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| Milestone Consulting, LLC

Considering the fundamental financial disparities between class action lawsuits and individual cases, there is a common misconception that class action attorneys’ fees cannot be deferred. The fees are typically higher, and they result from a court-ordered Class Attorney Fee award, rather than a contingency fee agreement.

Despite these and other differences, class action fees can still be structured into periodic payment obligations, creating an unlimited tax deferral opportunity.  Class action attorneys can receive the same benefits other trial lawyers have reaped for decades. These advantages include:

  • Accumulating wealth on a pretax basis,
  • Deferring income to yield a lower tax bracket,
  • Creating a steady flow of income in an unpredictable field,
  • Replacing buy/sell partnership insurance with pretax dollars, and
  • Building a generational strategy toward gifting, philanthropy and family.

Of course, there are tax-related considerations and technical nuances involved in electing periodic payments – about which Robert W. Wood’s article has long-standing precedence.

Factors for Class Action Attorneys to Note When Deciding whether to Defer Fees

Electing to structure fees is a planning tool that mass tort and individual case attorneys have historically used to build substantial wealth. However, attorneys need to decide if it’s the right tool for them considering their own situation. Deciding whether to elect a periodic payment obligation comes down to three factors:

  1. Evaluating whether deferment is possible. The answer to this question is specific to an attorney’s and his or her firm’s current financial needs.
  2. Deciding on the best product for the payment stream. If it’s feasible to structure payments instead of receiving a lump sum, the attorney will choose to structure the fees into one of the following:
    • Private wealth portfolio
    • Permanent insurance
    • Equity or fixed annuities
  3. Planning the distribution. The attorney will be able to decide the length of time to defer, so wealth can accumulate and become available at the desired time in life. The design of a periodic payment obligation is unlimited, and it’s fully customizable to the needs of the individual attorney and firm.

As long as the court orders a qualified settlement fund into existence, class action attorneys are able to elect periodic payment obligations as their distribution of choice.  If the choice is right for them, structured fees can be an exceptionally useful tool to accumulate wealth and financial success.

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