Attorney Fee Structures
We are hearing from more and more attorneys asking about the tax-deferred advantages of structuring attorney fees. This will answer some basic questions about structuring attorney fees.
1. Does the Claimant have to structure a portion of their settlement before the attorney fee can be structured? No. The Claimant can take cash and the attorney fee can still be structured on a stand alone basis.
2. How does fee structuring work? Structuring an attorney fee is just like structuring a Claimant’s settlement. The same rules and tax principles must be followed in order to protect the tax benefits of any fee structure. One of the most important rules is NOT to take receipt of the settlement proceeds intended to be structured. If you take receipt, whether actual (in your trust account) or constructive (bad or poorly drafted documents), of the portion of the settlement intended for structuring, your ability to structure your attorney fee on a tax-deferred basis is undermined. A key concept to remember is that regardless of the nature (taxable or tax-exempt) of the underlying settlement, attorney fees are structured on a tax-deferred basis; not tax-exempt.
Let us take a hypothetical example. You are about to settle a case for $300,000. Your fee would be $100,000. You could take the fee, pay taxes on it and then do what you want with the remainder, which may be about $60,000. Conversely, you could structure the full $100,000 to generate income in the future. By structuring your attorney fee you are using money that would have normally been paid away for taxes to generate further appreciation for you.
3. Why structure my attorney fee in a low interest rate environment? Fee structures are not suitable for every attorney. Whether a fee structure is appropriate for you will depend on variety of factors, including your age, health, risk tolerance, retirement goals, tax bracket as well as your current and long-term needs. However, structuring you attorney fees could provide beneficial tax relief as well as secure and stable tax deferred income up to, and including, your lifetime.
Consider the following circumstances: It is November and you are about to settle a large case, but the attorney fee from that case will either push you into the next tax bracket or be taxed at the highest possible rate. Why not structure that fee to payout over the next couple of years or even to start paying out at your retirement age? Even if the rate of return is nominal, after factoring in the tax-deferred savings of structuring a fee, it may be hard to beat.
**You can now leverage your Attorney Fee Structure. We have located a bank who will lend on fee structures and allow you to structure now AND invest now as well.
Learn More >> Leverage Your Attorney Fee Structures
4. Can I only structure contingent fees from a personal physical injury or wrongful death settlement? No. You can structure contingent fees from nearly any type of settlement. Companies have developed innovative products to expand the availability of attorney fee structures.
5. What do I need to do to prepare for structuring my attorney fees? Get prepared in advance by contacting your plaintiff loyal structured settlement planner. There are some basic foundational requirements you should be aware of before you structure your attorney fees.
Call us, we can help you prepare for this great opportunity.
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