Tax Minimization Strategies for Attorneys

As a successful attorney, you pay more than your fair share in taxes--especially if you are a personal injury attorney. On top of that, income taxes can be particularly tricky for partners in a law firm. Partners are considered self-employed for tax reasons and are required to report their percentage of the firm's income and expenses on their personal tax returns. We believe that proactive tax planning is an essential element of an attorney's overall wealth management strategy. 



Here's how we help:

Structured Fee Arrangements

Personal injury attorneys and others who work on a contingency fee basis face a unique tax challenge. The prospect of a big win for your client and large settlement fee has major tax implications. Receiving a large amount of income in one year can put you into a much higher tax bracket causing you to pay a much higher tax rate than you otherwise would. 

In most cases, contingency fee attorneys can instead structure their fees to receive them over a period of years. This allows you to reduce the sudden tax impact. Better yet, while your fee is being deferred you can invest these funds and have them professional managed to achieve maximum tax-deferred growth. 

We partner with firms that can help you set up a structured fee arrangement and we can invest these funds on your behalf according an investment policy that we will work with you to design. 

Making the Most of Your Retirement Plan

Contributions to your tax-deferred employer retirement plan are tax-deductible and reduce your taxable income. There are many different retirement plans to choose from for your firm if you are a solo practitioner or small firm. We can help you evaluate all of your different options and choose the right plan for you and your firm whether that is a SIMPLE IRA, SEP IRA or 401k. And we will help you manage and operate the plan as well. If you are part of a larger firm, we will help you make sure you are maximizing all the benefits and tax-deferral options available to you. 

For solo attorneys and small firms that need more tax-deferral, we can help you evaluate more advanced options like a cash balance plan. A cash balance plan is a defined benefit plan that can be paired with a 401k to allow you to defer even more money on a pre-tax basis. 

Tax-Deferred Investment Vehicles

Outside of your employer plan, you can contribute to your own traditional IRA or Roth IRA. We will help you evaluate these options and decide which is best for you in the long-run. If you have substantial assets in taxable accounts, you might also consider a tax-deferred annuity for additional retirement savings and to minimize any capital gains or dividend taxes. We provide low-cost, investment only annuities for our clients. 

For high paid attorneys who make too much money to contribute to an IRA or Roth IRA, we can help you take advantage of the back-door Roth IRA option and find other ways to help you put more money away on a tax-deferred basis. 

Tax-Efficient Investment Strategy

For taxable accounts, we have the expertise to help you design and implement a tax-efficient investment strategy. We can help you take advantage of tax loss harvesting strategies to minimize your capital gains taxes. And we use low-cost, low-turnover mutual funds and ETFs in our investment strategies. 

Want to learn more? Watch our free webinar "Tax Minimization Strategies for Attorneys and Law Firm Owners." Available on-demand!