The structuring (or deferral) of Attorney Fees has been affirmed by the U.S. Tax Court in the case of Childs v. Commissioner of Internal Revenue, 103 T.C. 634 (1994). This ruling allows the combined power of 100% tax deferral and compound growth rates to work for the benefit of attorneys. Should you decide to take advantage of this powerful tool, Robert W. Johnson & Associates can help you determine the best approach to structuring your attorney fees.

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Why Should You Consider Structured Attorney Fees?

 

• Lower Your Taxes and Increase Your Income: The 100% deferral of taxes on Structured Attorney Fees means your money grows and compounds faster to achieve greater pre-tax future income.
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• Unlimited Contributions and Flexible Payout: Structuring Attorney Fees does not have an upper limit on the amount of money an attorney can contribute in any year. The attorney can contribute up to 100% of fees earned in any given year. In addition, you have full flexibility in deciding when and how you receive your payout.
   

• Plan for Future Financial Events: Structuring Attorney Fees allows you to plan for future financial events such as retirement, financing your children's college tuition, funding your practice or buying-out a partner.

 

• Smooth Sporadic Income Swings: Many times attorneys do not know when they will receive their fees from a settlement or a verdict. Structured Attorney Fees can provide the peace of mind that accompanies a guaranteed monthly income.
   

• Guaranteed Income and Long-Term Security: There is no need to worry about fluctuations in the financial market. The Structured Attorney Fee will provide guaranteed benefits at specific payment dates to assure you of financial security. Structured Attorney Fees are only placed with top rated insurance companies.

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Tax Advantages of Structured Attorney Fees:

 

• All of the money that is placed into a structured attorney fee is 100% tax deferred. This means that the initial portion of the attorney fee that is used to purchase the structured attorney fee is not taxable income to the attorney in the year the purchase takes place. In addition, the growth of the money in a structured attorney fee is not taxed, but it is increasing. Only when the funds are paid out are they taxed. The attorney has full flexibility to decide both when and how the payout shall occur.
   

• Ability to shift the income from a higher tax bracket to a lower tax bracket. The deferral (shifting) of income (attorney fees) from a year in which the attorney will be in the top-tier tax bracket to a period later in life (i.e., retirement) when the attorney will be in a lower tax bracket is a significant benefit. Again, the attorney's full flexibility to decide when and how the payout shall occur enables the attorney to decide in which tax bracket he wants to receive the funds.
   

• Unlimited (without a cap) contributions to the attorney's retirement plan. The structured attorney fee does not have an upper limit on the dollar amount of money or percentage of income that an attorney can contribute in any year or combination of years. The attorney can contribute up to 100% of annual fees into his or her retirement package, and they can do so year after year.

 

Thus, the financial impact of the tax-deferred growth to the attorney, whether looked at from either a long-term or short-term perspective, is spectacular.

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In summary, a) the 100% tax deferral, b) the ability to increase cash flow while lowering taxes, and c) the unlimited contribution allowance illustrate that the case for structuring attorney fees is financially clear, convincing and beneficial to the future security of the attorney. Remember, it's not what you make but what you keep. For assistance with structuring your attorney fees, contact Tory K Owens.

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