With interest rates at record lows, you might think that structuring your attorney fee will simply lock you into a low-yielding investment.  Think again.  The income tax benefits of a structured fee can far outweigh the currently low rates of return.  By matching the year of receipt of structured fee payments with that of your expenditures, it is possible to incur zero income tax liability on that fee.

Let’s assume that you earn a $450,000 fee in 2010.  By using that fee to cover future case expenses through a structured fee, your income tax liability may be zero.  Suppose you can cover your expenses for the next 12-18 months but would like a predictable income stream in 2012 for future case expenses.  The two alternatives below illustrate the net income you would earn by taking the lump-sum in 2010 and then investing in Treasury Bonds versus structuring the fee with annual monthly payments during 2012.  As you can see, the end result is over $135,000 to you if you structure and match case expenses.

Alternative 1.  Take the fee in 2010 and invest for 2012 in 2-year Treasury Bonds yielding 0.40%.

Alternative 2.  Structured fee.