Trial lawyers: A qualified settlement fund (QSF) is a sophisticated planning tool designed to give you and your clients time to make thoughtful financial decisions around settlement. Just as depositions are integral in preparation for trial, think of QSFs as being equally integral in preparation for settlement.
Benefits of a qualified settlement fund include:
- Time, and time value of money
- Consideration of options for both clients (such as specialized trusts, wealth management options, and investment-backed structures) and attorneys (such as attorney fee deferral)
- Release of defendants from liability
- Removal of the burden of disbursement-making
There are three types of qualified settlement funds. The first is an individually-ordered QSF. This allows payment for a settlement to trigger a defendant’s release, thus expediting administration of funds for that particular case — whether it involves a single claimant or multiple claimants. Another type is a firm-wide QSF.Your law firm can have its own qualified settlement fund, established by a single court order, for the entire firm and all its cases. As the firm settles claims, all settlements can be paid into the firm-level QSF.
Lastly, Milestone has established a national master qualified settlement fund. Especially given the current state of COVID-19 affairs, attorneys who want to settle into a QSF at this time can join this national master QSF without an additional court order.
The timeline for utilizing a QSF is as follows:
- Prior to settlement, the plan should include a QSF and be a term of settlement.
- The QSF is then established by the fund administrator (OR a joinder and escrow agreement executed such that a case will be joined to a pre-existing national master QSF).
- Defendant(s) pay a gross settlement amount into the QSF.
- The fund administrator coordinates disbursements with law firm(s) and obtains signed distribution instructions.
- All necessary documentation related to disbursements is collected.
- Tax documents are prepared/provided by the fund administrator as needed.
- 1099 forms are prepared and issued for attorneys’ disbursements.
- Monthly financial accounting and statements are prepared/provided for counsel.
- Once all disbursements are made, all activities related to the account closure with the bank are handled by the fund administrator.
- Final letter is provided, confirming closeout of the QSF.
Throughout the process, your fund administrator should provide transparency and coordination of disbursements, in addition to acting as a liaison between you and your client. Milestone works with trial lawyers and their clients to establish a qualified settlement fund, and our team of experts can help administer a qualified settlement fund as well. With us, you can also expect:
- Little to no upfront cost
- A single vehicle where monies are secured (FDIC-insured banks)
- Collaboration with resolution specialists, special masters, and vendors
- Performance of all activities related to bank account closeout and final confirmation
To negotiate settlement to a qualified settlement fund, all QSFs must be obtained through a court order. In addition, the agreement to settle should include the terms of the fund as well as a W9 and release of the defendants. The payee of the settlement must be the QSF.
If you are interested in establishing a qualified settlement fund or have further questions, we welcome you to contact Milestone to learn more. There is no obligation when you call.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).