Today, we welcome our friend John Bair of Milestone Consulting, LLC as a guest blogger. Milestone Consulting, LLC is a settlement planning and management company.
The firm’s founder, John Bair, has been in the settlement management industry since 1999 and is a Certified Structured Settlement Consultant.
We hope you enjoy this blog.
Guaranteed Future Income with Attorney Fee Deferment
If you’re an attorney working on a contingency basis, I do not need to tell you that cash flow isn’t always opportune, even when your firm is successfully resolving case after case. Receiving income sporadically can be nerve wracking when it comes to wealth management at home. Likewise, a sudden lump sum can send you into a higher income bracket, which means the IRS will take more of your hard-earned money at tax time. These issues might just feel like a product of your field of law. However, with a little planning, the influx of your fee income can actually be very calculated and controlled, allowing you to build wealth and enjoy outstanding tax-related advantages.
Some refer to this planning tool as an attorney fee deferral. For others, it’s a structured legal fee or deferred income. No matter its name, one fact remains true. The mechanism offers a solution exclusive to plaintiffs’ lawyers, so they may decide whether to receive some or all of their fee now or later. The implications for wealth management are numerous, including:
- Tax-deferred growth
- Flexible financial planning options
- A lower tax bracket
- Reduction in tax obligation over time
- Protection against loss of principal
- Predictable future income
Attorney fee deferment is a tool meant for lawyers who work on a contingency fee basis in personal injury lawsuits as well as those involving intellectual property, whistleblowers, employment discrimination, and more. Those who elect to control their income can “structure” their fees by investing them in professionally managed portfolios. With Milestone, your attorney fee structure custody is at Charles Schwab, a major U.S. custodian, and you stay in control of the investment process. You can design a diversified global portfolio, and choose treasuries and other fixed income. By working with an expert planner, attorneys who structure get to decide when to receive their income and how much to receive at a time. All of our plans are designed to involve your trusted financial advisor in the creation, design and implementation of your tax deferral strategy.
There is one caveat to note about attorney fee deferrals. Those who participate must elect to structure their fees prior to settlement, and it must be included in the settlement agreement.
As an attorney, there are three main stakeholders in your financial future: you (along with your family), your law firm, and the IRS. Leverage this unique opportunity to create unlimited reserves of deferred compensation. Choosing when to receive fees will give you the power to effectively design your stream of income, plan for retirement, and build personal wealth.