A Qualified Settlement Fund (QSF) is a special court ordered “safe harbor” for  funds from one or more settling defendants that allows the defendant to take a complete tax deduction for the entire amount of the settlement monies prior to all of the claims for the monies being determined. The QSF then becomes a new tax-paying entity that enters into Separate Settlement Agreements (including Structured Settlement Agreements) with those that have claims on the monies.  IRC 468b, which authorized a QSF, specifically allows an IRC 121  “Qualified Assignment” of the QSF’s obligations to make periodic payments under a Structured Settlement.

The settling defendant and its carrier receive a full cash release. A defendant's carrier does not have an obligation to offer a Structured Settlement to an injured claimant; but it does have an obligation to obtain a release for its policyholder's liability.  Therefore, no defendant's carrier should have reason to object to the establishment of a QSF.  The administrator of the QSF is usually the representative of the claims to the monies paid into the QSF.  This is an advantage to the claimants as it gives them complete control in the choice of the funding vehicles used in any subsequent Structured Settlement or other investment and unlimited time to decide on use of the funds.  The QSF also grows through investment by the fiduciary of the fund while waiting for all factors to be determined prior to final distribution of the funds.