T H E P O W E R O F I N N O VAT I O N . Ta x - D e f e r r e d I n v e s t m e n t S o l u t i o n s w i t h M a r k e t - R e l a t e d R e t u r n s
Exclusively for Attorney Contingency Fees
FEE STRUCTURE PLUS
I N N O V AT I V E TA X - P L A N N I N G INVESTMENT SOLUTIONS Exclusiv e l y f o r t h e I n v e s t m e n t - M i n d e d A t t o r n e y.
CONTENTS
01
F EE STRUCTURE PLUS TM
03
THEN AND NOW
05
THE BENEFITS
07
F REQUENTLY ASKED QUESTIONS
09
S TRUCTURED ASSIGNMENTS, INC
11
1
FEE STRUCTURE PLUS
2
FEE STRUCTURE PLUS
(TM)
You’ve w o r k e d h a rd y o u r en t i re l i f e . You go the e x t r a m i l e i n a l l t h a t y o u d o . Your contingency fees should do the same.
Receive market related returns on the full value of your contingency fees...
Integrated Financial Settlements, a leading provider of structured settlements in the United States, has developed Fee Structure PlusTM - an innovative tax management program for attorneys working under contingency fee agreements. This program offers plaintiff attorneys a unique alternative to traditional structured attorney fee options. Fee Structure PlusTM allows attorneys to have their contingencybased attorney fees placed in a program that will enjoy market related returns. The introduction of Fee Structure PlusTM represents the next generation of structured attorney fees. In addition to tax deferral on contingency fees, deferred funds may be allocated to market-related investment portfolios. Attorneys can select a passive or active investment management approach using a respected trust company or their own financial advisor.
3
FEE STRUCTURE PLUS
4
5
THEN AND NOW N o t o n l y c a n y o u d e f e r t a x o n c o n t i n g e n c y f e es, b u t n o w y o u c a n a l l o c a t e a p o r t i o n o f t h o s e d e f e r red f u n d s t o m a r k e t - re l a t e d i n v e s t m e n t p o r t f o l i os.
Welcome to the new face of structured contingency fees... achieve market related returns with the guidance of your financial advisor.
The tax court decision Childs v. Commissioner1, affirmed by the 11th Circuit in 1996, was a watershed event that gave attorneys the ability to defer taxes on contingency fees received as periodic payments. The introduction of Fee Structure PlusTM represents the next generation of structured attorney fees in line with this decision. Identifying The Limitations Of Traditional Structured Fees The Childs case provided some measure of tax relief for contingency fee attorneys whose income may fluctuate, potentially resulting in
increased taxation. Initial fee planning options under this decision have been limited to the same fixed‐ rate annuity options made available to their personal injury clients. From a timing and security standpoint, these fixed‐rate funding vehicles were unique, offering broad design flexibility and a proven history of performance through both rising and falling economic cycles. However, as interest rates have declined over the past decade, it has become more difficult for attorneys to justify allocating 100% of deferred fees to purely fixed income arrangements. Although annuity rates have improved, many still favor diversifica-
tion of funds allocated for the long term. Many attorney‐clients would prefer that their deferred fees be allocated in different asset classes, as is routinely done in more traditional portfolio arrangements. Since the landmark Childs decision, not only can attorneys defer tax on contingency fees, but they may also allocate a portion of those deferred funds to market‐related investment portfolios. Further, they can select a passive or active investment management approach using a respected trust company or their own financial advisor. 103 T.C. 634 (1994); affirmed without opinion, 89 F.3d 856 (11th Cir. 1996).
[1]
FEE STRUCTURE PLUS
6
THE BENEFITS
Fee Structure Plus TM offers unique features that can provide greater long-term benefit over traditional fee structures .
-- Potential for Income and Tax Deferral --- Program Delivers Market-Related Returns --- Program May Utilize Your Personal Financial Advisor --- Design Periodic Payments to Meet Individual Needs -Fee Structure PlusTM (FSP) achieves the potential for asset-class diversification that may address an attorney’s income, retirement planning, operating expenses, and other financial needs. By deferring income and taxation, the full amount of the contingency fee may be placed into the program pre-tax, allowing for more growth than if the fee were to be taken as a lump sum and invested post-taxation. The funds can be managed by the attorney’s financial advisor or a highly rated trust company. This allows for the investment to work in conjunction with the attorney’s specific needs and overall wealth management strategy. Fee Structure PlusTM offers the ability to benefit from marketrelated returns. Adding equity investments as an option in addition to fixed returns addresses two of the most essential considerations of prudent investing: diversification and inflation protection.
7
FEE STRUCTURE PLUS
STRUCTURED ON YOUR TERMS.
“Due to lower fixed rates of return, we had never considered deferring our fees using a structured settlement annuity. Fee Structure Plus™ provided us with the ability to have our fees managed by our independent investment advisor on a tax-deferred basis. If you are looking for a trusted solution, look no further.” -Perry Weitz, Esq. and Arthur Luxenberg, Esq., Weitz & Luxenberg, New York, NY
“Preparation, preparation, preparation--that is the foundation to all of my cases, as well as my philosophy to my personal finances. That’s why I chose Fee Structure PlusTM to defer my contingency fees. The program offered me the opportunity to place my fees in a low-cost portfolio at a U.S. based trust company on a tax-deferred basis.” - Keith Lovendosky Esq., Bailey & Partners, Santa Monica, CA
8
QUESTIONS & ANSWERS
Is there a minimum or maximum amount that can be placed into Fee Structure Plus? The minimum amount for Fee Structure Plus is $100,000.00. There is no maximum.
Can the payee be the law firm? Yes, the payee can be either the attorney or the law firm. The payee will be reflected in the settlement documents.
Can an attorney structure fees with Fee Structure Plus even if his or her client does not select a structured settlement? Yes, a claimant structure is not necessary. Fee Structure Plus is available for stand-alone attorney fee structures.
Is Fee Structure Plus limited to physical injury cases? No, Fee Structure Plus is available to attorneys for any type of contingency fee case.
9
Can Fee Structure Plus be used for a claimant in a non-physical injury case (non-qualified settlement)? Please contact us for use of Fee Structure Plus for claimants on nonphysical injury cases. Cases will be reviewed on a case by case basis, but Fee Structure Plus can be utilized in certain of those situations.
Where are the assets funding the Fee Structure Plus payments held? Upon receipt of the funding amount in Barbados, the assignment company immediately sends funds via wire transfer to a trust company in the United States for custodianship and management. At the completion of the Fee Structure Plus transaction, the assets are held by the US domiciled trust company as the funds’ custodian. Additionally, if requested by the attorney, the trust company may transfer the funds to an external financial advisor’s platform.
Can the attorney designate a beneficiary? Yes, the attorney can designate both primary and contingent beneficiaries.
Why is the assignment company located in Barbados? The Assignment Company is domiciled in Barbados to make use of the benefits of the US-Barbados Tax Treaty for the avoidance of Double Taxation. More information regarding the use of our assignment company can be found on the following page.
What is the role of the trust company? The trust company serves as administrator and master custodian of the Fee Structure Plus program. It is responsible for accounting, tracking, reporting (including tax reporting), and calculations on behalf of the assignment company.
What are the fees for Fee Structure Plus? The fees for Fee Structure Plus are: • One-time assignment fee of $1,000.00 • One-time administrative fee of $400.00 • Annual FSP Program Fee of 1% of the value of the Fee Structure Plus account each year, taken at the time of account establishment and on or about each anniversary there after. This program fee covers the on going program administration costs, operating expenses of the assignment company and custodial and administrative services provided by the trust company. It also provides the attorney or law firm with access to the trust company’s investment asset allocation models at no additional cost. If investment advisory services by an external financial advisor or active management by the trust company are desired, the fees of the external advisor or the trust company would be added to the fees outlined above.
Are the assets within the Fee Structure Plus accounts protected from creditors of the attorney or law firm? While the attorney or law firm would be the payee of the future payments, the assets used to fund the Fee Structure Plus payments are owned by the assignee, Structured Assignments, Inc., pursuant to a non-qualified assignment. Since the attorney and/ or law firm have the right to receive periodic payments but do not have ownership rights in the underlying assets, the assets are not subject to claims of the attorney’s or law firm’s creditors.
What type of tax reporting is required for Fee Structure Plus? The trust company, on behalf of the assignment company, will issue a 1099-MISC to the attorney or law firm payee during the year(s) that payments are made. The payments are reported as ordinary income.
Can I view the balances in the Fee Structure Plus account online? Yes, online view-only access to the account is available.
Do the laws governing ERISA plans as well as other deferred comp plans apply to the Fee Structure Plus program? No, pursuant to the Childs case, a structured attorney fee payment is viewed as non-employee deferred compensation, not employee compensation (e.g., 401(k)). Further, it falls under Section 83 under the Childs decision and was exempted from the 409A deferred comp regs in Notice 2005-1. Copies of the Childs decision and Notice 2005-1 are available upon request.
FEE STRUCTURE PLUS 10
TRUST & EXPERIENCE
Tax deferral of contingency fees is made possible in partnership with Structured Assignments, Inc.
Structured Assignments Inc. was founded in 2010 as an entity for the purpose of accepting non-qualified assignments of periodic payment obligations. It is guided by an esteemed Board of Directors, utilizes the Royal Bank of Canada (the largest bank in the Caribbean) for all banking needs and was established with advice from the renowned law firm Chancery Chambers. The assignment company is domiciled and managed in Barbados in order to make use of the benefits of the US-Barbados Tax Treaty so that the ownership of the funding assets does not trigger double taxation. An assignment company organized as a United States corporation would generally be subject to tax on the receipt of a payment for assignment of a periodic payment obligation (fee for services rendered) as well as any interest gain from the assets it purchased and owned. Further, it would not have any offsetting deductions upon the purchase of the funding assets until and as payments were made to the holder of the assets (e.g., as economic performance occurs). While there is an exception for this under Section 130 of the Internal Revenue Code, it is limited to periodic payment obligations that are tax exempt under Section 104(a)(1) or 104(a)(2) of the Code. Barbados is a highly regulated jurisdiction with a well-established and long-standing tax treaty with the United States that allows for the assignment of payment obligations and asset ownership in a tax efficient manner.
11
BOARD OF DIRECTORS SIR TREVOR CARMICHAEL, KA, LVO, QC Sir Trevor Austin Carmichael was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. As a lawyer, he has been engaged in all facets of the law. His original practice areas spanned criminal, constitutional, labor, divorce, trademarks and later he has focused on commercial, charities and environmental law. He is a member of the International Bar Association, the InterAmerican Bar Association and a committee member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados chapter of the International Fiscal Association of which he is Charter President. He has authored over one hundred articles and monographs in the areas of Law, Economics and Public Policy and is the Founder of Chancery Chambers, a Barbados law firm engaged primarily in international business law, environmental law and the law relating to charities.
SEAN J. COLEMAN, ESQ., PRINCIPAL, INTEGRATED FINANCIAL SETTLEMENTS Mr. Coleman is a Principal, the Chief Operating Officer, and General Counsel of Integrated Financial Settlements, Inc. (“IFS”) IFS wholly-owns four (4) structured settlement consulting firms compromising more than forty percent (40%) of the US national market and originating more than $2 billion in annual structured settlement annuities. Mr. Coleman also is one of the founders and the Manager of Alpha Artists, LLC, one of the leading designers of equity indexed annuities in the United States. Further, Mr. Coleman plays an active legal and business development role with Counsel Financial Services, LLC, the largest non-bank lender to legal firms in the United States. Mr. Coleman has over 19 years of experience in the structured settlement industry, having originally started representing Millennium Settlements, Inc. in 1995. Mr. Coleman received his undergraduate degree with honors in 1991 from Princeton University, in Princeton, New Jersey, and his law degree in 1995 from University of Virginia School of Law, in Charlottesville, Virginia. He is a member of the Georgia and Atlanta Bar Associations and is active in the National Structured Settlements Trade Association, currently serving as chairman of its Legislative and Regulatory committee.
ARCHIE CUKE, C.A., M.B.A. Archie Cuke has a long and successful track record in business in Barbados and abroad starting with Price Waterhouse in Canada where he obtained his C.A. and M.B.A. His career has covered almost 30 years in Canada and the last 7 years back in his native Barbados including senior management roles and management consulting in the international business, financial services and investment areas. Archie’s background in the Barbados international business arena and senior management experience enables him to provide Structured Assignments, Inc. with the financial leadership to implement its strategic plan.
P R O F E S S I O N A L A D M I N I S T R AT I O N P R O V I D E D B Y CHANCERY CHAMBERS, ATTORNEYS AT LAW The firm with its’ affiliate, Chancery Corporate Services Limited, offers professional advice and guidance for International and local clients on the use of the appropriate entities such as International Business Companies, Societies with Restricted Liabilities, International Financial Services Companies and Exempt Insurance Companies. It also provides corporate advisory, corporate secretarial and administrative services to local, regional, international and multinational companies. Chancery Chambers regularly provides tax advice and opinions in international and domestic transactions and in the structuring of investments. It has also been a leader in developing tax advantaged structures working in conjunction with accounting firms and regulatory authorities.
12
FEE STRUCTURE PLUS
fsp@structures.com
w w w. F E E S T R U C T U R E P L U S . c o m
877.819.3480
Integrated Financial Settlements (IFS) is the leading provider of structured settlement solutions in the United States with business written through EPS Settlements Group, Structured Financial Associates, Millennium Settlement Consulting and JMW Settlements. IFS, or any of its affiliates, does not provide advice or services related to the purchasing of, selling of or investing in securities or other financial instruments. Any discussion of securities contained herein is not intended or written to be used, and cannot be used, as advice related to the purchasing of, selling of or investing in securities or other financial instruments. IFS, or any of its affiliates, does not provide legal advice or legal services, nor does IFS, or any of its affiliates, provide tax advice or tax services. Any discussion of legal or tax matters contained herein is not intended or written to be used, and cannot be used, as legal advice or for avoiding any penalties that may be imposed under Federal tax laws. To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication (including any attachments), unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.