Tax season in my business is typically the last two months of each calendar year. The reason being is that most cases are settled in the last 12 weeks of each year and most attorneys are faced with year end tax questions about deferring income into future tax years or funding and modifying their existing pension plan. Here are a few points to keep in mind as we approach tax season in 2013 if you are a trial lawyer:
1. You have a unilateral right to structure your legal fee on both taxable and non-taxable cases. However, you must include the appropriate language into your settlement documents, have a clear paper trail indicating that at no time were the fee's in your possession ( constructive receipt ) and you need to vet your situation with a qualified settlement professional.
2. There are a wide range of options for structuring your legal fee. You can do lump sum payments in future years, monthly and annual installments, you can increase or decrease amounts and you can make them payable for life. You can also defer the start date for several years and with some companies you may even include your spouse as a joint annuitant, meaning that it can pay for as long as one or both of you are alive.
3. Most attorneys don't know that there are options for professional corporations and partnerships to structure fees! If your partnership or firm wants to defer income to future years to even out cash flow this is an excellent tool to use.
4. You may structure out of a 468b trust, out of a mass tort case and out of most kinds of litigation. However, not every life insurance company writes every type of annuity so get with a qualified professional to determine what your options are and what the restrictions might be in dealing with a claims administrator on a mass tort case.
5. You can work with your own professional, you do not need to work with the defense! If you do not want defense counsel, casualty companies and other brokers knowing your business, do yourself a favor and engage a qualified plaintiff expert. Obviously, I would like you to choose Wahlstrom & Associates.
6. You can now obtain loans on structured legal fees. This has been worked on for many years and now it is possible for you to obtain the tax benefit of a structured legal fee, but also get the cash you need to pay off case expenses and financing. Contact Wahlstrom & Associates about this option and what the underwriting and qualification standards are in your particular case.
7. If you cannot structure this year you most definitely can create a pension plan that allows you to save tens, if not hundreds of thousands, of dollars in taxes this year. However, you MUST set this up and talk to our experts prior to December 31, 2013. Call our office today to discuss how we can assist you in pension planning for your firm before the end of the year.
