Attorney Fee Deferral Options

Attorneys help clients navigate structured settlements to support long-term financial stability. They can do the same for themselves regarding attorney fees. When attorneys receive a large cash payment from their fees upon settlement of a case, it can pose significant tax challenges.

When properly arranged before settlement, attorney fee deferrals generally allow attorneys to pay income tax on payments in the year they are received, rather than on the full fee in the year the case settles.
Tax treatment of attorney fee deferrals depends on the arrangement being properly documented before the fee is received and on individual circumstances. Ringler does not provide legal or tax advice. Consult a qualified tax advisor.

Attorney Fee Deferral Options

How Fee Deferral Works

Attorney Fee Deferral Options

Attorneys can choose from different fee deferral models, each designed to meet specific financial objectives.

Fixed Payment Annuities
  • Converts a cash fee into scheduled payments to support financial stability.
  • Can be scheduled for a specific time or delayed until retirement age.
  • Can support financial stability while deferring income tax to the years payments are received. Tax treatment of attorney fee deferrals depends on the arrangement being properly documented before the fee is received and on individual circumstances. Ringler does not provide legal or tax advice. Consult a qualified tax advisor.
  • Payments are guaranteed by the issuing life insurance company and are not subject to market volatility. Structured settlements provide scheduled future payments by the issuing life insurance company, instead of immediate cash.
Market-Based Deferrals
  • For attorneys seeking the potential for higher growth. Market-based deferrals are subject to investment risk, including possible loss of value, and are not guaranteed. Past performance does not guarantee future results.
  • Deferred fees are tied to a diversified portfolio.
  • Includes stocks and bonds, among other investments.
  • Attorneys with a higher risk tolerance can gain additional market exposure.

Benefits of Attorney Fee Deferrals

Besides potential tax advantages, attorneys choose to defer their fees and work with Ringler for these benefits:
Tax treatment of attorney fee deferrals depends on the arrangement being properly documented before the fee is received and on individual circumstances. Ringler does not provide legal or tax advice. Consult a qualified tax advisor.

Retirement Planning

Deferrals can serve as a supplement to traditional 401(k)s and other retirement plans. This is especially true when fees are deferred until retirement or shortly before.

Business Management

Using fees from a large case to help fund the firm’s future overhead can improve the profitability of new cases. Timing the inflow to the outflow can also improve efficiency.

Tax
Advantages

By deferring receipt of your attorney fees, you may pay tax only when you receive the fees, potentially in future years when you may be in a lower tax bracket.
Tax treatment of attorney fee deferrals depends on the arrangement being properly documented before the fee is received and on individual circumstances. Ringler does not provide legal or tax advice. Consult a qualified tax advisor.

Strategic Financial Planning

Structured fee deferral enables you to strategically plan your finances so that the receipt of your deferred fees aligns with anticipated life events, such as retirement. Planning ahead lets you make informed decisions that align with both professional and personal goals. Payment schedules are generally fixed once the deferral is in place.

How Ringler Helps with Attorney Fee Deferral Options

For the IRS to recognize the deferral, the language regarding the fee structure must be included in the settlement agreement and the applicable assignment documents. A Ringler Consultant can help coordinate this documentation with your legal and tax advisors. Ringler does not provide legal or tax advice.

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