Attorney Fee Deferral Options

Attorneys help clients navigate structured settlements to provide financial security. They can do the same for themselves regarding attorney fees. When attorneys receive a large cash payment from their fees upon settlement of a case, it can pose significant tax challenges.

With attorney fee deferrals, attorneys pay income tax only on payments received in the year they are received. They avoid paying the full tax amount in the year the case is settled.

Attorney Fee Deferral Options

How Fee Deferral Works

Attorney Fee Deferral Options

Attorneys can choose from different fee deferral models, each designed to meet specific financial objectives.

Fixed Payment Annuities
  • Converts cash fee into a steady stream of income to create financial stability.
  • Can be scheduled for a specific time or delayed until retirement age.
  • Can ensure financial stability while avoiding immediate heavy taxation.
  • Guaranteed and protected against market volatility.
Market-Based Deferrals
  • For attorneys seeking higher growth.
  • Pre-tax fees are invested in a diversified portfolio.
  • Includes stocks and bonds, among other investments.
  • Attorneys with a higher risk tolerance can gain additional market exposure.

Benefits of Attorney Fee Deferrals

Besides substantial tax savings, attorneys choose to defer their fees and work with Ringler to receive these benefits:

Retirement Planning

Deferrals can serve as a robust supplement to traditional 401ks and other retirement plans. This is especially true when fees are deferred until retirement or shortly before.

Business Management

Using the large case to fund the firm’s future overhead means that new cases are profitable. Timing the inflow to the outflow is also efficient.

Tax
Advantages

By deferring payment of your attorney fees, you can reduce your tax liability so that you pay tax only when you receive the fees. This allows you to defer income to future years when you may be in a lower tax bracket, thereby optimizing your overall tax efficiency.

Strategic Financial Planning

Structured fee deferral enables you to strategically plan your finances so that the receipt of your deferred fees aligns with anticipated life events, such as retirement. This flexibility allows you to exert control over your financial future, making informed decisions that align with both professional and personal goals.

How Ringler Helps with Attorney Fee Deferral Options

For the IRS to recognize the deferral, the language regarding the fee structure must be included in the settlement agreement and the qualified or non-qualified assignment documents. To ensure this is done correctly, it is best to consult a Ringler Consultant.

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