by John Darer CLU ChFC MSSC CeFT RSP CLTC
It’s not what is said about QSFs, but what is omitted that is significant
Let’s take a closer look…
Is this accurate?
“Qualified settlement funds are established with three requirements:
- The fund must be established pursuant to a court order and is subject to continuing jurisdiction of the court (26 CFR § 1.468B(c)),
- It must be established to resolve one or more contested claims arising out of a tort, breach of contract, or violation of law, and
- The fund must be a trust under applicable state law”.
Source: Website of a heavy promoter of qualified settlement funds
Answer: Here is what 26 CFR § 1.468B(c) actually says (highlight shows what was omitted):
(c) Requirements. A fund, account, or trust satisfies the requirements of this paragraph (c) if –
(1) It is established pursuant to an order of, or is approved by, the United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law) of any of the foregoing and is subject to the continuing jurisdiction of that governmental authority;
(2) It is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability –
(i) Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (hereinafter referred to as CERCLA), as amended, 42 U.S.C. 9601 et seq.; or
(ii) Arising out of a tort, breach of contract, 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, or its assets are otherwise segregated from other assets of the transferor (and related persons).
Source: Legal Information Institute Cornell University