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.