by John Darer® CLU ChFC CSSC RSP
Another affiliate of Settlement Professionals Inc. is cutting corners-this time with woefully deficient articulation of Qualified Settlement Funds (a/k/a 468B Trust), a major tool for settlement planners and their clients:
A. For such a major tool Tallahassee, FL and Atlanta, GA based Structure Wise, LLC doesn't even explain what a QSF is.
B. Structure Wise, LLC list two reasons for using a QSF (1) " The QSF is used quite often to protect and shield the plaintiff" Is that a reason, a statement of fact, or an opinion? (2) The QSF is used to ensure competitive structured settlement annuity quotes. Surely there are wider applications and more significant reasons! Also note that not all life insurers will write structured settlements out of a single claimant qualified settlement fund.
C. Structure Wise, LLC explanation of the QSF Life cycle is missing critical elements: They say:
1) The QSF Trust Agreement is submitted to the court. You just submit a trust document with out anything accompanying it, like a motion, petition, affidavit?
2) A motion is filed with the court establishing the OSF. What the heck is an OSF? Something that "Plantiffs" use to resolve cases?
3) The court approves the creation of the QSF.
4) The defendant pays the agreed upon amount into the QSF (per the Settlement Agreement and Release).
- Is there anything that goes on between #3 and #4?
- What if the QSF is a named party in litigation and the case has not yet settled?
5) Once the defendant has satisfied their obligation of payment into the QSF, it is released and the case is dismissed with prejudice.
6) The Qualified Assignment, Release and Pledge are created by the structured settlement planner inclusive of annuity costs.
- Have you ever seen the annuity cost included in a Qualified Assignment Release and Pledge?
- Doesn't the QSF administrator or trustee have to send funds to the qualified assignee to cover the annuity cost? That's not what they are saying!
- Isn't there a settlement agreement or release required too, as is set forth in the first recital paragraph of every qualified assignment release and pledge agreement?
- What about structured settlements where there is no secured creditor status offered by the assignee such as when structures are placed with New York Insurance Company, Liberty Life Assurance Company of Boston or John Hancock Life Insurance Company (USA) or John Hancock Life Insurance Company of New York. Are we supposed to believe you use a QAR&P then?
7) A motion is filed with the court to approve distribution of the QSF assets and terminating the QSF. Can you say accouting and tax return? Unless the attorneys and/or administrators do the tax returns Structure Wise, LLC inaccurately states that the only costs are administration costs and attorney fees. At least the business formalities of the QSF must be discussed.
Here's an example an articulate rendering of what a QSF is from tax lawyer Robert Wood, an author of a major legal treatise on Qualified Settlement Funds:
"QSFs receive special tax treatment, generally obviating the constructive receipt and economic benefit tax doctrines. They do so for an enormously valuable policy reason approved by Congress and the IRS: dispute resolution. Monies can be transferred to a QSF and are then deductible by the settling defendant(s), yet will not constitute income to the payees until the QSF distributes them.
QSFs conserve assets; enable the resolution of difficult and sensitive issues among co-plaintiffs; facilitate the resolution of battles among competing co-counsel; and facilitate structured settlements that can provide a fiscally conservative payout of monies to claimants. Such fiscal conservation can assist in their healthcare and life-planning, and can serve a spendthrift and asset protection function as well"
Is it to hard for people to know what they are selling? Competition like this makes my job easier, but it is embarassng for the profession.