Disability Law

Robert Wood and 468B Funds

By Patrick Hindert

Robert W. Wood has written an important new legal treatise titled "Qualified Settlement Fund and Section 468B" published by the Tax Institute and available for purchase on the Tax Institute website.

Professionals who work with QSFs will immediately recognize the value of Wood's new 468B book which:

• Promotes the benefits of QSFs;
• Maps the technical landscape;
• Addresses strategic and controversial issues.

Wood is a preeminent tax attorney whose specialties include structured settlements and settlement planning. Wood also authors "Taxation of Damage Awards and Settlements Payments" plus many valuable articles accessible from the Wood and Porter website. Wood writes and speaks frequently about QSFs including this January 5, 2009 article about single claimant issues.

Wood's new book offers the first "dedicated guidebook about QSFs". His target audience includes litigators (both plaintiff and defense lawyers), trust lawyers and tax professionals who might establish such funds, accountants and tax lawyers who might file tax returns and render tax opinions based on such funds, judges, settlement administrators, and structured settlement professionals. Special needs attorneys, settlement planners, mediators, trustees, allocators and guardians will also want to read Wood's book.

Wood's book provides significantly more QSF information and resources than any previous publication. The book includes 13 chapters with extensive footnotes, an Appendix, Forms, Glossary, Tables and Index.

Wood's compendium of QSF topics addresses: establishing, drafting, administering, transferring, distributing, and terminating QSFs; tax calculations, payments and penalties; plus extensive discussions about structured settlements. Wood's book also addresses: 468B Designated Settlement Funds (DSFs) and Non-QSF Funds.

Although his new 468B book is comprehensive, Wood acknowledges his analysis "clearly enters unchartered ground". QSF unchartered ground includes:

• Structured settlements;
• Single claimants;
• Structured attorney fees;
• Definitions for claims and claimants.

Both proponents and opponents of single claimant 468B will be disappointed (for different reasons) with Wood's conclusions about single claimant issues. Wood acknowledges the most obvious interpretation of "one or more" is "one or more". Also that, "the 'one or more' language in 468B [regulations] would seem to trump economic benefit concerns". Further, Wood states he has not found any tax authority (cases; rulings) denying QSFs for single claimants in otherwise qualifying 468B cases.

Wood also reports "some believe that Revenue Procedure 93-34 leaves unanswered the question whether the economic benefit doctrine will attribute income to a single claimant" thereby potentially disqualifying a subsequent IRC section 130 qualified assignment. Wood states "the foregoing concerns have led some practitioners to seek further guidance from the IRS". To date, according to Wood, "the answer remains unsettled".

Until the single claimant issue is addressed with rulings or case law, Wood recommends avoiding the single claimant controversy by establishing a QSF with multiple claimants. Wood raises the issue of plaintiff attorneys qualifying as separate 468B claimants and offers drafting advice to help achieve that objective. Although Wood's 468B book does not address non-tax government benefits, other commentators have argued that lien holders with claims against an injury recovery, including Medicare and Medicaid, qualify as 468B claimants.

Wood's analysis of the single claimant controversy highlights "the political and business underpinnings that surround the single claimant controversy" - or to utilize Wood's section title: the "Control and Commissions" of structured settlement annuities. Wood's discussion of how commissions help drive the single claimant controversy does not pick sides or criticize conduct. His focus is case specific as opposed to debating competing business models and policy disagreements.

Wood nonetheless makes clear his enthusiasm for the benefits and advantages of QSFs which he describes as "an important dispute resolution vehicle possessing remarkable tax efficiency". The benefits of a QSF "seem to be of staggering proportions", according to Wood, and "QSFs are definitely not tax shelters".

Wood asks his 468B readers: "how could one not do handstands over a simple trust that essentially abrogates the fundamental tax concepts of constructive receipt and economic benefit"? Settlement planning professionals who read Wood's new 468B book will agree and benefit from Wood's valuable and timely analysis.

Wood's readers (and settlement planners generally) should continue to expand Wood's strategic QSF discussion:

• Why doesn't "one or more" encompass single claimants?
• Does public policy support single claimant QSFs?
• How does 468B, as a potential settlement planning "standard", impact settlement negotiation, planning and funding?
• Why don't plaintiff attorneys and settlement planners utilize QSFs in more cases?
• How best can QSF performance metrics be defined and improved?
• How can QSFs improve and grow the structured settlement and settlement planning markets?
• What are the most important QSF educational priorities and opportunities?

Related S2KM commentary:

• Robert W. Wood
• 468B QSFs

Full post as published by Beyond Structured Settlements on February 08, 2009 (boomark / email).