The best part of our job at Milestone is the ability to help people who have faced tragedy to secure their future, financially. While we offer a variety of useful tools to maximize clients’ settlements, our team can also assist plaintiffs’ attorneys by guiding them to invest their fees .
We have specifically crafted plans to fit both the needs of survivors of sexual assault and the attorneys who represent them. Three of the most important tools are the qualified settlement fund, the attorney fee deferral, and the equity-backed structure.
Qualified settlement funds (QSF) are trusts that exist parallel to a law firm’s escrow account. When settlement dollars are paid into a QSF instead of the firm’s escrow account, the lawyer and the client are yet to technically receive the funds. This keeps all settlement and fee planning options open.
This tool is particularly important for sexual assault litigation. Sexual assault litigation often takes place within strict statutory windows. This means the vast majority of cases are being filed in a short time span. These cases may also settle in bunches if they are up against a common defendant – such as a diocese, or an individual, or an organization. Attorneys may see larger fees and increased income over a short period. Therefore, their tax burden may increase suddenly and considerably. This may include higher taxes than they’ve ever experienced before. By placing their settlement dollars in a QSF, attorneys are able to gain 100% income recognition, and choose whether or not to defer accepting their fees as income. The process of spreading fees over time is an attorney fee deferral.
When participating in an attorney fee deferral, attorneys can spread their income from a “big year” over years or even decades. In the meantime, the fees are able to grow in a personalized wealth management account. Instead of paying a high tax rate, attorneys can let their money grow and spread their tax burden over decades. Payment schedules are flexible, and investment options are near limitless.
Even with attorneys benefiting greatly from QSFs, clients benefit even more – especially survivors. QSFs give clients as much time as they need to plan out their financial future. While the money rests in the QSF, there is no pressure to remove the funds. Instead, clients are encouraged to explore their financial options. Maybe they need to open a personalized wealth management account, or they want to purchase a home. Maybe they want to engage in a spend down and protect their needs-based government benefits. The important thing is, with the qualified settlement fund, clients have time to become educated consumers.
Many survivors are young and do not have an immediate need for their settlement dollars. For those individuals, there is an option to grow their funds tax-free, in a personalized wealth management account. This is a once in a lifetime opportunity, and something many financial advisors cannot even believe is a real thing upon first learning about it. By utilizing an equity backed structure, a client can grow their funds tax-free for years or even decades, receiving the benefit of not only their settlement, but also the tax-free growth of their settlement.
We recently worked with a 23-year-old survivor who placed her funds in a QSF. She has a good career and does not have an immediate need for all of her settlement money. She is placing nearly one million dollars in an equity backed structure. She is scheduling pay outs for a wedding when she turns 26, a first home when she turns 29, and then letting the rest grow until a planned early retirement at age 50. While her attorneys fought hard for her settlement, our planning will allow her settlement to positively impact the rest of her life. (She is also planning a six figure contribution to a non-profit that helps other survivors.)
The #MeToo movement is being pushed forward by plaintiffs. Settlement planning is an important piece of this push. We are proud to support the #MeToo movement and to help survivors move forward with Milestone.
By Sam Dolce-Powers, Esq.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).