It's the week before Christmas and the annual year end rush to settle cases is coming to a conclusion.
If you are a trial lawyer, and you have funds being paid at the end of 2006 in a sizable amount it's never too late, until the clock strikes midnight on December 31, 2006 to engage in the greatest form of tax planning available to trial lawyers, and that is the structured legal fee, alternately called the structured attorney fee, by other insurance markets.
I won't go into all the details, they are covered in great length on my blog over at Wahlstrom & Associates, but trial lawyers continuously miss the boat on this incredible benefit either out of lack of understanding or simply failing to plan.
The highlights of the structured legal fee are:
1. Tax deferral. It is the ONLY legal, tax approved method by which trial lawyers may defer income earned in a tax year into future years. Rather then pay a huge tax bill and invest what's left, this allows you to structure your payments, with interest, into future years and even out the income and defer the tax hit.
2. Income averaging. By careful planning you can design a cash flow plan that finances your practice or expenses over time, thus evening out your budget in a fashion that you move taxable dollars into future years, where they will likely be offset by case and over head expenses, again saving tax dollars by not lumping money into one year where you don't have sufficient offsetting deductions to shelter it.
3. Funding retirement and insurance plans. By creating a guaranteed cash flow you can work with actuaries or benefit specialists to fund defined benefit retirement plans, knowing that you will have the exact amount necessary to fund your retirement over a period of time. The fee can be for the exact amount and will pay into the account automatically. This tool taxes fully taxable income and matches it to a fully tax deductible pension contribution, again over time and in a fashion that reduces or eliminates tax liability on that income.
4. Create life time income that supplements your retirement plan at your law practice. If you want to create a life time income for yourself, but not have it as a benefit that needs to be shared under ERISA with partners and employees, you set up a life time income to start at a future date, to supplement your existing retirement and benefit plans.
All of the fee structures are guaranteed by major life markets, pay competitive guaranteed rates of interest and have incredible design flexibility. If you aren't taking advantage of them you are really missing the boat. Contact your settlement professional, or if you don't have one, contact Mark Wahlstrom here at the Settlement Channel, and we will explain in greater detail how this all works.