Structured Attorney Fees: Tax deferral and more

Looking for ways to reduce your tax burden? Structured attorney fees can be tax efficient methods of addressing your financial needs — leading to significant savings as a result of deferred taxation on the principal and accrued but unpaid interest. But the advantages of structured legal fees are not just limited to tax savings. The many benefits are as follows:
  • Tax efficient: Structured attorney fees may help attorney taxpayers avoid a higher income bracket, allowing the money saved to be invested and put to work.
  • Protection: A structured settlement annuity provides protection from outside interests. Your money is sheltered from creditors and others.

  • Guaranteed income: A structured settlement annuity provides a consistent, guaranteed income stream that helps you budget for the long term and plan for meeting your unique needs, even as they change over time.
  • Customizable: Structured fees can be personalized with the ability to set up payments for known future expenses. Payments can be changed to reflect adjustments in regards to health concerns or life expectancy.
  • Pension plan format: Structured fees can achieve the results of a pension plan without contribution limits, administrative costs, or formalities and maintenance.
  • Less restrictive: Unlike qualified retirement planning options, there is no limit to the amount deferred and distributions can start any time — including before age 59½. Employee participation in the plan is not mandatory.
  • Case selection: You have an opportunity to defer taxes on your fee each time a case settles, with no long-term commitment.
  • Predictable payments: Financial markets fluctuations do not affect structures because rates of return are fixed.
  • Income supply: Attorney fees can be structured to help smooth out the peaks and valleys that come with contingency fees.
  • Recruitment/incentive opportunities: You can offer deferred compensation to associates funded with structured fees payable to the firm, helping you to retain associates and use as a tool to attract future partners and associates.


However, there are some disadvantages associated with structuring fees. The payment
becomes inflexible and illiquid once it is designed and funded. Due to the guaranteed nature of the fixed annuity, rates of potential return may be less than returns for equity-based investments. But the net results of deferring income with a structured attorney fee may be greater than that of an equity-based investment made with post-tax income.
The Alcaine Halterbeck Investment Group can help you navigate this complex area of your practice.
Contact us at (916) 581-7540 or (866) 844-8609.