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Trial lawyers working on cases with contingency fee agreements have the opportunity to defer an unlimited amount of income through periodic payments. Also known as attorney fee deferral, this wealth planning tool is useful for attorneys who want to save money pre-tax and better secure their financial future. Below, we answer a few questions about the benefits of and rules for deferring attorney fees.

How do I defer my attorney fee?

As part of the settlement with the defendants and/or their insurers, your contingency fee must be a term of settlement that allows you to defer any/all of your contingency fee and create a periodic payment obligation. The defendants and/or their insurers would issue any of your fee payable to the selected assignment company. Or, your contingency fee must be a term of settlement that allows your fees to be payable to an existing qualified settlement fund (QSF) or to a settlement account that can be established. The QSF would issue any/all of your fee payable to the selected assignment company. 

What is my time frame to set my deferral payment schedule? 

If your fees are coming directly from the defendants and/or their insurers, a desired deferral plan must be chosen prior to the settlement being issued. Or, if your fees are placed into a QSF, you have more time and less pressure to make a decision on your payment options because there typically is no immediate time frame to distribute the funds or create a periodic payment obligation.  

What type of fees can be deferred?  

Any contingency attorney fee for physical or non-physical injury tort settlements.

Who is the payee of the periodic payment(s)? 

Depending on your contingency fee agreement, the deferred fees can be payable to you individually, your law firm, and/or your co-counsel if applicable.  

At the time of distribution, how will my payment be taxed? 

The distributions come out of the attorney fee deferral program are reportable as ordinary income.  

Who can be named as beneficiary? 

Your estate or the law firm can be named as beneficiary.

More questions? We can help.

Our team at Milestone develops a customized strategy that works best for each attorney and his or her family. If you’re a trial lawyer interested in establishing a fee deferral plan, we welcome you to give us a call to discuss your options.

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