Structured Attorney Fees

Since 1996, federal courts have recognized an attorney’s ability to defer taxation of his or her fees by using an attorney fee structure. Using a fee structure, all or part of your attorney fee can be deferred pre-tax and paid over time. With such a structure, you receive the same tax-deferral benefits as a Qualified Pension Plan without the hassle of having to adhere to the requirements of a qualified plan, including how much money you can put in. You can defer taxes on your fees, as well as the interest that it earns, until the year in which payment is actually received from the fee structure. In addition, spreading fees over several years avoids a higher tax bracket and allows the money saved in taxes to be invested at little or no risk with no money management fees.

SFA is pleased to annouce a new product to help plaintiff attorneys maximize the value and use of their hard-earned fees – Fee Structure Plus™. Integrated Financial Settlements (IFS), the parent company of SFA, developed this unique and powerful product exclusively for SFA and its other member companies.  Fee Structure Plus (FSP) enables a law firm and the attorneys associated with a particular case to defer taxes on a contingency fee, while simultaneously providing the option for immediate liquidity on the fee.  By doing so, attorneys have tremendous flexibility and more options to use the proceeds of the fee as they want.  Whether attorneys want to invest back in their business or utilize the fees for personal purposes, Fee Structure Plus™ puts the decisions and control back in your hands.

This is accomplished by establishing a deferred compensation arrangement via a FSP tax “Transaction”. In the Transaction the law firm agrees to accept annual periodic payments from a third party assignee in satisfaction of its contingency fee arrangement. The assignee purchases assets that generate the income for the periodic payments. When you establish a Transaction in this manner, you will receive your first periodic payment one year from the date of the Transaction establishment and annually thereafter. You will receive an IRS Form 1099 each year only to the extent of the amount of your annual periodic payment as opposed to incurring taxes on the entire contingency fee up front if you cash-out the contingency fee.

Liquidity of your contingency fee is then created because you have the option to immediately acquire a low, fixed rate, fixed duration, unsecured loan from one of our strategic banking partners. The proceeds from the annual periodic payment stream (i.e., the payments from the Transaction) can be used in part to make scheduled annual repayments of the loan’s principal and interest. 

FSP transactions have a lot of flexibility built directly into them in a variety of ways including:

• You decide how much you want to put into the FSP on any given transaction so long as you meet the $300,000 minimum.
  
• Not all partners in a law firm have to participate in FSP – any combination of partners can participate so long as at least one partner participates.
  
• You have complete discretion to use the loan proceeds however you desire whether for personal or business purposes.
  
• If you elect to do the loan portion of FSP, you can take the maximum loan amount permissible or you can take a lesser amount based on what you need/want.
   

SFA is helping attorney's invest in their financial future with structured attorney fees and Fee Structure Plus.  For more  information on these products, please contact a structured settlement consultant.  To find a consultant near you, click here. 

To download the SFA Fee Structure Plus brochure, click here.

To download SFA: Helping Attorneys Invest in Their Financial Future, click here.

*This information is provided for general educational purposes and is not to be relied upon as legal, tax or investment advice. For individual advice, please consult with your legal or tax advisors.