Guest Appearance during Ep. 27 of the Ask the Law Firm Seller Show: Greg Maxwell, Esq., CFP of Amicus Settlement Planners: What tax savings value do structured settlements provide to sellers and buyers of Contingency Fee law firms?   During Ep. 27 of the Ask the Law Firm Seller Show, Greg Maxwell, Esq., CFP of Amicus Settlement Planners joins to address the following question:   What tax savings value do structured settlements provide to sellers and buyers of Contingency Fee law firms?   Maxwell initially explains that Amicus Settlement Planners primarily works with contingency fee practices, assisting with settlement planning from the standpoint of spreading out recoveries in contingency fee matters to reduce the “tax bite” that plaintiffs may otherwise incur. Maxwell and Senior Attorney Match’s Jeremy E. Poock, Esq. then discuss the benefits that structured settlements offer to contingency fee plaintiff attorneys, including a role for structured settlements in the sales of contingency fee law firms. As Poock and Maxwell discuss, structured settlements can play a role in the following scenarios: (a) Deferring taxes upon a portion of upfront money paid by a purchaser to the seller of a contingency fee law firm; and (b) Deferring portions of annual earnout payments for sales structured as earnouts once a selling contingency fee attorney receives annual earnout payments that satisfy a selling attorney’s annual income needs. Maxwell explains the benefits of a structured installment sale when sellers of contingency fee law firms receive significant upfront payments in consideration of their law firms. In those sales, Maxwell explains that a buyer can direct a portion of purchase proceeds to a company such as MetLife or Independent Life, which can establish a future series of payments for a seller, such as payments over the course of 3, 5, or 10 years, or the remainder of a Seller’s lifetime.   As Maxwell states, “So, the point of that is to really get them down into the tax bracket that they want to be in so that they don't have a huge spike in taxes the year they sell their firm. . . This gives them the opportunity to spread out that recovery . . . and keep themselves in a tax bracket that's more comfortable for them.”   Maxwell’s appearance also includes addressing the following hypothetical: Assume that the 67 year old owner of a Personal Injury Law firm that generates $2M in annual legal fees sells to a growing PI firm in consideration of 1/3 fee sharing for 5 years upon cases attributable to the Seller’s Book of Business.   Assume that the Seller’s Book of Business continues to generate $2M/yr. during the 5 year earnout period, which would result in annual fee sharing with the Seller in the amount of $667k/yr.   Assume that the Selling attorney only needs to earn $350k/yr. because of revenue from other sources of income.   How could a structured settlement arrangement “capture” the additional $317k in annual earnout revenue, including deferring taxes for the Seller?   As Maxwell explains, the Seller may treat the additional $317k as deferred compensation, where similar to an annuity, that $317k could benefit from deferred tax treatment until the Seller receives all or a portion of that amount from a plan administrator in the future.