Synergy Blog

Now Is the Time to Defer Taxes on Contingent Legal Fees: When does a 0% rate of return make sense?

As the Republican Party takes control of the White House and Congress in 2017 we can expect some changes to the tax code. Now is the time to consider doing some planning to take advantage of what likely will be a lower effective rate for attorneys and other investors.

President-elect Donald Trump released his plan earlier this year. For the purposes of this blog, we will use his proposed plan and the current estimated 2016 plan under President Obama to illustrate what the tax differential is likely to be. We pulled both of these charts from The Tax Foundation website (www.taxfoundation.org)

 

 

In an effort to keep things simple, we are only going to discuss the marginal tax brackets; however, it is safe to assume that other deductions and credits will also change moving forward. For an attorney, filing jointly, that earns in excess of $231,450, they can see a potential tax savings of 6.6% annually. The current 10-year treasury rate is under 2%. If you can combine a traditional tax deferred attorney fee structure with a marginal tax savings, you can see a 3-9% return on your money.  Not bad for taking little to no risk on an investment!

Ask us how to start deferring taxation for contingent legal fees today.

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Joni Hautamaki
Didier Law Firm

"I recently engaged Synergy to assist with a complicated PTD settlement involving a substantial Medicare Set Aside. The claimant’s wife has been providing full time attendant care which is not Medicare covered. The Synergy nurse was able to do a full analysis of non-Medicare covered expenses which far exceeded the value of the MSA analysis performed by the carrier’s contracted MSA provider. The non- Medicare figures became the main focus of the settlement negotiations and more than doubled the value of the case. Although I could estimate the attendant care figures, the nurse added in other items that I would not have routinely considered. I also asked Synergy to evaluate the EC’s MSA as well as their prescription review. Synergy offered insight about the prescription donut hole which I did not have a clear understanding about. Again, their insight and information added a great deal of value to the overall settlement. Not only did I learn from Synergy but was able to educate my clients in the process. These are very complex and complicated areas; I will use Synergy again and again!"

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Lancaster & Eure

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