Structured Settlements – Evaluating Case Reports on Structure Settlements

Evaluating structured settlements in comparison to other investments can be beneficial to your research. The difference could be what you are searching for in your questions regarding structured settlements.

How do structured settlement fees evaluate against other investments? Take into account the following three examples comparing structured settlement attorney fees with taxable investment accounts.

1) Required Rates of Return – On this case report, we will use an example of a 5.0% rate of return and a 35% Federal tax rate on a $300,000 annuity premium. A structured settlement annuity compared with an alternative taxable investment account, the taxable account would need an additional 2.7 rate of return to equal the structured settlement annuity level payout.
2) Valid Payouts – We will assume that the structured settlement annuity and the taxable account both provide the same rate of return. Payouts for the taxable account would be $7,071 less than the structured settlement payout each year. The total adds up to be an alarming $106,065 less.
3) After-Tax Payouts – The taxable investment account eventually runs out of money during the payout phase assuming equal rates of return and after-tax payments. What this example shows us is that the taxable investment account pays $126,791 less in after-tax payments than the structured settlement annuity payout. Furthermore, it is exhausted sooner.  From a tax perspective, structuring attorney fees is a method of deferring fee. The deferral of attorney fees has been affirmed by the Tax Court in the case Childs vs. Commissioner.
As a result of several groups apprehensive about taxpayers who earn fees and commissions from several sources of income, the Treasury Department exclusively removed contingent-fee attorneys from the group of taxpayers to be affected by the American Jobs Creation Act of 2004. The Treasury guidance promptly removed attorneys from the new rules, confirming that attorneys could continue to defer fees and taxes.
Structuring an attorney fee requires the assistance of a competent tax professional. It is important to realize that the facts of each case can differ. For this reason, it is recommended to work with a tax advisor. By evaluating case reports on structured settlements you can learn from the comparisons.

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Updated: January 2, 2012 — 11:35 am

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