Qualified Settlement Funds & Structured Settlements from the Settlement Planner’s Perspective Jason D. Lazarus, Esq., CSSC Settlement Planner ASNP National Conference

2 “They are not paying me enough for this”

3 Qualified Settlement Funds (QSF) Candidate Cases? Multiple claimants (allocation issues) or single claimant Multiple layers of coverage/aggregate settlement Lien Resolution Issues Public Benefit Planning Issues Structured Settlements (client or atty) contemplated All of the above....

4 Qualified Settlement Funds (QSF) Why? Solves the time crunch! PI lawyers gets fees & costs immediately Defendant pays their money and is out of the picture No “approved list” issues with the structure, but....

5 QSF Basics Trust created pursuant to Treasury Regulations – Temp Holding Tank Offers the following benefits: Allows for immediate lump sum settlement Removes defendant from the process Time to employ experts Preserves ability to structure and create SNT or MSA without violating constructive receipt Preserves ability to do attorney fee structure Drawback: Requires court approval + more cost

6 “Trust me, this is safe”

7 3 Requirements for Creation of a QSF (1) It is established pursuant to an order of... a court of law...; (1) It is established pursuant to an order of... a court of law...; (2) It is established to resolve or satisfy one or more contested or uncontested claims... and that has given rise to at least one claim asserting liability- (i) under CERCLA (ii) Arising out of a tort, breach of contact, or violation of law; or (iii) Designated by the Commissioner in a revenue ruling or revenue procedure; and (3) The fund, account, or trust is a trust under applicable state law

8 Mechanics of a QSF Settle with Defendant for Cash – Execute a cash release – Check will be made out to the QSF Petition the Court and obtain order creating QSF Funds remain in Qualified Settlement Fund, without violating constructive receipt doctrine, until: Allocation decisions are made Liens Satisfied Special Needs Trust is created Amount to be structured and the plan is decided upon QSF Terminates when all funds have been disbursed

9 Structured Settlements from a QSF Process is no different than if the defendant was involved. QSF Stands in the shoes of the defendant. When the funds are disbursed from the QSF, a release and Uniform Qualified Assignment are created. Trustee of the QSF signs release and assignment. QSF trustee cuts a check to fund the structured settlement annuity.

10 Section 130 Assigned Annuity Transaction with a QSF Plaintiff QSF (Assignor) Life Company Assignment Corporation (Assignee) Annuity Issuer Release from Liability Consideration Qualified Assignment Acceptance of Substitute Obligor Substitute Obligor Obligation to make Periodic Payments Premium Annuity Contract Periodic Payments

11 Why do a Structure in the First Place? Tax Break under 104(a)(2) Who cares? Not Subject to Trustee Fees Creditor/Judgment/Divorce & Bankruptcy Protection Take care of quantifiable needs Planning around payback? DRA? Funding specific needs outlined in LCP (tool for allocation decisions)

12 SNT/Trust Profile Spendthrift Protection Future Needs Not Certain Future Needs Event Contingent Moderate to Nil Tax Bracket Liquidity for Special Events Structure Needs Profile Spendthrift Protection Future Needs Highly Certain Moderately High or High Tax Bracket Life Contingent Payments How do you Allocate between Structure and an SNT? First step is to determine the “profile”!

13 Structured Settlements & SNT When doing a structure into an SNT, think about: Irrevocable assignment language Payment plan that makes sense for the trust Death beneficiary planning Commutation

14 Be careful in this area, you don’t want to have to put your malpractice carrier on notice or call Todd.....

15 Jason D. Lazarus, J.D., CSSC Settlement Planner Of Counsel John Staunton, P.A.