Trim Attorney Fee Deferral Sails Early For Smoother Journey
Should a law firm consider revising its contingent fee agreement when preparing for attorney fee deferrals?
According to San Francisco tax lawyer Robert Wood, a ” lawyer should generally consider revising his or her generic contingent fee agreement to expressly contemplate periodic payments for all cases. Exactly what wording to use in a generic fee agreement is a matter of opinion; however, it is good practice for the agreement to state that the attorney may receive his or her applicable percentage in cash or in periodic payments. The fee agreement can provide that the attorney will specify which payment type—and the amount—in writing before the case goes to judgment or is settled. There is no disadvantage in doing this from the beginning in every legal fee agreement. It does not bind lawyers but gives them the right to structure their fees if they want to.
Ten Things CPAs Need to Know About Structured Legal Fees by Robert W. Wood, J.D July 1, 2008
Areas to Address When Considering Attorney Fee Deferrals
For solos, structuring legal fees is usually simple.
Any other forms of legal practice should exercise additional protocols for belt and suspenders. It is important for plaintiff trial lawyers and their firms to consider:
- Will the firm be the payee for the structure, receive the periodic payments and subsequently pay them to the individual lawyer as payments are received?
- If the firm has the relationship with the lawyer’s client (so the firm is technically entitled to the legal fee), is it acceptable to have an individual lawyer take his or her share of the attorneys’ fees the firm receives as an annuity?
- How the structure structure will be paid and taxed in the context of the form of business entity professional corporation, partnership, or limited liability partnership.
