Man holding Fees sign shows Contingency Fees Money

Money Management for Contingency Fees

By Theda C. Snyder

As if you didn’t have enough to worry about—between getting clients, pleasing clients, meeting deadlines, sending out invoices and making sure the yogurt isn’t past its “sell by” date—you have to think about your financial future, too.

If financial planning sounds overwhelming, and you work on contingency, take a look at “structured settlements.”

Here’s how it works: If you work on contingency, you can defer some (or all) of your fee until later and avoid paying tax on it until a time you choose.  It could be:

  • Spread over a period of years to help even out income peaks and valleys
  • Coordinated with your kids’ college tuition due dates
  • Scheduled for your life expectancy  or a set number of years starting now or at retirement

Major life insurance companies with an “Excellent” or “Superior” rating from A.M. Best issue structured settlements for lawyers. When you settle your case, the documents define the payout terms.  The defense pays directly to the insurance company, which then assumes responsibility for making the payments to you. A structured settlement broker can provide sample documents to incorporate into the agreement.

More than likely you’ll find this is a better savings vehicle than your law firm’s qualified benefit plans, because:

  • There are no limits to the amount or the timing
  • The contribution can exceed the amount ordinarily allowed by the IRS
  • Payments can begin at any time without a penalty
  • Firm partners can defer money payable to themselves alone, without providing a like amount for employees.

There is a minimum: You can’t structure less than $10,000.  And your partners will have to consent for the deferred compensation to be debited appropriately against your profit share. But it can be a great way to manage your finances and clear up that financial planning headache!

Theda (“Teddy”) Snyder is an attorney and structured settlement broker with Ringler Associates. She has practiced law for 33 years, including 10 years as principal of her own firm. She is a frequent speaker and has written four books on law practice management, including Women Rainmakers’ Best Marketing Tips, 3rd Edition (ABA, 2010).

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Categories: Daily Dispatch, Law Firm Strategy
Originally published March 9, 2011
Last updated October 19, 2019
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Teddy Snyder Theda C. Snyder

Theda “Teddy” Snyder mediates civil disputes, workers’ compensation and insurance coverage cases, including COVID-19 related coverage disputes, in person or by video. Teddy has practiced in a variety of settings and frequently speaks and writes about settlements and the business of law. She was a Fellow of the College of Law Practice Management and is the author of four ABA books, including “Women Rainmakers’ Best Marketing Tips, 4th Edition” as well as “Personal Injury Case Evaluation” available on Amazon.com. Based in Los Angeles, Teddy can be found at SnyderMediations.com and on Twitter @SnyderMediation.

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