Attorney Fee Deferrals

Personal injury attorneys have the unique ability to defer the receipt of their legal fee to future tax years to reduce taxable income.

Tax deferral of attorney legal fees

A Tax Planning Tool for Personal Injury Lawyers

Personal injury attorneys have the unique ability to defer the receipt of their legal fee to future tax years. We specialize in creating customized strategies for attorneys to minimize income taxes, fund retirement or other future goals, normalize firm cash flows, and retain key employees.

Watch our videos below to discover some of the unique applications and planning strategies available through attorney fee deferrals. 

overview of attorney fee deferrals

A Quick Primer on Fee Deferrals

When you defer the receipt of a legal fee, you also defer the income tax from that fee to a future tax year. As a result, the income taxes that would normally be due in the current tax year are deferred to future tax years when you actually receive distributions.

In this video, Greg Maxwell provides a brief overview of what an attorney fee deferral is and explains some of the more common types of attorney fee deferral vehicles. Greg also outlines some basic use cases for attorney fee deferrals.

webinar on using Fee deferrals to lower taxes

Investment Account Deferral Option

In this 20-minute webinar with Mike McGarry of Optcapital, we discuss how deferred attorney fees can be placed into an investment account. This approach can provide higher returns and greater flexibility than an annuity-based option.

Other benefits of using the investment account deferral vehicle:

  • Fees can be deferred directly from your IOLTA account (no special language needed in the release agreement)
  • You can invest an unlimited amount of legal fees on a pre-tax basis — reducing your currently taxable income
  • You are not locked into a fixed payment structure (i.e., flexible payout schedule)
  • There’s zero defense involvement

fee deferral use case: golden handcuffs

Retain Key Employees with Deferred Fees

Your firm can use fee deferrals to fund a retention plan for key associates and employees. This can mitigate the risk of important employees or associates leaving the firm and taking valuable skills, cases and other employees with them.

By using a vesting schedule, key members of your staff can only collect their bonus payments if they stay with your firm for a defined period of time. If the employee leaves before their funds are vested, that money instead can go to you/your firm.

With deferred bonuses, key employees become more aligned with the firm’s long-term success — without you having to give up equity interest. (The “Golden Handcuff” strategy starts at 4:40.)

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Our goal at Amicus Settlement Planners is to be the premier, comprehensive resource for personal injury attorney for all of the financial and legal issues that arise at the time of settlement.

We'd love to explore how we can help you and your clients.