A "Qualified Settlement Fund" is a unique settlement planning tool. From billion-dollar mass torts to small claims with one claimant, qualified settlement funds have become an indispensable financial and tax-planning tool for settling a variety of injury and taxable damages claims.

Created by IRC Section 468B, a QSF is treated as a "party to the suit or agreement" and allows a defendant or its insurer to settle one or more claims by agreeing to pay a cash settlement into the fund. The defendant can release its liability and receive a tax deduction for the full amount paid, just as it would with any cash settlement.

A "Qualified Settlement Fund" is a unique settlement planning tool. From billion-dollar mass torts to small claims with one claimant, qualified settlement funds have become an indispensable financial and tax-planning tool for settling a variety of injury and taxable damages claims.

Created by IRC Section 468B, a QSF is treated as a "party to the suit or agreement" and allows a defendant or its insurer to settle one or more claims by agreeing to pay a cash settlement into the fund. The defendant can release its liability and receive a tax deduction for the full amount paid, just as it would with any cash settlement.

Once the money has been deposited into the fund, a settlement plan can then be created for the plaintiff without the limitations and pressure of defense involvement. The QSF can then distribute the funds within the trust according to the settlement plan -- in cash to the plaintiffs, into a Settlement Protection Trust, into a Special Needs Trust to protect government benefits, or used to buy a tax-exempt structured-settlement annuity.

A QSF provides breathing room after settlement to consider the following settlement planning issues without the defendant's involvement. A QSF allows the plaintiff to:

• Properly allocate damages among plaintiffs, lien holders, Medicaid, etc.

• Determine if a Special Needs Trust should be established to protect Medicaid or other government entitlement benefits.

• Create a sound settlement plan and evaluate the appropriateness of a structured settlement annuity, settlement protection trust, managed account, etc.

• Underwrite a lifetime structured settlement annuity, if applicable.

• A QSF also protects the plaintiff attorney from "failure to inform" and other liability stemming from financial and settlement planning advice.