Structured settlement annuities typically offer a moderate rate of return that is fixed and guaranteed, meaning that even in the event of a decrease in the market, the scheduled payments will stay the same. For those who want a potentially higher rate of return, a market-based structured settlement could be a better option. You can also merge various options, depending on your financial intentions.

Attorney fee deferrals are a type of arrangement where the attorney agrees to defer a portion of their contingent fee until a later date. This type of arrangement is often used in physical injury and workers' compensation cases, where the settlement funds are not received until after the case has been resolved. However, any contingent fee is eligible to be deferred, no matter the case type.

Here is how attorney fee deferrals typically work:

1. Agreement: The attorney agrees on the terms of the fee deferral, including the amount to be deferred, the payment schedule, and the investment vehicle.

2. There are no taxes on the amount deferred.

3. We work on the settlement documents and arrange for the defendant or the insurer to pay the deferred fee to the chosen assignment company.

4. Interest: The deferred fee may accrue interest over time. The benefit to the attorney is the pre-tax growth of his or her deferred fee.

Attorney fee deferrals can be a useful way for attorneys to manage their cash flow, as deferrals pay attorneys over time, rather than all at once. We can provide guidance and help ensure that the fee deferral is structured in a way that meets the attorney’s long-term financial needs and goals.

Unfortunately, you are no longer eligible for fee deferral once you have received your fees, whether personally or into your client trust account. Fee deferrals must be established as part of the settlement agreement, with the defendant or insurer entering into an Assignment and paying the agreed-upon deferral amount directly to the assignment company.

Here are some general principles that apply:

1. Income Tax: The deferred attorney fee will be treated as taxable income in the year in which it is received, and will be subject to federal and state income taxes.

2. Interest Income: Any interest earned on the deferred fee is also be subject to income tax.

3. Reporting Requirements: The attorney would report fees paid in future years on those years’ tax returns.

No. Our commission on the sale of the annuity is already baked into the quote/contract. There are no ongoing fees or costs for a fee deferral annuity.

Yes, an attorney can still defer their fees even if their client does not decide to proceed with any structured settlement.

Attorney fee deferral payments can be made to either the law firm or an individual attorney.

If the payments are made to the law firm, the firm may distribute the payments to individual attorneys as specified in the firm's partnership agreement or operating agreement.

If the payments are made to an individual attorney, the attorney may choose to reinvest the payments into their law firm, or use the payments for their personal expenses.

Regardless of who the payments are made to, it is important to carefully consider the terms of the fee deferral agreement, and to ensure that the agreement meets the needs and goals of both parties.

The practice of structuring attorney fees has been a popular option for over three decades, with its foundation being the Tax Court decision in Childs v. Commissioner. The three lawyers involved reported their annuity payments as they received them over time.

However, the IRS contested their tax returns, claiming that each payment stream should be considered as complete income in the year the first payment was received. The attorneys took the matter to the Tax Court, which ruled in their favor. This ruling has established a level of confidence in attorney fee structures.

In late 2022, the IRS issued a GLAM tht seemingly targeted attorney fee deferrals. Many legal experts concluded that the GLAM was aimed at deferred compensation products marketed to attorneys rather than deferred contingent fees using the assignment process.

Either/Both!

A deferring attorney can elect to have his or her periodic payments begin immediately or defer them to future years – or do both! There are no time limits, age restrictions, amounts-payable restrictions or other encumbrances like other retirement or deferred compensation plans. The ability to defer contingent fees is truly a unique opportunity for attorneys!