What is a Conditional QSF?
A Conditional Qualified Settlement Fund (or “Conditional QSF”) allows defendants to fund a QSF trust for specific future needs, such as medical monitoring, medical treatments, services, testing, rehabilitation, or remediation. Unlike traditional QSFs, Eastern Point’s proprietary Conditional QSF includes provisions for returning excess funds to the defendant at the trustee's discretion, once designated conditions or goals are satisfied. This structure promotes more rapid settlement, accountability, minimizes waste, and aligns incentives for the timely resolution of needs.
Key features:
Conditional Funding: Payments are tied to verifiable milestones, goals or outcomes.
Discretionary Return: Unused funds can be refunded to the defendant, reducing overall settlement costs.
Tax Advantages: As a QSF under IRC Section 468B, it offers immediate tax deductions for the defendant while deferring taxation for the plaintiff until distributions are made.
Real-World Example: Trip and Fall Accident in a City
Consider the actual scenario where an individual is injured in a trip and fall accident on city property. The settlement establishes a Conditional QSF funded by the city to cover rehabilitation services for the injured party.
The QSF is initially funded by the city defendant with an amount sufficient for anticipated rehabilitation needs.
As the injured person progresses through treatment, funds are disbursed only for verified services.
Once rehabilitation goals are accomplished (e.g., full mobility restored, confirmed by medical reports), the trustee evaluates remaining funds and retuned the unused funds to the city defendant.
Excess amounts are returned to the city defendant, ensuring the municipality isn't overpaying and can redirect savings to public services.
This approach not only supports the plaintiff's recovery but also protects the defendant's financial interests
Real World Example: A QSF was funded by a local educational system to fund accessibility accommodations for a student, i.e. ensuring funds were available to the student for certain technology assistive devices etc. for the duration of the student’s time in that public school setting. Following graduation, the unused funds reverted to the school.
Pro Tip: A Conditional QSF can be used alone or in conjunction with a lump-sum settlement payment or structure.
