Structured Attorney Fees for Los Angeles Trial Lawyers

Childs v. Commissioner, 103 T.C. 634 (1994), aff'd 89 F.3d 856 (11th Cir. 1996), is the controlling authority. Done correctly and in time, you defer tax on your contingency fee across 5–30 years through a carrier-backed structure — uncapped, unlike any qualified plan. The IRS has scrutinized the exotic "defer-plus-loan" products in recent years; I only build the plain, Childs-compliant kind, and I coordinate with your tax counsel.

Why Los Angeles is the highest-value place to do this

California's top marginal rate is 13.3% (plus the 1% mental-health surcharge over $1M). A DTLA plaintiff lawyer taking a $3M fee as a lump sum loses close to 50% off the top slice. Spread that same fee across ten years and much of it drops into lower brackets — the effective rate can fall to the low 30s. On a $3M fee that is roughly $540,000 kept instead of paid. That number is real, recurring, and larger in California than in any no-income-tax state.

The math — $3M contingent fee, L.A. plaintiff attorney

How it works

1. Before the settlement is fully papered, your fee agreement is restructured so the defendant or settlement fund directs your fee to a qualified assignment company — not to you.
2. The assignment company buys a fixed annuity from a major life carrier (Pacific Life, MetLife, Independent Life, USAA Life).
3. The carrier pays you on the schedule you choose — 5 years, 10 years, life, lump-then-monthly, or custom.
4. You recognize income only as payments arrive. No constructive receipt, because you never controlled the fee in year one.

The whole thing turns on timing. The structure has to be in the settlement paperwork before you have a right to the fee. Once you've taken constructive receipt, the deferral is gone. If your case is close, call before you sign.

Who I structure fees for in Los Angeles

• Personal injury & trial firms — single large case or a steady book of settlements
• Mass tort / MDL lead counsel — bellwether and common-benefit fees
• Plaintiff employment lawyers — wrongful termination, discrimination, PAGA and wage-and-hour class fees
• Consumer class action & securities — opt-out and class fees
• Product liability — cases with large punitive components

When it fits

• Contingent fee $750K+ (ideal $1.5M+)
• Structuring papered before you have a right to the fee
• Defendant or settlement administrator willing to direct payment (institutional defendants do this routinely)
• You don't need the entire fee at closing

When it doesn't

• Fee already paid to you or your firm trust account (too late)
• Fee under ~$500K (the math doesn't justify it)
• Already-finalized mass-tort distribution with no room to structure

How I work

Hans Goldstein, Goldstein & Co. — based in Los Angeles, California Insurance License #4322192. I structure attorney fee deferrals through carrier-appointed brokerage relationships with Pacific Life, MetLife, Independent Life, and USAA Life. I'll meet you in Downtown L.A. — I come to your office.

Free 15-minute fit-check. Bring your fee estimate, expected settlement date, defendant's counsel, and target payout schedule. I model lump-sum vs. structured side by side. The carrier compensates the broker — this costs you nothing out of pocket. I coordinate with your CPA or tax counsel so the structure is clean and audit-safe.

Frequently asked

Q: Is this still safe with the IRS looking at fee deferrals? A: The scrutiny is aimed at aggressive "deferral plus immediate loan" products — not plain Childs structures, which have held since 1994 with IRS acquiescence. I build only the conservative kind and coordinate with your tax counsel. Being audit-safe is the point.

Q: Can I defer just part of the fee? A: Yes. A common structure takes 30–50% at closing for immediate needs and defers the rest to optimize the bracket reduction.

Q: Does my client need to know? A: The defendant or settlement administrator agrees to direct your fee to the assignment company. Your client's net recovery is unaffected.

Q: What if the defendant won't agree to direct payment? A: Institutional defendants in major L.A. cases do this routinely. If yours won't, the settlement administrator often can.

Q: How is this different from selling my firm? A: This defers your fee income. Selling the practice is a capital-gains event handled under §453 — a separate strategy I also structure.

Educational. Not tax or legal advice. Plaintiff attorneys: the structure must be in the settlement paperwork before constructive receipt — talk to me before signing. Coordinate any structure with your own qualified tax counsel. Ref: Childs v. Commissioner, 103 T.C. 634 (1994), aff'd 89 F.3d 856 (11th Cir. 1996).