Attorney Fee Deferral Strategies
Plaintiff attorneys have the unique ability to place all or a portion of their contingency fees in several types of tax-deferred vehicles. By electing to defer fees, an attorney also defers the tax obligation until the year(s) in which payments are received.
Attorneys can choose to defer fees regardless of whether the claimant structures his or her own settlement proceeds; however, the ability to defer fees must be included in the settlement agreement.
Fixed Annuity Attorney Fee Structures
To facilitate an attorney fee structure using a fixed income annuity, the defendant (or insurance company) directs the attorney’s fees to a third-party assignment company. The assignment company then uses the fees to purchase a fixed annuity that provides the attorney with payments based on a pre-determined schedule. Payments are eligible to be electronically deposited into the attorney’s bank account and will be reported on a 1099-MISC as income only during the years in which the payments are received.
Structured attorney fees do not have any ongoing administrative or maintenance fees, so more money stays in the attorney’s pocket. Payment schedules can be arranged for monthly, quarterly, semi-annually, annually, or in a series of future lump sums and can begin immediately or on a future date¹.
Fixed Index Annuity Options
Attorneys may select from several structured settlement annuity options, in addition to the fixed annuity. Minimums for investment may vary depending on the product, and non-fixed annuity options may include setup and/or annual administration costs. However, non-fixed annuity options may offer the chance for greater growth than the fixed annuity while still providing guaranteed income.
Fee Structure Plus®: Fee Structure Plus® allows an attorney to direct a contingency fee, tax-deferred, into a market-related investment portfolio. The funds can be managed by a respected financial institution or by a financial advisor of the attorney’s choosing. Payments will be received on a periodic payment schedule, with taxes due only on funds received during a given tax year.
Treasury Funded Structured Settlement™: A Treasury Funded Structured Settlement™ (TFSS) is backed by the United States government and uses U.S. Treasury Bonds as the underlying investment. Attorneys can choose to place all or a portion of their contingency fees in a TFSS for a safe, reliable fee deferral option.
For more information about Attorney Fee Deferrals, contact Milner Settlements today.
¹ Payment start date restrictions may vary by issuing insurance company.