Understanding Attorney Fee Deferrals Part 1

There are many benefits for attorneys to employ an expert in settlement planning. As you may already know, during the mediation process of a case, a settlement planner can assist the plaintiff’s attorney to maximize the total financial sum of the settlement for the plaintiff. With a knowledgeable professional determining the total sum of the settlement, the attorney can focus on the legal context of the case.

Although the support a settlement planner offers an attorney during the mediation is invaluable, there are also many long-term benefits to utilizing settlement planning strategies well after the case has settled. In this two-part article, we will discuss how the process of a structured settlement for a client can be applied to the attorney’s fees as well. In section two, we will discuss the many advantages to utilizing this strategy.

The Basic Concept of Fee Deferrals

Settlement planners specialize in providing their clients with the financial security they need for the future. This is beneficial not only for plaintiffs but also for their legal representatives. By taking the settlement management trust process used for plaintiffs and tailoring this process to align with the financial goals of the attorney, the settlement planner can optimize the attorney’s earnings from a settlement by appropriately allocating the attorney’s fees in a way that maximizes the overall value of the earnings.

Provides Structure to Fluctuating Compensation

If you are a personal injury attorney, compensation can greatly differ from month-to-month or even annually. In some cases, the earnings made from one large settlement could result in significantly more compensation earned from hundreds of smaller settlements. With fluctuating earnings year-to-year, devising a structured settlement that systemically results in the attorney receiving guaranteed, tax-deferred payments can benefit the attorney’s long-term financial goals in a variety of ways.

Only Taxable When Compensated

It’s often to the attorney’s detriment to pay the total earnings from a large settlement in just one tax season. By structuring the attorney’s fee, the compensation is only taxable during the time period that the payments were received by the attorney. As we will discuss more in the second section, tax-deferred payments allow the settlement planner and the attorney to decide how to best coordinate the attorney’s fees through this structured process.

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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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