Structured Attorney Fees for Los Angeles Trial Lawyers

Childs v. Commissioner, 103 T.C. 634 (1994), aff'd without published opinion, 89 F.3d 856 (11th Cir. 1996), is the leading authority. Done correctly and in time, you defer tax on your contingency fee across 5 to 30 years through a structure funded by a fixed annuity from a highly rated life insurer. It's 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 comes back with every big fee, and it is 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 an assignment company, not to you.
2. The assignment company buys a fixed annuity from a highly rated life carrier.
3. You are paid on the schedule you choose: 5 years, 10 years, life, lump-then-monthly, or custom. The assignment company owes you the payments and funds them with the annuity it owns.
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: a 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 #4273294. I structure attorney fee deferrals through a brokerage firm that places the annuities with highly rated life insurers (A or better by A.M. Best or equivalent). I hold no direct insurer appointments. I'll meet you in Downtown L.A., at 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. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee. I coordinate with your CPA or tax counsel so the structure is clean and documented.

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 rest on a 1994 Tax Court decision that has not been overturned. (The IRS has not formally acquiesced in Childs, and its Dec. 2022 memo AM 2022-007 shows it is watching.) 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 to 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.

Free guides (PDF)

• Structured Attorney Fees: one-page explainer
• Before You Settle: the pre-settlement tax checklist
• §453 for your clients selling a business or property

Educational. Not tax or legal advice. Plaintiff attorneys: the structure must be in the settlement paperwork before constructive receipt, so 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).