Attorney Fee Deferral Process
After settlement, your fee will go either to an assignment company or flow from a qualified settlement fund to the assignment company. It is important to understand that you cannot have constructive receipt of your fees
You have the option of choosing the investment vehicle that best suits your needs (see options below) We recommend you collaborate between your Attorney Advantage advisor, your accountant and your investment advisor to better understand whether an annuity-based or investment account deferral plan makes more sense for your needs.
Once you have chosen your investment vehicle and pay schedule, the fees are released from the assignment company into your investment account.
Your payments will be dispersed according to your predetermined schedule. Worth noting there are no limits on how much money you are allowed to contribute to your deferral plan.
It is important to understand that you will in fact have the ability to add fees to your existing deferral plan in the future. It goes without saying that you can also create additional deferral plans if you so choose.
The attorney fee deferral process is quite simple although it is a bit more in depth than most companies let on.
The assignment company, in our case Havelet, purchases an annuity contract which enables it to fulfill its obligations under the assignment contract.
An irrevocable instruction is given to Havelet’s bank to immediately transfer any money it receives to purchase the annuity, thereby securing all monies will be applied according to the terms of the assignment contract.
The Attorney is named as the annuitant under the annuity contract and Havelet remains the owner. Once the assignment contract has been completed and the money has been transferred to the annuity provider, the annuity provider will invest the sum in the appropriate investment portfolio.
Payments under the assignment contract will be made directly by the investment manager via written instruction from Havelet, the annuity provider and/or trustee. This multi-signatory process provides checks and balances to secure funds are distributed in accordance with the assignment and annuity contracts.
US tax code imposes a withholding tax up to 30% on earnings of dividends and realized capital gains within all investment accounts. Havelet can mitigate these taxes by ‘wrapping’ each account with a private placement annuity per Article 18 (2) of The US / Barbados Tax Treaty.
Furthermore, Havelet is compliant with IRS § 72(u) meaning our clients are able to obtain distributions, without the imposed 10% penalty, before age 59 ½.
In short, assignments through Havelet have more flexibility than those offered through domestic assignment companies which are subject to withholding tax and IRS§ 72(u).
Types of Attorney Fee Deferral Vehicles
Annuity Based Deferral Option
An annuity-based deferral, commonly referred to as a structured settlement annuity, allows you to select both the date of the payouts and the monetary amount of said payouts.
In an annuity-based deferral, the rate of return is fixed and is generally guaranteed by large life insurance companies. Because of the guarantee the rate of return is on the lower end of all possible investment vehicles.
Investment Account Deferral Option
An investment account deferral option is becoming more and more popular in recent years, and it is easy to see why.
With this option, you can invest into an account that follows the deferred compensation plan rules and guidelines. While this type of investment vehicle operates similar to a 401(k), it falls outside of federal laws that protect 401(k’s)
So, you can direct the investments and invest in virtually any investment portfolio of your choosing in the hopes of gaining higher returns than the aforementioned fixed annuity-based option.
if you do not want to commit immediately to a fixed set of annuity payments, you can decide at a future date when you would like to receive future payments.
