Structuring Attorney Fees

The next best thing to tax-free income is tax-deferred income. As plaintiff’s counsel, you are in the only profession that can take advantage of deferring your fee and spreading your taxable income over time. You are permitted to receive all or a portion of your attorney fee in the form of periodic payments. You don’t have to wait until age 59 ½ to start payments and payments are reported to the IRS in the year you receive them. Your payments are fixed and guaranteed, unaffected by future market performance. Even if your clients choose to take all of their settlement in cash, you may still accept fees in the form of periodic payments.

A plaintiff attorney who structures his/her fee is effectively able to invest “pre-tax,” locking their share of the settlement proceeds into a guaranteed obligation. You may want to structure a portion of your attorney fee to maximize your retirement benefits, to fund college and/or post-graduate education for your children, or use this as part of your overall estate planning.

This planning benefit is unique to the plaintiff and his/her attorney. For the claimant, as per IRC Section 104, the periodic payments from a structured settlement are received income tax-free for liability and workers’ compensation cases. For their attorney, the periodic payments from a structured settlement are income tax deferred, with taxes only being paid when the payments begin {Childs vs. Commissioner 103 T.C. 634 (1994)}.

Benefits to the Attorney

  • Guaranteed fixed payments
  • Tax-deferred income
  • Customized payout scenarios:
  • Low investment risk and competitive rate of return

Ferlisi Jolley Associates, Inc. can provide you with the appropriate language to include in your contingency fee agreement, referencing your ability to receive all, or a portion, of your fees in the form of periodic payments. An election should be made in writing prior to fees being earned (i.e. before the settlement documents are signed). Ideally, the attorney’s election should be made before the attorney’s precise share of the settlement is determined, and the election should be irrevocable.

Contact our office for more information on how to take advantage of this tax-deferred income.

Ferlisi Jolley Services

Personal Physical Injury or Wrongful Death

Determine the client’s financial needs, design the proper Structured Settlement plan to deliver those funds, and select the most competitive and secure life insurance companies entrusted to provide those funds.

Attorney Fee Structures – Deferred Compensation

An excellent opportunity for attorneys to take advantage of deferring current year income tax liability and creating an income stream for a secure future. This option is available even if you client accepts a cash settlement.

Medicare Set-Asides (MSAs)

Protecting Medicare’s interest as secondary payer in Worker’s Compensation and/or Third-Party Liability cases.

Qualified Settlement Funds {IRC Sec. 468(B)}

Established to resolve or satisfy one or more contested or uncontested claims — a court ordered “safe harbor” advantageous to the plaintiffs and their attorneys, giving them control in the selection of various funding vehicles available to them, including structured annuities.

Non-Qualified Annuities

Settling employment or other non-physical injury claims by providing the client the benefit of a stream of guaranteed periodic payments instead of an upfront, lump sum payment which may cost them money.

If you would like more information about how Ferlisi Jolley Associates, Inc. can help you, call us at 205.803.6200.