Structured attorney fees, higher tax rates in 2013 drive interest in tax deferal

The pending "fiscal cliff" has the financial and political world transfixed as the game of chicken being played edges the economy and government closer to a crisis. However it plays out is anybody's guess, but according to nationally renown structured settlement expert Mark Wahlstrom, the certainty of much higher taxes for trial lawyers in 2013 is almost a 100% certainty. 

In this weeks edition of Speaking of Settlements, Mark Wahlstrom looks at the still obscure but powerful tax planning tool known as structured legal fees, also referred to as structured attorney fee funding. Since the 1980's lawyers have had the option of using a structured annuity program at the time of settlement to structure, or defer, their fee income from year into future years. The benefit of this is of course to avoid the huge tax hit that a large fee settlement brings and to smooth out the income and cash flow into future years when rates might be lower, but also where other deductions can be used to offset taxable income. 

Fiscal cliff and tax disaster or a chance to leap out into future years and secure your firms financial plans?
Fiscal cliff and tax disaster or a chance to leap out into future years and secure your firms financial plans?

This is no wild and crazy technique, but has been validated by the US Tax Court in a prominent case of Childs v the Commissioner as well as two SCOTUS cases as well. Still, few lawyers are aware of this option and fewer still know how to incorporate it into their settlement agreements so that it is compliant from a tax and underwriting stand point. This weeks commentary on the topic also looks at some of the expanded funding options that are now on the market, ranging from the traditional fixed rate annuity and now other options such as index funds or baskets of equity funds.

Learn more about your tax and settlement planning options using structured legal fees by contacting Mark Wahlstrom at his office in Scottsdale, AZ. With over 30 years of experience in structured settlements, settlement planning and structured attorney fee programs, his firm, Wahlstrom & Associates is prepared to help you determine if these tools and techniques are suitable for your tax and business planning options.