A qualified settlement fund (QSF) is a trust or other account that holds proceeds from a lawsuit settlement in escrow. The types of litigation one can use this for include mass tort, personal injury, or breach of contract, for example. QSFs help the settlement administrator stay organized and give the attorney more time to counsel their client through the settlement process.
QSFs remove the defendant(s) and their insurers from the post-settlement decision-making process. The defendant(s) have the option to pay cash into the fund in exchange for a general release. A general release also allows attorneys to collect their fees immediately, thus speeding up their cash flow process. Learn how to set up a QSF below.
How to set up a QSF
When setting up a QSF, the law firm of record must establish an escrow or another form of trust agreement with a professional fund administrator. This agreement paves the way for those involved to understand their roles in the process. Note that most professional administrators obtain court approval as part of their general services.
Next, defendants need to make sure they can show they have a qualified, and thus deductible, payment. They also must demonstrate a release of all the claims brought against them and any other claim that might arise from the creation of the QSF.
Defendants deposit settlement monies into the QSF account (at a bank referenced in the escrow/trust agreement). An independent trustee or a professional administrator then works with the plaintiff(s) to determine the most beneficial settlement plan.
Once they establish a QSF, the trustee or professional administrator can carefully design settlement plans for the plaintiff(s). Whether it’s a Medicare set aside trust account, special needs trust, personalized structured settlement, or any other settlement plan, the plaintiff(s) and their counsel have more time to assess the available options. This allows them to make the best-individualized decision. To that point, a QSF presents various options to counsel for how and when he or she might like to receive their attorney fee(s).