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.