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For trial lawyers, any strategy is worth investigating if it offers better financial organization and planning at settlement time. We’ve worked with hundreds of law firms nationwide on opening qualified settlement funds, because QSFs do just that. By holding settlement proceeds past the end of a lawsuit, plaintiffs can ensure they comply with government benefits and strategize for the long-term. Meanwhile, attorneys and law firms can explore how fee deferral would be most advantageous before their contingency fee(s) are constructively received.

Some attorneys may think of a traditional qualified settlement fund as the individually ordered type that contains proceeds from one legal action. However, the most streamlined method of utilizing a qualified settlement fund is to open a firmwide QSF, which holds proceeds from several (or all) of the firm’s cases. Also called a pooled qualified settlement fund, this type of trust can be created with a single court order and remains open for the firm to use now and in the future, eliminating the need to create a new QSF before every single settlement.

How Law Firms Benefit from Pooled QSFs

Instead of taking the time to form a QSF as settlement approaches, an attorney can add a claim to their firm’s pooled QSF quickly and then reap the benefits of controlling when and how their fee arrives. Tax attorneys Robert W. Wood and Alex Brown of Wood LLP, who took a closer look at pooled QSFs, explain that: “Preestablished QSFs can streamline case settlements and avoid a midnight scramble when an unanticipated settlement needs to be grabbed and quickly documented. Perhaps they are the plaintiff lawyer’s analog to ‘Don’t leave home without it.’”

In addition to offering the benefit of more time after settlement, pooled qualified settlement funds allow law firms to:

  • Plan when and how revenue will come into the firm throughout the year.
  • Plan for incoming contingency fees and save on taxes through attorney fee deferral.
  • Afford plaintiffs extra time to financially plan for their settlement funds.
  • Alleviate defendant participation and relieve the pressure to resolve lien negotiations while still in the financial planning phase of settlement.
  • Reduce litigation expenses.

Complying with 468B Regulations

One of the biggest questions is whether a pooled QSF can qualify as a QSF under Reg. section 1.468B-1. However, “if the pooled QSF is set up like most QSFs, we think we can assume that it does qualify on most of the fundamentals,” Wood and Brown note. “No one seriously contests that a pooled QSF can be a trust under state law, and no one seriously contests that a pooled QSF cannot be formed under the supervision of a court or other qualifying government entity.”

It is necessary that all cases in a law firm’s pooled QSF rise from a single event or related series of events, such as sex abuse cases, or defective medical device cases. “Aim to strive for commonality of events, topics, parties, or counsel. You need not have all of these, but the more boxes you can check, the less you may worry.”

Law firms can also help ensure compliance through their joinder agreement, which is how claims are formally added to a pooled QSF. The agreement can include language that satisfies the requirements for the QSF under the 468B regulations. So, getting court-approved joinder agreements every time should eliminate most if not all concerns.

Getting Started with a Pooled Qualified Settlement Fund

Pooled QSFs offer big benefits to law firms, and usage concerns can be alleviated by sticking with the best practices outlined in Wood and Brown’s article, which we highly recommend reading in its entirety.

At Milestone, we serve as QSF administrator to law firms nationwide and can answer your questions. Give us a call today to speak with an expert.

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