Tax
Nov. 25, 2025
IRS rules give lawyers leeway on qualified settlement fund setup
The QSF regulations give claimants and their counsel broad flexibility -- there's no requirement to use a trust, but rather the opportunity to do so when it suits the situation.
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
A qualified settlement fund is commonly interposed between plaintiffs and defendants when a lawsuit is settled. Funds are sent to the QSF instead of to the lawyer's trust account. QSFs were put into the tax law in 1993, ostensibly so defendants could deduct settlement payments immediately upon payment to the QSF, even though it might take years for disputes among plaintiffs and lawyers to be resolved and amounts to be paid out. The normal tax rule is that a defendant can deduct a payme...
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