Attorney Fee Deferral for Contingent Fee Attorneys

Solution

As a contingent fee attorney, you are uniquely able to defer the receipt and taxation of legal fees without the burden of complying with challenging tax rules for deferred compensation that apply to most other businesspeople. As you will have been advised by your tax advisor, favorable tax case law allows you to time fee payments and their taxation if you operate within an established framework.

DAC can provide the framework upon which you and your trusted tax, legal and financial advisors can build a long-term financial plan for your contingent legal fees to reduce the annual tax burden and provide greater control over the timing of your legal fee income.

Key Benefits

There are no maximum limits on amounts you can defer and no age-related restrictions on when deferred fees can be paid.
Your fees are invested on a pre-tax, tax-deferred basis.
Dominion Switzerland can provide you with a wide range of options regarding how best to invest legal fees which you choose to defer. Payments are made to you under an agreed periodic payment plan and you will be taxed on those payments as compensation in the year in which you receive them.
Deferring the receipt of legal fees can significantly improve the financial planning opportunities and cost of finance for law firms funding the acquisition of mass tort cases.
Where the value of your deferred legal fees is significant, you should discuss estate and tax planning opportunities with your legal and tax advisor.

Investment Options

Customized Investment Portfolio

You can defer legal fees of $1 million or more to be invested directly in a customized portfolio of investments. The payments generated will wholly depend on the investment portfolio performance. You can choose the investment manager and can set portfolio-level investment objectives and risk parameters utilizing one of Dominion’s core custodians.

PPVA

You can defer legal fees of $1 million or more to be invested in a private placement variable annuity (“PPVA”) contract which wraps an underlying customized portfolio of investments. A PPVA contract can be issued by a U.S. or non-U.S. life insurance company. A PPVA contract is a customized annuity contract that is more flexible than a traditional retail variable annuity contract.

The payments generated wholly depend on the performance of the investment portfolio underlying the contract. You can choose the investment manager and can set portfolio-level investment objectives and risk parameters. Depending on PPVA contract costs, a PPVA contract may marginally outperform a directly invested portfolio if the chosen investment strategy regularly generates significant (4% or more of the total portfolio annually) amounts of U.S. stock dividend income.

Fixed Indexed Annuity

You can defer legal fees of $50,000 or more to be invested in a fixed indexed annuity contract issued by a U.S. life insurance company. The payments generated combine features of fixed (guaranteed) and variable (based on a stock market index) annuity contracts. Fixed indexed annuity contracts often provide complete downside protection in the form of a 100% return of principal guarantee.

Fixed income portfolio constructed by Dominion

Dominion Switzerland has the capability, supported by Dominion’s office in Malta which employs investment qualified staff, to offer a fixed income portfolio. This investment option can be offered where you may not have a trusted investment advisor and can apply as either a standalone investment option or as an addition to a fixed indexed annuity. The minimum investment size is $500k. This service must not be construed as the provision of investment advice. You must seek your own independent investment advice.

Borrowing Opportunities

While you cannot use your deferred legal fee payment rights as security for a loan, you may be able to borrow from a third party who will take your future deferred legal fee payments into consideration as a source of loan repayment and extend a loan on favorable arm’s-length terms. DAC can provide more details on proprietary lending programs offered by bank and non-bank lending partners.

Solution

Investment Options

Other solutions offered by the DAC provides assignment company;