The Qualified Settlement Fund concept was enacted in 1986 under Section 468B of the IRC to enable defendants to deduct amounts paid to settle multi-plaintiff lawsuits before they agreed how these amounts would be allocated. In these cases, the defendants and plaintiffs had agreed how much the defendant or their insurers would pay to settle the cases collectively, but not individually. The defendant benefited by accelerating its deduction to the date that the settlement amount paid is to the Qualified Settlement Fund (QSF) rather than when each plaintiff is paid.

Plaintiff attorneys now favor these funding agreements because they can control the settlement funds while negotiating medical liens, determining appropriate distribution amounts to their clients (in cash and in structured settlements), in Supplemental Needs Trusts to preserve Medicaid and Supplemental Security Income (SSI), structuring attorney fees, and planning for estate needs. Obtaining the money early also eliminates risk of insolvency for the defendant or its insurer and avoids the mandates and interference of the defendant in the structured settlement placement.

A QSF should be considered in tort, class action, or environmental (CERCLA) lawsuits involving one or more claimants when there has not been an allocation among the plaintiffs, and the insurance carrier is willing to tender the agreed settlement amount for a complete release from the plaintiffs. Specific language should be inserted at mediation or the court can order that defendant will pay the agreed settlement amount into a "QSF within the meaning of the 468B-l of the Treasury Regulations". This can be a simple checking account or a more complicated trust agreement using a bank trust department. The settlement proceeds remain in the QSF subject to the continuing jurisdiction of the court. After the dispute is resolved, the court approves the allocation and orders the payment of settlement proceeds.