Qualified Settlement Funds

    Qualified settlement funds (or Section 468B trusts) have blossomed into an important dispute resolution vehicle possessing remarkable tax efficiency. The benefits of a QSF can be of staggering proportions. They are specifically authorized by Section 468B of the Internal Revenue Code and Treasury Regulations that lay out necessary requirements and procedures. In fact, the IRS has expanded on the statute, morphing the more sanguine "designated settlement fund" into the broader and more flexible QSF.

    QSFs receive special tax treatment, generally obviating the constructive receipt and economic benefit tax doctrines.They do so for an enormously valuable policy reason approved by Congress and the IRS: dispute resolution. Monies can be transferred to a QSF and are then deductible by the settling defendant(s), yet will not constitute income to the payees until the QSF distributes them.

    QSFs conserve assets; enable the resolution of difficult and sensitive issues among co-plaintiffs; facilitate the resolution of battles among competing co-counsel; and facilitate structured settlements that can provide a fiscally conservative payout of monies to claimants. Such fiscal conservation can assist in their healthcare and life-planning, and can serve a spendthrift and asset protection function as well.

    Wood LLP works with plaintiffs and their counsel nationwide on the formation and architecture of QSFs.We are also engaged by defendants to assist in their own tax and litigation management planning with QSFs.In 2009, Robert W. Wood completed a massive legal treatise entitled Qualified Settlement Funds and Section 468B, the first legal book available in this critical expanding field.He is considered a national authority. A former Commissioner of the IRS said "Wood explains these subjects in a detailed by understandable manner . . . his new treatise is a must." (Gibbs, Tax Notes, April 6, 2009, p. 97.)

    We have formed, advised, administered or liquidated qualified settlement funds nationwide (in class actions as well as in non-class cases) in the following fields:

    • Pre-litigation environmental and toxics cases;

    • Products liability and consumer products cases;

    • Securities and other investor fraud claims;

    • Wrongful conviction and wrongful imprisonment litigation;

    • Antitrust law and compliance;

    • Nuclear waste litigation;

    • Airline crash disaster litigation; and

    • Mineral royalty litigation.

    Robert Wood regularly speaks nationally to accountant, attorney and business groups, and he has published hundreds of articles on the tax treatment of litigation payments for legal, accounting, tax and employment publications.

    For articles we have written about QSFs, see:

    References available on request.