A QSF is a temporary trust established to receive settlement proceeds from a defendant or group of defendants. Its primary purpose is to allocate the monies deposited into it amongst various claimants and disburse the funds based upon agreement of the parties or court order, if required. Upon disbursing all of the monies the QSF ceases to exist.
There are many reasons to use a QSF in a complicated settlement. Most importantly they are quite easy to establish. A QSF may hold benefits for all parties as it relates to taxes, timing of income and settlement planning needs. A tax-free structured settlement and a tax-deferred attorney fee structure can be properly created through the use of a QSF. The parties can influence timing of income through the use of a QSF. QSF claimants are typically not taxed on funds in the QSF until those funds are distributed (assuming the damages are taxable). A QSF also gives some extra time and flexibility for claimants to make decisions related to settlement planning issues such as special needs trusts and Medicare Set Asides along with structured settlements.