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 they allow them to earn their attorney's fees 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.

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

The terms of the fee deferral agreement, including the payment amount and schedule can be structured to meet the specific needs and goals of the attorney. The agreement can also be funded through a range of financial products, including annuities, investment accounts, or other vehicles.

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 the attorney.

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.

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

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 and client may be required to report the deferred fee on their tax returns, and to provide documentation of the deferral agreement to the tax authorities.

It is important to understand the tax consequences of attorney fee deferral, and to carefully consider the impact of taxes on the attorney or law firm.

The practice of structuring attorney fees has been a common 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.

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 with other retirement or deferred compensation plans. The ability to defer contingent fees is truly a unique opportunity for attorneys!

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.

Structured settlement annuities generally offer a moderate rate of return that is fixed and assured, 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-oriented structured settlement could be a better option. You can also merge various options, depending on your financial intentions.

No, after the payments are received, you have the freedom to use the money as you desire. For example, you might opt to set up periodic payments when your children are attending college. Though, if you are utilizing a conventional college investment scheme such as a 529 plan, the money must be spent on educational expenses approved by the IRS.

Alternatively, you can also choose to allocate part of the deferred fees to college and keep the rest for other objectives. Additionally, you may decide to use the deferred fees to finance your retirement plan. While the IRS has limits on traditional retirement plan contributions, there are no limits for attorney fee deferrals.

No, fixed annuities are not the only option for deferred attorney fees. While they are still the industry standard, other options for deferring attorney fees include:

1. Variable Annuities: This type of annuity allows the holder to invest in a range of underlying investments, such as stocks or bonds. The payment amount can vary depending on the performance of the underlying investments.

2. Structured Settlements: This type of settlement involves a series of periodic payments, rather than a lump sum. The payment amount and schedule can be customized to meet the specific needs and goals of the client.

3. Trusts: A trust can be established to hold and manage the attorney fee deferral payments. The trust can provide tax benefits, and can be structured to meet the specific needs and goals of the client.

4. Investment Accounts: The attorney fee deferral payments can be invested in a range of financial products, including stocks, bonds, mutual funds, and other types of investment accounts.

Each option has its own unique features, advantages, and disadvantages, and it is important to carefully consider the specific needs and goals of the client when choosing an option for deferring attorney fees.

We can provide guidance and help ensure that the best option is chosen to meet your long-term financial needs and goals.