It is that time of the year again, April 15th and trial lawyers nationwide are looking at their increasing tax bills, the excessive cost of law suit financing and law practice debt, as well as their depleted retirement accounts. This week on Speaking of Settlements, Mark Wahlstrom examines the use of structured legal fees as a tax and income planning tool for trial lawyers and the ways in which they can be used to reduce current tax bills, provide more cash now to pay off or reduce case funding and to fund retirement plans for lawyers.
Structured legal fees, also referred to as structured attorney fees, are a long standing planning tool afforded to trial lawyers who want to spread the tax hit of a big case or big earnings year over several different tax years. This is done through the use of a structured legal fee annuity, negotiated at the time of settlement and designed in partnership with the trial lawyers tax professionals. It allows for carefully designed payment schedules that move income into future years, secured by a settlement annuity, and thus allow for tax planning options to be used vs simply taking a lump sum of cash and paying taxes.
The implications, given increased income tax rates on the state and federal level, are huge as many lawyers are facing marginal tax rates well in excess of 50% and consequently are paying more in tax than they are keeping on large cases. Couple this with the need in many cases to pay down case financing with after tax dollars and we actually see situations where the lawyer nets almost zero on a case due to poor planning.
Mark Wahlstrom, President of Wahlstrom & Associates, is one of the nations leading experts on structured legal fees and the planning issues trial lawyers face. There are crucial aspects of any such plan that need to be done in conjunction with tax professionals and as part of case settlement, so tune into this quick broadcast and learn more about the process. There are ways for some lawyers to convert fully taxable income into contributions to a qualified retirement plan, dramatically lessening the tax hit and putting in place a safe and orderly retirement funding plan.
If you are a trial lawyer who wants to get off the debt payment, huge tax hit treadmill, this is a broadcast on structured attorney fee's you won't want to miss.