In the face of rising marginal tax rates, a well-structured fee deferral program can reduce your tax liability, accelerate wealth accumulation, improve cash flow, and help you retain valuable associates.
Deferral offers a dual benefit: you bypass immediate taxation and invest the full, pre-tax fee amount rather than what's left after taxes, letting your returns compound over time. Spreading income across years can also lower your effective rate versus taking it all in one spike — or you can wait to withdraw until rates or your circumstances change.
Build a personalized portfolio from low-cost index funds (ETFs), choose a model portfolio ranging from conservative to aggressive, or select a fixed-return option if you'd rather not take market risk. Your deferred fee compounds — it isn't locked into a single fixed annuity rate the way a traditional structured settlement is.
You decide when income arrives and how it's taxed — much like an executive deferred compensation plan, but built around your own case timeline. Ladder payments over time and push back anything you don't need yet — no rigid term has to be locked in on day one.
No deferral cap, no early-withdrawal penalty. Unlike a 401(k) — capped annually by IRS guidance and subject to a 10% penalty for withdrawal before age 59½ — there's no dollar limit on what you defer here, and no age-based penalty for accessing it. See the legal foundation for how this is grounded in three decades of Tax Court precedent.
Deferral isn't only a personal tax play — firms use it as a strategic tool too.
Extend a deferral arrangement to key associates as a long-term incentive to stay — a "golden handcuffs" structure that mitigates the risk of a valuable associate leaving and taking cases with them.
Instead of one large, unpredictable fee year, laddered deferrals can be structured to create a more predictable, recurring flow of income for the firm.
Smoothing a lumpy fee year, funding retirement, bridging income between ages 50 and 59½, and creating recurring cash flow to cover firm costs.