Structured attorney fees, the single best tax planning tool for trial lawyers

As viewers of our content and commentary over the years know, Wahlstrom & Associates is one of the nations leading experts in and advocates for ​structured legal fees. These secured annuity funded programs allow trial lawyers and other lawyers to carefully, securely and wisely move taxable income from a large case or a banner year, into future tax years so as to smooth out the tax hit and more carefully plan their cash flow needs. 

​Structured legal fees, the single best planning option for trial lawyers to reduce their tax burden.

In this weeks edition of Speaking of Settlements, Mark Wahlstrom looks at the impact of the 2013 income tax increases on both the state and federal level and the fact that many lawyers are now facing tax rates in excess of 50%. When coupled with the fact that most large verdicts and large fee awards also come with substantial litigation debt financing that needs to be repaid, it is possible that some lawyers can actually net close to zero after paying taxes and litigation loans and financing!​

While in past years it was always the advice of tax lawyers and CPA's to take income in the current year as taxes go up, we are now faced with the reality that taxes HAVE gone up and there is a strong argument to be made for deferring income into future years and possibly lower tax rates or brackets. ​I can't stress this enough, no other profession has the option to safely and securely income average their current year revenue into future years and to not at least examine if this makes sense for your tax situation is beyond foolish! Call your CPA or tax professional, schedule an appointment and find out the key points of what your new marginal tax rates are, what is your anticipated 2013 income and call Wahlstrom & Associates to determine if a structured legal fee annuity is possible on some of your cases in 2013. 

The only certainty at this point is that you WILL pay higher tax rates in 2013 but with careful planning and working with an experienced structured settlement planning professional you can design a plan that works to save you money, fund your retirement and get off the case financing treadmill!​

Structured legal fees appear ready to take off in use in 2013

Thanks to the fiscal cliff and the almost 100% certainty that tax rates for high income earners are about to soar, it is highly likely that the use of structured legal fees, also referred to as structured attorney fees, is going to increase dramatically.

The ability of trial lawyers to use standard structured settlement funding vehicles, such as fixed annuity contracts, to design at settlement guaranteed, predictable cash flows that move taxable income from one tax year into future tax years, is a technique that is going to explode in use according to Mark Wahlstrom, President of Wahlstrom & Associates.

Fiscal cliff or an opportunity to save taxes and build a strong financial plan?

In this video Mark explains how structured legal fees work, the general benefit for lawyers, but more importantly some of the new funding techniques that are being developed that expand on the standard annuity funding and which include the use of equity or stock index strategies to increase future yield potential.

Learn more about structured legal fees and how they might help your personal or professional tax planning in future years. Contact the national structured settlement expert and acknowledged expert in structured legal fees, Mark Wahlstrom.

The fiscal cliff. Should you structure your sale or settlement before 2013?

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. 

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.