Synergy Blog

Traditional Structured Attorney Fees with Life Contingency Payments

Bet On Your Health!

A pre-tax and tax-deferred attorney fee structure offers great benefits to attorneys who earn contingent legal fees.  In essence, it is an unlimited retirement investment vehicle exclusively for attorneys.  Using annuity based fee structures, an attorney can get a guaranteed competitive fixed rate of return.  The returns are typically similar to other fixed instruments such as bonds.  However, there are ways to boost return by using a life contingent plan.

The traditional attorney fee structured settlement has a fixed payment stream.  The payment is guaranteed for the term of the contract.  However, when you have a life contingent component you add in a variable element.  It is not variable like the returns on a stock.  The variable is your ability to outlive the insurance company’s life expectancy.  The longer you live, the greater the ultimate return.

The pricing methodology for an annuity is based upon the guaranteed payment stream coupled with the mortality tables.  To illustrate this point, an attorney can defer $375,000 into a traditional structured settlement.  Let’s assume the payment stream selected is for life with a 20 year guarantee.  Let’s also assume for easy math the payment is 2,000 per month.  In order to figure out the rate of return, we typically look at the following:

  • Rate of Return Worst Case Scenario (Only 240 Payment are Made) –        2.6%
  • Rate of Return at 30 years (the last 10 years were not guaranteed) –        5.0%
  • Rate of Return at 40 years (the last 20 years were not guaranteed) –        5.7%

For an extremely healthy client with a family history of longevity, betting on your own life expectancy can create a much higher rate of the return.  By analyzing the impact of the guarantee periods in a traditional structured settlement, you can look at the option of taking on more life expectancy risk to create the potential for higher returns.  This is accomplished by potentially using a shorter guarantee period and betting on a longer life expectancy.  In the above scenario, the attorney’s rate of return will be between 2.6% and 5.7% depending on how long they live.

No matter what, it is still a conservative approach to investing by using a fixed annuity.  With proper planning, you can do the assessment with your settlement planner on what guarantee periods make sense for you and your family.  There is risk in all investments.  Using a fee structure annuity with a lifetime component is something every attorney should consider in their retirement planning.  The proper investment and product allocations will ultimately determine the success of your retirement plan.  You should consider all the options for deferring attorney fees as part of your retirement plan.

Synergy offers unique solutions for trial lawyers to invest their fees on a pre-tax and tax-deferred basis.  Visit www.structuredfees.com for more information.

 

TESTIMONIALS

"In my twenty-two year career as a trial lawyer I've handled my share of catastrophic cases and structures, but imagine the complexity of an engaged, unwed mother catastrophically injured during delivery, giving birth to a healthy child, but left in a vegetative state? The issues of guardianship and entitlements of the newborn, the rights of the biological father-fiancé, an out-of-state teenage child of the mother, lifetime maintenance of the mother, as well as the rights of family of the mother, who became her primary care-takers? Synergy systematically managed the seven figure tender of one defendant, the establishment of a Qualified Settlement Fund, a Special Needs Trust, and multiple structures, all the while concurrently maintaining the various entitlements to ancillary services, as well as the remaining litigation. Everything was handled professionally, timely and literally without a hitch. Truly an amazing feat."

Marcus J. Michles II
Michles & Booth

"Synergy Lien Resolution Services was extremely knowledgeable and effective in assisting to reduce our client's insurance lien. They were a pleasure to work with, extremely professional, and went above and beyond the scope of our expectations. Many times, throughout our case, they worked after business hours to accommodate our needs. The end result was a huge savings for our client and we hope to utilize the Synergy again in the near future."

Joni Hautamaki
Didier Law Firm

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