Most structured settlements involve use of a Qualified Settlement Funds or QSFs as defined in US Treas. Reg. 8 1.468B-1 (c). QSFs are used to ensure that the annuities used to fund the periodic payments to a claimant are and will remain safe, secure and viable.

Congress’ intent in enacting the section 130 (1988 statutory amendment) and the policy underlying Rev. Proc. 93-34, 1993-2 C.B. 470, was to provide procedures under which qualified settlement funds (QSF) can be used to facilitate a qualified assignment under section 130.

However, there have been a small number of structured settlements that use a Designated Settlement Fund as defined in section 468B(d)(2) of the Code (DSF), rather than a QSF.

The term Designated Settlement Fund or DSF means any fund which is (A) established pursuant to a court order and which extinguishes completely the taxpayer’s tort liability with respect to claims described in subparagraph (D); (B) with respect to which no amounts may be transferred other than in the form of qualified payments; (C) which is administered by persons a majority of whom are independent of the taxpayer; (D) which is established for the principal purpose of resolving and satisfying present and future claims against the taxpayer (or any related person or formerly related person) arising out of personal injury, death, or property damage; (E) under the terms of which the taxpayer (or any related person) may not hold any beneficial interest in the income or corpus of the fund, and (F) with respect to which an election is made under this section by the taxpayer.

The term qualified assignment usually refers to an assignment of a liability to make periodic payments or structured settlements.

Simply put, it refers to the process of a defendant (or its insurer) transferring the obligation to make future payments (and hence the term "qualified assignment") to a financially secure institution, often a life insurance company. For the Injured parties, the assignment (usually) provides them with strong financial security, and for the defendants, it allows them close the case for good.

Upon successful completion of a "Qualified Assignment," the defendant gets relieved of all his/her responsibility for the further payments, as well as that of the administration and record-keeping responsibilities. The company that the said responsibility gets assigned to takes over those responsibilities and usually offers better financial security for the claimant.

Most Structured Settlement awards (periodic payments) involve some form of compensatory damages. Such awards may arise from a litigation, an agreement for an out-of-court settlement, an award involving compensation under any workmen's compensation act, or a compensatory or punitive damage award for a personal injury or sickness caused by occupational hazards.