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April 19, 2016

Structured Attorney Fees Best Practices to Avoid Unexpected Timing of Income

by John Darer® CLU ChFC MSSC RSP CLTC

When structuring attorney fees or taxable damages in the second half of the year, it is common to push the first payment out until January of the following year so that it is not received in the same tax year as the settlement.  An attorney who is already having a great income year can use this strategy to delay receipt (and thereby some of the taxes) on the fee. In some cases this may result in a lower tax bracket.

Timing is everything
Timing is everything when it comes to structured attorney fees and structuring taxable damages

 Care should be taken to avoid the tax planning strategy backfiring by not using a January 1 payment start date for structured attorney fee payments.  Many structured settlement annuity issuers automatically send out payments by check in advance, to assure they arrive on time. One company is known to send out payments as much as 10 days in advance! 

Even if you have direct deposit, you're not completely out of the woods with a January 1 payment date.  The annuity issuer has a contractual obligation to make payments on time.  This applies not just to your January 1 payments, but to likely to tens of thousands of other annuitants and policyholders with the same payment due date.  In 2016, January 1st was on a Friday and the next business day was Monday January 4, 2016.  If the insurer waited to pay the next business day,  payments for thousands of people would have been 3 days late.  Therein lies their dilemma.  So a number of insurers set their computerized payment systems to release direct deposit payments early so that they would be in good faith and timely.

It is possible that you will also receive a 1099 for that payment, in the year of settlement.  What a way to mess up your tax planning if you're not careful.

The same issue goes when using a structured settlement for taxable damages.
 
How to Avoid Getting Hit With Unexpected Income in the Wrong Tax Year  When Structuring Attorney Fees

  • Select a first payment date no earlier than January 10th, if getting paid by check
  • Select a first payment date a few business days into January, if being paid by direct deposit.

Posted at 12:14 PM in Albany New York Structured Settlements, Boca Raton Florida Structured Settlements, Bowling Green Kentucky Structured Settlements, Bridgeport Structured Settlements, Bronx New York Structured Settlements, Brooklyn New York Structured Settlements, Buffalo New York Structured Settlements, Chicago Illinois Structured Settlements, Detroit Michigan Structured Settlements, Garden City Structured Settlements, Greenwich Structured Settlements, Hartford CT Structured Settlements, Jacksonville Florida Structured Settlements, Long Island NY Structured Settlements, Los Angeles CA Structured Settlements, Maryland Structured Settlements, Mineola Structured Settlements, Missouri Structured Settlements, NC Structured Settlements, New Jersey Structured Settlements, New York Personal Injury, New York Settlement Planning, New York Structured Settlement Practice, New York Structured Settlements, Newark NJ Structured Settlements, Newburgh Structured Settlements, News About Structured Settlements, NJ Structured Settlements, NYC Structured Settlements, Orange County Structured Settlements, Philadelphia PA Structured Settlements, Rhode Island Structured Settlements, Rochester Structured Settlements, Sacramento Structured Settlements, San Francisco Structured Settlements, Santa Monica Structured Settlements, Sarasota Structured Settlements, South Carolina Structured Settlements, St. Louis Structured Settlements, Structured Settlement Help, Structured Settlement Payments, Structured Settlements, Structured Settlements in Ithaca New York area, Suffolk County Structured Settlements, Syracuse Structured Settlements, Taxes and Structured Settlements, VA Structured Settlements, Washington Structured Settlements, West Virginia Structured Settlements, White Plains Structured Settlements |

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Guide to Structured Settlements 2024

  • What is a Structured Settlement? What You Need to Know
    Structured settlements and what you need to know about them including a helpful introductory video featuring A.M. Best Client Recommended Structured Settlement Expert and Registered Settlement Planner John Darer of 4structures.com LLC
  • How Do Structured Settlements Work? How Structured Settlements Work
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  • Rated Ages and Structured Settlement Cost
    Rated Ages for Structured Settlement Annuities present advantages to all parties. Shift the mortality risk to a life insurance company whose business it it is to assess mortality risk to price its life insurance and annuities. Rated ages boost your structured settlement annuity benefit per premium dollar, or your yield on lifetime payments. Rated ages help to reduce the cost of funding a Medicare Set Aside arrangement where a Structured MSA, is being used { WCMSA LMSA or NFMSA].
  • Top Structured Settlement Annuity Companies 2024
    Which life insurance companies issue structured settlement annuities in 2024? A list of current structured annuity issuers, the location of their home offices and their financial ratings from A.M. Best, Moodys, Fitch, Standard & Poors and/or other Tier1 NAIC ratings, with links to their websites and other useful information. Last updated June 14, 2024
  • Treasury Funded Structured Settlements
    Treasury Funded Structured Settlements are a settlement option for the most conservative using the OTHER permissible qualified funding asset under IRC 130(d), United States Treasury Bonds in addition to, or instead of, structured settlement annuities. Treasury Funded Structured Settlements can also be used to fund installment sales, also known as structured sales and other non qualified structured settlements.
  • Compare Structured Settlement IRR to Other Settlement Alternatives
    Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
  • Structured Settlement Payments | Types of Structured Settlements 2024
    Ways You Can Structure Your Settlement Payments in 2024. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
  • Structured Attorney Fees for Tax Deferral for Attorney Contingency Fees
    Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as capped or uncapped index linked structured settlement annuities where payments are adjusted based on upside changes in the S&P 500 or another index, Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team in 2024.
  • Structured Settlement Annuity Company Customer Service Phone Numbers
    Receiving structured settlement payments from your own structured settlement or inherited structured settlement? You'll like this huge time saver. Click the title for a link to a comprehensive list of customer service telephone numbers that includes both current AND former structured settlement annuity issuers and reinsurers. If you have simple bank or beneficiary changes, or if the insurance company that issued the structured annuity has merged, sold or spun off its block of structured annuity business (e.g. Aviva, Allstate, Transamerica, AEGON, GE Capital, Liberty, CNA, Confederation Life), oran annuity issuer has changed its name and you're trying to track them down. Here you go! The list is regularly updated. Last updated May 20, 2024.
  • Structured Settlement Quote Lock-Ins | What You Need To Know
    What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
  • What Are Structured Settlement Annuities?
    Structured settlement annuities are annuities that can provide one or more customized annuity payment streams in a single contract. Read about structured settlement annuities here.
  • History of Structured Settlements
    Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
  • What Are Market Based Structured Settlements?
    Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that: 1. Can afford to take some market risk 2. Have discretionary settlement dollars. Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
  • iStructure |Uncapped Fixed Index Structured Settlement Annuity
    iStructure is an innovative game changing fixed index structured settlement annuity for plaintiffs or attorneys. with an intermediate to long term horizon
  • Structured Settlements and Longevity Risk| What Are the Odds?
    Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can include one or more customized payment streams and types.

Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
    Qualified Settlement Funds | What You Need to Know
  • Firmwide Qualified Settlement Funds Debunked
    Firmwide qualified settlement funds have been heavily promoted to trial lawyers, but have been debunked in a detailed analysis in a July 2022 legal opinion a tax partner at the law firm of Faegre Drinker Biddle & Reath, LLP. Trial lawyers and firms who have established Firmwide QSFs or coinsidering establishing a Firmwide QSF should read the analysis as part of their evaluation.

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Structured Settlement Best Practices Corner

  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
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