What Is a Qualified Settlement Fund?

Previously an associate at DLA Piper in Los Angeles, Bethany Palmer Recht is now a partner at Keating Muething & Klekamp PLL. From her Cincinnati, Ohio office, Bethany Recht represents trustees of settlement trusts and qualified settlement funds (QSFs).

QSFs, also referred to as 468B trusts, are settlement tools that allow the settlement of mass tort litigation or cases involving multiple claimants. They are established pursuant to the orders of a governmental authority, resolve claims arising from an event or series of events, and segregate the assets of the fund from the transferor, in this case the defendant. Therefore, once a QSF is established, the defendant transfers assets into it and is absolved from liability while the claimants get to receive a proper settlement without going through a rigorous litigation process. 

QSFs have many advantages for both claimants and defendants. For defendants, not only are they released from all claims, but payments into the QSF are tax deductible, hence companies receive immediate tax deductions from such transfers. For claimants, the QSF allows for time to agree on favorable settlement options within themselves - the defendants have already settled their part, and it is now up to the claimants to agree on the allocation of funds. It also allows time to settle lien claims and in some cases, where there is the risk of insolvency of the defendant, the QSF ensures claims are settled before funds are no longer available.