New Tax Law Raises Questions Concerning Future Structured Attorneys’ Fee

The recently passed American Jobs Creation Act of 2004 created a new Internal Revenue Code Section 409A that significantly changes the tax treatment of non-qualified deferred compensation plans

or arrangements by imposing a number of restrictions and requirements.

These new rules broadly define non-qualified deferred compensation and may include more than what has been typically considered "deferred compensation". It is unclear whether or not structured attorneys’ fees fall under the new definitions.

The tax and legal departments of the life companies accepting attorneys’ fee structures are reviewing the scope of Section 409A and will be issuing advisories on their positions as soon as possible. The Treasury and the IRS are expected to issue guidance on the new rules, but we do not know how long that might take regarding attorneys’ fees.

The good news is that attorneys’ fee structures will continue to be viable, albeit possibly under a new set of rules, forms and guidelines. We will keep you informed as more details become available.

You can rely on Creative Capital to insure up-to-date compliance with new legislation including tax code changes, and to achieve the best possible structured settlements for you and your client.

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