation Trusts. Its expediency, affordability, flexibility, and tax optimization capabilities redefine the landscape, empowering businesses to navigate environmental challenges with confidence and efficiency.

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Eastern Point Trust Company Announces Sponsorship Grants to National Forest Foundation

FOR IMMEDIATE RELEASE

[10/13/2022] — Eastern Point Trust Company (“EPTC”) announced that it entered into a sponsorship with the National Forest Foundation (“NFF”) to provide grant funding in support of NFF’s mission to restore and enhance our National Forests and Grasslands.

Working on behalf of the American public, the NFF leads forest conservation efforts and promotes responsible recreation. Its mission is founded on the belief that these lands, and all they provide, are an American treasure and vital to our communities’ health.

Rachel McCrocklin, Eastern Point’s Chief Client Officer, stated, “Eastern Point welcomes the opportunity to partner with the National Forest Foundation in support of its mission to improve and protect our national lands. A portion of Eastern Point’s revenue is dedicated to funding priority reforestation and enhanced wildlife habitat by supporting the National Forest Foundation’s 50 million for Forrest campaign.”

About Eastern Point Trust CompanyWith over three decades of trustee and trust administration experience, Eastern Point is a world leader in trust innovation that provides fiduciary services to individuals, courts, and institutional clients.

Eastern Point has the benefit of practical experience and industry-leading technology, providing services to over 6,000 trusts with more than 20,000 users across the U.S. and internationally.

About The National Forest FoundationThe National Forest Foundation is the leading organization inspiring personal and meaningful connections to our National Forests, the centerpiece of America’s public lands.

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Eastern Point Trust provides services across the U.S. and internationally.

FOR IMMEDIATE RELEASE

[11/21/2022] — Eastern Point Trust Company (“EPTC”) announced recent successes of the Plaintiff Recovery Trust (“PRT”) solution in solving the Plaintiff Double Tax, which is the unfair result of 2017 legislation that can cut plaintiff recoveries in half.

Glen Armand, Eastern Point’s CEO, expressed, “Eastern Point’s gratitude for the testimonials of Mirena Umizaj, Joseph Di Gangi, Rebekah Reedy Miller, Susan Gleason, Jennifer White, Andy Rubenstein, and Zane Aubert. By utilizing the PRT, you are the catalyst for saving plaintiffs over $30 million of federal and state taxation.”

Mr. Armand also announced Joseph Tombs as Director of Plaintiff Recovery Trusts (PRT). Mr. Armand also noted, “The contributions of Lawrence Eisenberg and Jeremy Babener for partnering on our newest settlement solution.”

Settlement and financial planners and CPAs can learn and access resources on Eastern Point’s PRT Planner Page here: https://www.easternpointtrust.com/plaintiff-recovery-trust-for-planners

About Eastern Point Trust Company
Eastern Point is a world leader in trust innovation that provides fiduciary services to individuals, courts, and institutional clients across the U.S. and internationally.

With over three decades of trustee and trust administration experience, Eastern Point provides the benefits of practical experience, industry-leading technology, and innovation. Eastern Point Trust provides services across the U.S. and internationally.

About The Plaintiff Recovery Trust
The Plaintiff Recovery Trust is the proven solution to increase the amount plaintiffs keep in taxable cases. Without it, plaintiffs are taxed on the settlement proceeds paid to their lawyers. https://www.easternpointtrust.com/plaintiff-recovery-trust

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Qualified Settlement Funds (QSFs), a 468B trust, are valuable and crucial in managing litigation settlements efficiently and effectively. "QSF", which stands for "Qualified Settlement Fund", is a fund established as a trust or account established to hold settlement proceeds from litigation. According to the definition under Treasury Regulations, it is an escrow account, trust, or fund established according to an order of or approved by a government authority to resolve or satisfy claims.

This comprehensive infographic guide explains the essential aspects of Qualified Settlement Funds:

• What is a Qualified Settlement Fund and its purpose
• Key benefits
• Eligibility requirements
• The approval process
• How to create a Qualified Settlement Fund
• Qualified Settlement Fund tax treatment and tax reporting
• Investment options
• QSF administration process
• Qualified Settlement Fund Administrator role and responsibilities
• Procedures for making distributions
• Compliance and regulatory matters
• Complex cases
• Minor's Settlements

The guide provides valuable insights, tips, and rules of thumb for legal professionals, claimants, and other stakeholders about how a QSF account benefits the settlement process. A QSF offers many advantages, including immediate tax deduction for defendants, tax deferral for claimants, and efficient management of settlement proceeds. QSFs are commonly used in class action lawsuits, mass tort litigation, and cases with multiple claimants, but can also provide benefits in single claimant cases.

Setting up a QSF involves petitioning a government authority and appointing a QSF Administrator to oversee the fund. The QSF Administrator, often a platform like QSF 360, is responsible for obtaining an EIN, handling tax reporting, overseeing QSF administration, and making distributions to claimants. Online QSF portals streamline the Qualified Settlement Fund administration process.

Partnering with an experienced QSF Administrator is essential. Services like QSF 360 from specialize in QSFs for both large and small cases and can help ensure compliance with IRC § 1.468B-1 and other regulations.

In summary, Qualified Settlement Funds are a powerful tool for managing settlement proceeds. With proper planning and administration, QSFs provide significant tax benefits, enable efficient distribution of litigation proceeds, and help bring litigation closure. Understanding what is QSF and how to leverage QSFs is invaluable for any legal professional involved in today's settlements.