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Expecting Attorney Fees? Set up a Fee Deferral Before Year’s End

Expecting Attorney Fees? Set up a Fee Deferral Before Year’s End
Sage Settlement Consulting

The end of the year is closing in fast, and you likely know which of your cases will soon settle. Sage offers tax-deferred opportunities for attorney contingency fees. There are two main requirements to take advantage of this opportunity: 1) you cannot have constructive receipt of the funds; and (2) fee deferral language must be included in the settlement agreement.

Why consider deferring your attorney fees?

When you accept your fees as a cash lump sum, the full amount is subject to income tax. This can be especially problematic if you’ve had an extra-profitable year and are bumped into a higher tax bracket.

Alternatively, you can set up a fee deferral that allows you to pay taxes on the fees when you receive them.  In the meantime, your pre-tax fees continue to grow.

What are your fee deferral options?

The two main fee deferral options are a structured settlement annuity and a market-based structured settlement.  Both options fall within IRS guidelines for attorney fee deferrals. The best choice depends on your individual financial needs and goals.

Choose a structured settlement annuity if:

  • You need guaranteed1 payments
  • You want to avoid incurring market-related risk

Choose a market-based structured settlement if:

  • You want market-based returns
  • You want the option to have your own financial advisor manage your funds

If you fall into both categories, you can also choose a hybrid approach. Your settlement consultant can assist you in devising the correct plan. 

How to Get Started with Your Attorney Fee Deferral

REMEMBER: fee deferral planning begins BEFORE your client’s settlement is finalized. Contact your Sage consultant today to begin creating your fee deferral plan that works for you.

1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.

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