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October 09, 2016

Guide to Personal Injury Attorney Fee Tax Deferral Plans | Overview for Year End Tax Planning

by John Darer® CLU ChFC MSSC RSP CLTC

Personal injury trial lawyers can defer taxes on attorney fees in excess of what qualified plan limits by planning ahead and I can help.

Tax planning
Defer Taxes, Save , Grow

Trial lawyers have a variety of options for deferring their attorney fees:

I. Fixed Income Strategies [Structured Attorney Fees]

  • Structured attorney fee funded via structured settlement annuity providing fixed return  (qualified assignment)
  • Structured attorney fee funded via structured settlement annuity providing fixed return  (non qualified assignment)
  • Structured attorney fee via periodic payment reinsurance
  • Structured attorney funded with index linked structured settlement annuity from Pacific Life insurance Company or, for New York personal injury lawyers,  Pacific Life and Annuity Company with payment adjustments based in changes in the S&P 500 index with 5% cap and no downside adjustments
  • Structured attorney fee using US treasuries  (Treasury Funded Structured Settlements)

II. Market Participation Personal Injury Attorney Fee Deferral Strategies  [ Attorney Fee Deferred Compensation]

Historically, personal injury attorney fee deferral programs have been established by closely-held companies that lack the institutional backing and legal mechanisms required to assure the long-term security of the assets. They have also operated offshore and offered loans linked to deferrals, creating tax risks. The personal injury attorney tax deferred compensation solution that we offer through our partner, addresses these concerns.

  • Large, independent institutions assure accounts are accurate and managed appropriately. Deferred fees held at BNY Mellon, acting as trustee, and tracked by  The Newport Group, the country’s largest administrator of tax-deferred compensation for Fortune 500 executives, with over $75 billion in deferred compensation plans under under management.  Attorneys enjoy 24/7/365 monitoring of values in their attorney fee deferred compensation account.
  • “Single-purpose entity” status prohibits unrelated activities that could impact assets
  • Onshore domicile and bona fide loans eliminate aforementioned tax risks

Benefits of Attorney Fee Deferred Compensation

  • Reduce taxes. Enhanced Wealth Accumulation via compounding on a pre-tax, tax-deferred basis
  • Improved investment Options: Participation in U.S. and international equity and fixed income markets via investments in low-cost ETFs. Can be used as  a diversification strategy if you already have a substantial amount in fixed structured attorney fees.
  • Flexibility of Payments: 5-year rolling income stream. Unlike traditional structured attorney fees, attorney fee deferred compensation payments can be postponed, as provided for in IRC 409A(a)(4)(C), as long as an election is made at least 12 months in advance and the postponement is for at least 5 years. For example, on a payment due in at least 12 months.  You could elect at least 12 months in advance to defer 50% of that for another 5 years.  Just like Fortune 500 executives deferring their compensation, personal injury lawyers can exercise greater control over the timing of income and resulting taxation
  • A bona fide lending facility to meet near-term cash needs at competitive rates
  • Fund a retention plan for key associates and employees, mitigating the risk of important people leaving the law firm,  on a more tax favorable basis than paying the bonus in cash or making the bonus deferred without deferring attorney fees.
To avoid constructive receipt and current taxation the law firm or attorney should make an irrevocable agreement to defer specified fees before there is a legal entitlement to a fee that is currently payable.
 
If you would like to have a more comprehensive discussion of your attorney fee deferral options  please contact John Darer at 888-325-8640
 
Helpful Reference
 
Deferred Compensation | Structured Attorney Fee Alternative for Trial Lawyers Talking Settlement™, featuring John Darer and Leif Lundberg  August 2016
 
Structuring Legal Fees Without Annuities: Offspring of Childs, Vol. 148, No. 3, Tax Notes (July 20, 2015), p. 341.
 

Posted at 03:08 PM in Albany New York Structured Settlements, Attorney Financial Planning, Boca Raton Florida Structured Settlements, Boston 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, CT Structured Settlements, Dallas Fort Worth TX Structured Settlements, Detroit Michigan Structured Settlements, Hartford CT Structured Settlements, Kings County Structured Settlements, London Structured Settlements, Missouri Structured Settlements, New Haven CT Structured Settlements, New Jersey Structured Settlements, New Orleans Louisiana Structured Settlements, New York City Structured Settlements, New York Personal Injury, New York Structured Settlements, Newark NJ Structured Settlements, Newburgh Structured Settlements, NH structured settlements, NJ Structured Settlements, NOLHGA, NYC Structured Settlements, Philadelphia PA Structured Settlements, Providence Rhode Island Structured Settlements, Rhode Island Structured Settlements, Rochester Structured Settlements, Sacramento Structured Settlements, San Diego Structured Settlements, San Francisco Structured Settlements, Stamford Structured Settlements, Staten Island Structured Settlements, Structured Attorney Fees, Structured Settlement Information, Structured Settlement Tips For Lawyers, Structured Settlements, Structured Settlements in Connecticut, Structured Settlements in Ithaca New York area, Structured Settlements in Nassau County, NY, Suffolk County Structured Settlements, Syracuse Structured Settlements, Taxes and Settlements, Taxes and Structured Settlements, Westchester 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
    How structured settlements work, including 4structures.com LLC's super helpful structured settlement flow chart/diagram showing how structured settlements fit in on the spectrum of settlement planning solutions.
  • 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 SETTLEMENTS 4REAL® Blog Is a Popular Source of Structured Settlement News, Information and Commentary, John Darer Reviews, Settlement Planning News and Financial Solutions for over 18 years,
    with a stable readership that seeks credible structured settlement information, John Darer Reviews, commentary and/or opinion about topical issues related to settlement planning, targeted to lawyers, injured persons and their family members, guardians, survivors, judges, magistrates, special masters, mediators, administrators, trust companies, insurance company executives and adjusters, financial advisers, settlement professionals, financial professionals, insurance regulators, government leaders, federal and state law enforcement, buyers and sellers of structured settlement payment rights, the news media and other interested parties. 4structures.com LLC established this structured settlement blog in 2005. John Darer ®, CLU ChFC MSSC CeFT® RSP CLTC, President of 4structures.com, located in Stamford, CT 06902. John Darer is an experienced New York City area structured settlement expert, structured settlement broker, Certified Financial Transitionist, and Registered Settlement Planner. He holds insurance licenses in 45 states, has 41 years financial services experience and 31 years in the structured settlements and settlement planning space. In his capacity as a investigative journalist and commentator, and professionally, John Darer passionately believes that shining the light on a business practice is both healthy and newsworthy. It is in the best interest of injury victims, their families and their legal advisers, that the settlement planning discussion involve those that are properly trained in the topic, properly informed on the topic and, with respect to structured settlements, properly licensed and/or appointed. It has significant instructional and deterrent value to other practitioners and firms as well as those who may be caught in the cross hairs. WHAT YOU GET here is the straight stuff with a touch of irreverence and humor. We hope you enjoy and find the content to be helpful. Subscribe to the structured settlement blog feed, or a specific category feed through your blog reader, or through the Subscribe button at the top left of this page. Followers of JDDarer™ on Twitter may also receive select content. If you would like to speak with John he can be reached at (888)325-8640 Thank you for reading! Last updated July 10, 2024

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Structured Settlements 4Real Reader Comments

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  • "...Thanks to Mr. Darer's blog and personal pointers I was able to obtain a fair price for the sale of client structured settlement. Therefore, if one has no choice, but to sell their settlement educate yourself first before selling start by reading John's blog" Mr P. 11/17/2012
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  • John—this (video published 11/2010) is a well done piece. I like the way you always stick to the facts-AM
  • What a wonderful blog you have! I have completely enjoyed reading some of your posts (4/16/2010)
  • Thank you so very much for discussing my concerns about Symetra, my annuity company. I am amazed that PI attorneys as well as a settlement broker in San Diego, could not answer the simplest questions I had regarding the Safeco/Symetra issue. Your blog/web site is most interesting and informative, and I am grateful you have take on the "watchdog" role! Thank you so much again (3/25/10)
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  • "All the others that I had emailed & have seen on the net were "cash now types" & have no concern of me & just are looking for my $$$. When I came across your site & blog I realized that u are an upstanding guy & are not like others. That's why I emailed"
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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
  • When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
  • Be aware that financial advisors use of testimonials is prohibited or restricted
  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
  • Number of States That Prohibit Payment of QSF expenses by licensed agents and brokers
    5 Survey not yet complete.

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  • Comments and Trackback Policy
    Comments to this blog are encouraged, welcome and add spice to the interactive nature of blogs. However, the unscrupulous practice by some to deliver comment spam, to connect all manner of unrelated products to structured settlements, detracts from user experience, is NOT tolerated by this author and thus necessitates the practice of comment screening.

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  • Learn more about structured settlements by reading structured settlement expert John Darer's blog
    Researching Structured Settlements? It may be helpful to check (1) in Archived Blog Posts (above left); (2) use the Google search box (below); (1) visit the 4structures® website at https://www.4structures.com, (4) visit 4structures® Structured Settlement Experts YouTube Channel by clicking https://www.youtube.com/user/4structures1, or (5) call settlement expert John Darer® at 888-325-8640, toll-free in the USA, 646-849-1588 in New York City, or 203-325-8640 in CT, or from outside the USA.
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Why Take a Structured Settlement?

  • A structured settlement offers guaranteed financial security to personal injury victims, wrongful death survivors and their families. A structured settlement involves a customized stream of payments, provides long-term stable tax-free income, for a period of years or a lifetime. Unlike other income annuities. a structured settlement annuity can have multiple payment streams to address multiple needs in a single contract.

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Tax Deferral Resources | Defer Taxable Settlement

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