When I went to law school many, many seasons ago, I went with a specific focus in mind - tax and estate planning. I took every tax class that the University of Miami taught as a JD student and many more as a LL.M student. Needless to say, none of these subjects are covered on the bar exam. I paid a big price, learning and relearning subjects that I should have taken or at least taken more seriously. Certain topics were of surprising interest to me like criminal procedure. Nevertheless, I never fashioned myself as a litigator given that I could not (and have not) beaten Mrs. Nowotny in an argument in almost forty years. How could I expect to represent plaintiffs successfully! On the other hand, how many husbands can point to a successful record of winning arguments with their wives. Consequently, my only connection with plaintiff attorneys has been in the area of tax planning for contingency fees.
Up until now, attorneys have not heavily relied upon structured settlement annuities. In my view, the primary reasons include the unattractiveness of fixed annuities during a low interest rate environment. Secondly, before the advent of third party lending to law firms, law firms needed the money to support the litigation costs of current and future cases. The use of assignment companies for non-qualified assignments in Ireland and other jurisdictions also garnered some attention. However, none of these solutions has succeeded in providing a solution which would allow attorneys to structure a large percentage of their substantial contingency fee income.
How many lifetimes of deferred income does an attorney need? In my view the better solution is structuring contingency fee income so that the contingency fee income is income and estate tax free outside of the reach of personal creditors with the ability to take distributions during the attorney's lifetime on a tax-free basis. The better solution is Private Placement Life Insurance (PPLI). PPLI provides for tax-free treatment on investment income within the Policy and tax-free loans and withdrawals of that income during the lifetime of the Policyholder. The ideal solution for attorneys provides for tax-free treatment of the contingency income; tax-free reinvestment of the income within PPLI; tax-free loans and withdrawals of the income during lifetime; protection from creditors along with income and estate-tax free treatment. Of course, the key is how you connect the dots aka the “secret sauce”. If you are a plaintiff's attorney looking for a better way, drop us a line!