Trial Lawyers: Start Year-End Planning Now

It’s hard to believe, but the end of 2021 is weeks away. And if you're a trial lawyer, it’s time to think about financial goals for next year and the strategies you could be implementing now to get there.

At the top of the list should be a qualified settlement fund (QSF). Also known as a 468B trust, a QSF holds settlement proceeds past the end of a lawsuit, allowing all plaintiff parties enough time to plan for their portions of the settlement. While QSFs can be created for individual cases, you can establish a QSF that stays open for your law firm to plan for the receipt of income from any cases that may resolve before 2022. This concept can then become best practice for year over year planning.

Here's how a QSF works: The defendant pays the agreed-upon settlement amount into the QSF and is released from litigation -- regardless of any liens, holdbacks, or other issues still on the table. As the settlement money remains within the QSF, your client can work with an expert to preserve government benefits eligibility and plan for their financial future. And as their attorney, you can do more with your contingency fee.

As you likely already know, collecting a big fee (or multiple fees) all at once doesn't allow for much control over your long-term financial planning -- and it could bump you into a higher tax bracket. But when you allow a QSF to hold your fees temporarily, you have the power to think ahead to tomorrow, next year, and even to retirement. And that point brings me to the next important strategy to consider: attorney fee deferral.

While your fee is in the QSF, you have time to decide whether to structure your fee, which would allow you to break up the large sum into incremental, strategic payments over time, thus spreading your income and tax burden. Of course, just because you put fees into a QSF doesn’t mean you have to create this arrangement; it just hits the pause button so you can strategize income timing and your goals.

Look at it like this. If you settle a big case in October, but you could make the decision on December 1 about whether to defer your fee, wouldn’t it be easier to make that decision? By December, you’ll know better what kind of year you and your firm have had and the goals you hope to accomplish in 2022. By creating a QSF for your firm, this is the power of time that you can gain. If you’re interested in hearing more about QSFs and/or fee deferral for year-end planning, DM me or contact Milestone.