Marketing Attorney Fees. Forge Consulting LLC

Transcription

1 Marketing Attorney Fees Forge Consulting LLC

2 Marketing Attorney Fees Introduction Spooner Phillips, Founding Principal, Forge Consulting LLC Traditional approach vs. Comprehensive Planning approach Changing the Conversation Comprehensive Planning Personal Tax Planning Business Planning Retirement Planning Conclusion

3 Traditional Marketing Approach Lump Sum Attorney Fee & Investments Advantages Maximum liquidity in year of receipt Control over investments Rate of return options Disadvantages Self-discipline required to invest Confidence to invest in uncertain market Maximum tax liability resulting in lower net investment

4 Traditional Marketing Approach Attorney Fee Structure & Investments Advantages Annuities provide predictable stream of payments Guaranteed rate of return Disadvantages Low rate of return Exposure over time Less liquidity Uncertainty and issuer risk

5 Traditional Marketing Approach Scenario 1 Lump Sum Attorney Fee John Doe Attorney receives $500,000 legal fee Taxed at approximately 40% Potentially HIGHER RATES OF RETURN in stock market if properly invested Scenario 2 Attorney Fee Structure John Doe Attorney structured $500,000 legal fee into $50,000 payments over 10 years. Taxed at approximately 25% MINIMAL RATES OF RETURN with annuities

6 Traditional Approach: Limitations Limitations of traditional Investment approach: Bound by market and rates of return Assumption of growth/hope wins Risk profile becomes critical Stuck in Rate v. Rate Change the conversation!

7 Changing the Conversation Integrate a Comprehensive Planning approach Personal planning Business planning Tax Planning Retirement planning Learn and address for your attorney clients Needs Wants Fears Include tax professional and advisers in your sale

8 Personal Tax Planning (Hooks) Attorney Fee Structures: Smoothing out cash flow Maintain lifestyle year-to-year Take the ANXIETY out of waiting for the next BIG CASE Illiquidity for spendthrift protection Predictable income College tuition Tax savings Retirement planning More later

9 Structured Attorney Fees Age 47 Premium: Case #1 Case #2 Case #3 Case #4 Annuity Annuity Company Annuity Company Anuity Company Company #1 #2 #3 #4 Total Premium $15, $1,500, $ 500, $ 100, $2,115, Tax Planning Illustration Year Age Total Annual Income $13, $4, $17, $162, $50, $7, $219, $162, $50, $9, $222, $162, $50, $9, $222, $ $162, $50, $9, $222, $1, $162, $50, $9, $223, $1, $162, $50, $9, $223, $1, $162, $50, $9, $223, $1, $162, $50, $9, $223, $1, $162, $50, $9, $223, $1, $148, $46, $9, $205, $1, $2, $3, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $1, $ $ Policy Details Annuity Company #1: $99.70 per month, guaranteed for 20 years, beginning on 09/07/2018, with the last payment on 08/07/2038. Annuity Company #2: $13, per month, guaranteed for 10 years, beginning 12/15/2014, with the last guaranteed payment on 11/15/2024. Annuity Company #3: $4, per month, guaranteed for 10 years, beginning 12/15/2014, with the last guaranteed payment on 11/15/2024. Annuity Company #4: $ per month, guaranteed for 10 years, beginning 04/15/2015, with the last guaranteed payment on 03/15/2025. Prepared by: T H E F O R G E C O MForge P Consulting, A N I ELLC S

10 Personal Tax Planning Attorney Fee Structures: Income tax savings improves the rate of return Plan ahead for tax payments Reduce exposure to ACA taxes or other thresholds Affordable Care Act Additional 3.8% Net Investment Income Tax above these thresholds à Filing Status ACA 3.8% tax Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) Qualifying widow(er) with dependent child $200,000 $250,000

11 Business Planning (Hooks) Attorney Fee Structures: Introduce predictability to firm s annual revenues Prepare firm s expansion Plan for overhead expenses Plan for exit strategies/buyout arrangement Plan to work part-time Work on fewer/selective cases Reduce stress

12 Business Planning Example Partner Buyout Fee agreement Tax savings Essentially a structured sale Predictability

13 Retirement Planning Attorney Fee Structures: Fund retirement with a predictable income stream Replace income Provide liquidity for contributions to qualified plans Maximum contributions to retirement plans in SHORT amount of time SIGNIFICANT tax savings

14 Assumed Age: 40 Goal Retirement Age: 55 Goal Income Year Age Premium Needed to Fund Payments $250, $180, $250, $175, $250, $170, Back fill single lump sum income after satisfying lump sum income at age 53. Back fill single lump sum income after satisfying lump sum income at age 54. Back fill single lump sum income after satisfying lifetime income beginning at age 55. Retirement Planning Illustration $250, $ 3,268, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250, $250,000.00!for life Lifetime Income starts at age 55 guaranteed for 15 years and life. Assumptions: Rates listed are illustrative and not indicative of final quotes. To fund lifetime income, attorney could use 100K fee from 33 cases, 250K fee from 13 cases, 500K free from 7 cases, or 1M fee from 3+ cases, or any combination of fees to sastify lifetime income goal. After lifetime income goal is satisfied, attorney could start backfilling income prior to age 55 with single lump sum fee deferrals using same fee strategy with multiple cases as mentioned above. Prepared by: Forge Consulting, LLC T H E F O R G E C O M P A N I E S

15 Conclusion Change the Conversation Comprehensive planning approach Focus areas with the attorney Personal Business Retirement Tax Bring in CPAs and other advisers Confirms tax benefits by trusted source Helps direct focus on what s important Identify opportunities Proper plan design

16 Questions? Contact us and thank you! Copyright 2015, Forge Consulting, LLC. The information contained in this illustration is not written or intended as financial, tax or legal advice. The information provided herein may not be relied on for purposes of avoiding any federal tax or penalty. You are advised to consult your own advisor prior to acting on any illustration or information contained herein.