Having trouble viewing this email? Click here to view online.  
Forward | Subscribe
Ringler Newsletter Banner
Get A Quote My Profile Medicare Set-Asides Download vCard
Associate Photo
Ringler Honolulu
Dona L. Hanaike, J.D.
Lindsay Schoenecke
Alexa Zen, J.D.
P.O. Box 11447
Honolulu, HI 96828
(808)521-7666 (Office)


Structure Strategies

Attorneys Can Pick and Choose Cases

Tom and Art don't stop caring about their clients after a case closes, which is why they often recommend the protection of a structured settlement. So they were all ears when asked if they knew they could structure their own attorney fees.

Their case involved a woman who was seriously injured in a fluke accident when she was struck by debris from a gas explosion. Tom and Art called on their Ringler consultant to design a structured settlement that would help this woman's family provide lifelong care, as the client was disfigured and suffered a brain injury. Throughout planning discussions, both attorneys talked about how much they would like to devote all their energies to cases like this one. But given how unpredictable income can be in a law practice, they felt they had to keep taking as many cases as possible to pay the bills. Like a lot of plaintiff attorneys we've worked with, they were surprised to learn that they could enjoy long-term financial protections and tax benefits similar to those achieved by their clients in a structured settlement.

To make a long story short, Tom and Art decided to take only a small portion of their fees in this case at the time of settlement, choosing to receive the majority of it in the future. After considering their options, they decided to defer receipt for five years and then take monthly payments during a 15-year period starting at age 55. Structured in this fashion, the fees from this case covered their overhead and provided a solid base income. It was kind of an "early semi-retirement."

Editor's Note: The case described above was a large one, and Tom and Art structured a sizable amount of their fees. To accomplish the same outcome, attorneys can structure fees on a number of smaller cases. If an attorney structured a third of his/her fee on every case over a particular size, the result would be quite a nest egg – all growing on a tax-deferred basis. Learn more about attorney fee structuring here.

(Note: While Structure Strategies is based on actual Ringler case histories, the names and images of the people involved have been changed to protect their privacy.)

Don’t Go It Alone: Fee Structuring Requires Special Handling

Payouts from a fee structure are not affected by stock market gyrations.

The Basics

Structuring fees requires knowledge and cooperation. Not every insurance company makes this option available, but the potential economic benefits to a trial attorney are significant and can be highlighted as part of settlement discussions. Current tax opinion stems from a 1994 case titled Childs v. Commissioner. From this case, the industry has developed some best practices to which parties should adhere. These steps are not complex; most are common sense, as is the concept of tax-favored savings.

The most recent Retirement Confidence Survey, published by the Employee Benefit Research Institute, points out that many Americans still don’t feel ready to leave the workforce despite the recovery. College tuition costs have risen at twice the rate of normal inflation over the last 40 years. Practice income is often unpredictable and may be dependent on factors that cannot be controlled, like health, competition and legislation. Structuring benefits for the injured party is done in part to guarantee the important things in his or her life. Attorneys often have the option to do the same.

Future benefits are funded by an annuity contract issued by a major U.S. life insurer. Money that would normally be lost to immediate taxation can grow on a tax-deferred basis, with future fee payments taxable in the year received – whether in 2015 or 2045.* Like with the injured party, these fee structure arrangements are creatively designed to coincide with the attorney’s future needs, wants and/or goals ... funding things like future overhead costs, retirement, children's college educations and more. Read this month’s Structure Strategies (this page) to see how two attorneys created a plan to allow them to enjoy what they do more.

Attorneys can structure fees at settlement for future expenses ... even if the client doesn't.

Practice Pointers and Other Key Benefits

  1. Get the ball rolling early: Fee structure arrangements must be made before settlement documents are signed. It's also a good idea to include boilerplate language in client fee agreements that outlines the option to elect periodic future payments.
  2. Consider even if the client doesn't: It's not required that the client structure for the attorney to do so. Most structured annuity issuers allow stand-alone fee structure arrangements.
  3. Fee structure in any firm: Fee structure arrangements can be written for solo practitioners, professional corporations, partnerships and LLCs.
  4. Reassure accountants, planners: Direct advisers to Childs v. Commissioner and other resources as listed below.

Consult the Pros

Ringler Associates has created more structured fee arrangements than any other structured settlement company. We can help design a unique plan or show the parties a variety of creative ideas other attorneys have used to make their futures brighter. Our knowledge of all the parties and protocols makes us uniquely qualified to help get it right the first time.

* As with any tax-planning strategy, we recommend you consult your professional advisers.