Posts tagged #structured legal fee

Tax problems for trial lawyers can be reduced using structured legal fee programs

In this weeks edition of Speaking of Settlements, Mark Wahlstrom looks at the use of structured legal fee annuity programs as a means of reducing the income tax hit trial lawyers often face when they have a big year or big case push them into top tax brackets.  

Structured legal fees, the best tax planning tool for lawyers!

Structured legal fees, the best tax planning tool for lawyers!

With many states having increased income tax rates, the so called millionaire brackets, coupled with increases in Federal tax rates, trial lawyers face the problem in many cases of paying 50% or more in taxes on large cases. When you couple these much higher tax rates with the fact that many lawyers also have to pay back case debt or loans with after tax dollars, it is not uncommon for an attorney to net close to zero from a large fee.  

Structured legal fees, also referred to as structured attorney fees, are a powerful, safe, planning solution that pushes current year income out of 2013 and into the desired tax year. Among professionals only trial lawyers have this option so it is something that should be a standard part of the tax planners tool kit for attorney clients. Learn more about the structured legal fee option from one of the nations premier experts on structured attorney fees, Mark Wahlstrom, and watch for additional videos on this topic over the next few months.  

Structured legal fees, what lawyer wouldn't want to defer fees?

In this weeks edition of Speaking of Settlements, host Mark Wahlstrom examines the topic of structured legal fees, or structured attorney fees, and how the tax cliff and higher tax rates could lead to an explosion in the use of this powerful tax and financial planning tool. 

Structured legal fees have been a fixture in the structured settlement profession for decades, but over the last decade or so there has been a decline in the use of them for planning future cash flows for trial lawyers looking to defer fee income into future tax years. The fact that since the early 2000's most attorney's and tax planners have realized that they were in an era of unusually low tax rates for high income earners, both on the state and federal level. That era, for better or worse, is drawing to a close and now we are about to experience another period of time where in high income earners are going to have substantially higher income tax rates and as such will be looking for options to spread out income and move into lower tax brackets. 

In this video, structured settlement expert Mark Wahlstrom of Wahlstrom & Associates reviews some of the coming changes in the structured legal fee market, options trial lawyers and attorney's will have to structured income and some of the new annuity and tax planning options available to attorneys who wish to use structured attorney fees in their tax and business planning.

Posted on December 17, 2012 .

The fiscal cliff and your decision to use structured settlements

Few metaphors have been more over used in the last month or so than that of "The Fiscal Cliff".  

That said it is important for the next four weeks ending 2012 that professionals and others be aware of the issues and questions related to the certain tax law changes and how they relate to structured settlements, structured sales, structured legal fees and oil&gas lease bonus deals.

Structured Settlements:  For all intents and purposes people who are considering a tax free, section 103 qualified structured settlement should be more comfortable with the decision given the almost 100% certainty that marginal tax rates are going up on the federal level. The ability to obtain guaranteed, tax free income that is not subject to state or federal tax is going to have greater value just due to the tax savings, but also in comparison to other investment options such as dividend stocks, which are scheduled to be taxed at a much higher rate under anticipated tax plans in 2013. 

Structured Sales of real estate or farm property: Under anticipated tax plans we are almost certain to see a rise in the capital gains tax. No matter how foolish this might be in the big picture of our economic policy, we can pretty much take this to the bank. Furthermore, all income will now be subject to the Obamacare tax of 3.8% on top of what ever the marginal rate is for a particular year, so it is safe to say that capital gains tax rates are as low now as they are going to be for some time.  With that knowledge I strongly encourage anyone who can complete a sale in 2012 to close it, pay your taxes at the lower rate and invest your money. I see no strategic advantage in 2012 to structuring sales out into future years at higher rates of taxation. 

The fiscal cliff

The fiscal cliff

Structured Legal Fees: Much in the same line as structured sales, which allow for the deferral of currently taxable income into future tax years, structured legal fees are designed to secure guaranteed future income by pushing it into the future in an orderly, structured plan. Again, given the certainty of much higher marginal rates at the top end, coupled with the 3.8% Obamacare surtax on income, a lawyer is well advised to take as much income in 2012 as is practical and to begin to devise structured legal fee techniques on income that you know is going to fall into 2013. No responsible settlement advisor would suggest structuring income at the end of this year given the certainty of the tax increase, so don't let yourself get talked into anything unless you have a substantial planning reason for doing so. 

Oil and Gas Lease Bonus structures: Again, the rule on taxable income or ordinary income or gains that qualify to structure hold here, if the tax rate on your income is certain to be higher in 2013, then take as much income in 2012 as you can and pay down debt or build up your cash reserves. However, once 2013 rolls around and we see what rates are, the value of structuring taxable income from oil and gas lease bonus payments will be much greater. 

In summary, if you have tax free income via a structured settlement option there is no reason to delay as the tax free nature of the payment increases in value when tax rates rise. However, if you are considering a taxable transaction you are well advised to take the funds in 2012 and being to acquaint yourself with deferral options in 2013 and beyond.