Litigation

Jacksonville, FL's Upchurch Financial Services states it "has extensive experience and expertise in the use of 468(b)trusts. It states that a 468(b) trust is created by court order and is used to facilitate the creation of a qualified settlement fund (QSF)". It goes on to say  that it is a "mechanism is used to help resolve complex cases were issues such as lien resolution, allocation and investment decisions have not been finalized. It allows the plaintiff attorney to completely remove the defendant from the process as these issues are handled. In the interim, the funds from the settlement are in a trust account earning interest that will ultimately benefit the plaintiff"

Fact: A 468(b) trust is NOT used to facilitate the creation of a qualified settlement fund (QSF) or any of the things that Upchurch Financial says. Upchurch Financial Serviuces is dead wrong. You see IRC 468(b) has to do with Special rules for mining and solid waste reclamation and closing costs (more specifically the allocation for property where election not in effect for all taxable years) and states verbatim:

"If the election under subsection (a) (1) is not in effect for 1 or more taxable years in which the reserved property is disturbed (or production  occurs), items with respect to the reserve property shall be allocated to the reserve in such manner as the Secretary may prescribe by regulations".

ON THE OTHER HAND...Section 468B of the United States Internal Revenue Code (26 U.S.C. 468B) states that in general, "for purposes of section 461(h), economic performance will occur as qualified payments are made by the taxpayer to a designated settlement fund". Some people use the phrase 468B trust interchangeably with Qualified Settlement Fund or Qualified Settlement Trust.

Upchurch Financial muddles the terms "constructive receipt**" and "actual receipt" in saying "Alternatively, in these cases, if the attorney were to receive the agreed upon funds and put those in a client trust account, the client would be charged with constructive receipt. This would in turn forfeit the favored tax treatment available under a structured settlement."

Comment: The plaintiff does not forfeit the favored tax treatment available under a structured settlement BECAUSE at the point of contructive receipt he or she becomes INELIGIBLE to receive a structured settlement. To forfeit something means you had to give up something as punishment for a crime, an offense or breach of contract".

Finally,  Upchurch Financial Services claims it "can help attorneys determine early in the process whether a 468(b) trust is likely to come into play, and can help facilitate the process". That's fine if you're dealing with solid waste, but not much use for anything else.

MESSAGE: When it come to Section 468, SIZE MATTERS!

**see Treas. Reg. § 1.451-2(a)