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FREQUENTLY ASKED QUESTIONS --
STRUCTURED ATTORNEY FEES

Have a question about Structured Attorney Fees? Click any question link below to read the answer.
More FAQ Topics....

Structured Settlements

Punitive Damages

Basics of Structured Attorney Fees

1. What does it mean to structure my fees?
2. What are the advantages of structured attorney fees?
3. What portion of an attorney's fees can be structured (or deferred)?
4. Can the attorney receive the settlement proceeds and then structure the attorney's fees?
5. When is tax applied to the structured portion of the attorney's fees?
6. If my attorney fee is structured when do I get the 1099 statement?

Independence of Fees

1. If the plaintiff wants to cash-out his/her portion of the settlement, can the attorney still structure his/her portion of the settlement?
2. Can the structured settlement payment stream for the attorney be completely independent of the payment stream received by the plaintiff?
3. If the fee has to be split among multiple plaintiff attorneys, each of whom wants a different payout schedule, is a structured attorney fee still viable?

Payments and Rates

1. What types of periodic payments are available for attorney's fees?
2. When I structure my attorney's fees will I get the same great interest rates as the plaintiff?

Agreements and Requirements

1. What special language should the attorney's fee agreement include to facilitate the structuring of attorney's fees?


Basics of Structured Attorney Fees

1. What does it mean to structure my fees?

"Structuring" of attorney fees is a method for deferring fees, from a tax standpoint. The structuring (deferral) of attorney fees has been affirmed by the Tax Court in the case Childs vs. Commissioner, 103 T.C. 634 (1994), affirmed 898 F3d 856 (June 11, 1996).

While the 100% tax savings that a structured settlement offers a plaintiff is not available to their counsel, a 100% tax deferral is available. The ability to defer the payment of attorney fees to future years yields many benefits beyond the obvious tax savings from moving the receipt of fees into a lower tax bracket.

Click here to view the Childs v. Commissioner case or click here to read the appeal. Top
2. What are the advantages of structured attorney fees?

  • to defer income into a lower tax bracket.

  • to augment, at an unlimited level, an attorney's retirement income.

  • to provide a guaranteed cash flow.

  • to meet future overhead expenses.

  • to meet the diverse tax needs of different partners.

  • to assist in the buying-out of retiring partners.

  • to provide college funds for their children or grandchildren.

Top
3. What portion of an attorney's fees can be structured (or deferred)?

An attorney can structure a portion (or all) of their fees when (a) the attorney does not have constructive receipt of the funds; (b) the attorney's fees agreement allows for the structuring of attorney's fees; (c) the requirements set forth in Childs vs. Commissioner are met; and (d) the requirements of the insurance company issuing the structured attorney fee are met. Top
4. Can the attorney receive the settlement proceeds and then structure the attorney's fees?

No. The attorney must not have constructive receipt of the funds. Top
5. When is tax applied to the structured portion of the attorney's fees?
The structured portion of the attorney's fees is taxed in the actual year the payment is received by the attorney according to Childs v. Commissioner, 103 T.C. 634 (1994), affirmed 89 F3rd 856 (June 11, 1996). Top
6. If my attorney fee is structured when do I get the 1099 statement?
Your 1099 statement will be sent to you for payments that you received in that year. For example your 2001, 1099 statement will reflect only those structured settlement payments that you received in the year 2001. Top
Independence of Fees

1. If the plaintiff wants to cash-out his/her portion of the settlement, can the attorney still structure his/her portion of the settlement?

Yes, an insurance annuity company will allow the attorney to structure (defer) their fee even if the plaintiff does not want to participate in a structured settlement for him or herself. Top
2. Can the structured settlement payment stream for the attorney be completely independent of the payment stream received by the plaintiff?

Yes, the timing of the payout of the attorney's fees can be designed to be independent of the timing of the payout received by the plaintiff. Top
3. If the fee has to be split among multiple plaintiff attorneys, each of whom wants a different payout schedule, is a structured attorney fee still viable?

Yes, attorney's fees can be structured even when you have to split the fees among several attorneys. In addition, it is permissible for each attorney to have their own unique payout schedule. Top
Payments and Rates

1. What types of periodic payments are available for attorney's fees?

Attorney fees can be structured so that the periodic payments are received in any combination of:

  • lump-sum payments

  • monthly payments

  • life-time payments
Top
2. When I structure my attorney's fees will I get the same great interest rates as the plaintiff?

Yes, the insurance companies that structure attorney's fees all use the same annuity rate schedule for both plaintiff and attorneys. Top
Agreements and Requirements

1. What special language should the attorney's fee agreement include to facilitate the structuring of attorney's fees

The attorney's fee agreement must allow for the attorney to receive all or a portion of their fee in the form of future periodic (structured) payments. Top
Have a question about structured settlements or punitive damages analysis?

Structured Settlements FAQs

Punitive Damages FAQs