Is there a minimum or maximum amount that can be placed into Fee Structure Plus® (FSP)?
An FSP account must be funded with a minimum of $100,000.00. There is no maximum.
Can the payee be the law firm?
Yes, the payee can be the attorney or the law firm. The payee will be reflected in the settlement documents.
Can FSP be used for a claimant in a non-physical injury case (non-qualified settlement)?
Where are the assets funding the Fee Structure Plus® payments held?
To take advantage of the U.S.-Barbados Tax Treaty, the FSP funds are initially sent to a Barbados-domiciled assignment company. Upon receipt of the funding amount, the assignment company immediately sends funds via wire transfer to a United States-domiciled trust company for custodianship and management. The funds are ultimately held by the trust company. Alternatively, the trust company may transfer the funds to an external financial advisor’s platform upon the attorney’s request.
Why is the assignment company located in Barbados?
The assignment company is domiciled in Barbados to make use of the United States-Barbados Tax Treaty, which prevents double taxation.
What is the role of a trust company?
The trust company serves as the master custodian and administrator of the FSP program. It is responsible for accounting, tracking, reporting (including tax reporting), and calculations on behalf of the assignment company.
What are the fees for FSP?
The fees for FSP are as follows:
- One-time assignment fee of $1,000
- One-time administrative fee of $400
- Annual fee equal to 1% of the Fee Structure Plus® account value. Fee is deducted at the time of account establishment and on or about each annual anniversary date thereafter.
If investment advisory services by an external financial advisor or active management by the trust company are desired, the external advisor’s or trust company’s fees are added to the program fees outlined above.
What does the annual FSP program fee cover?
The highly competitive 1% program fee covers ongoing program administration costs, operating expenses of the assignment company, and custodial and administrative services provided by the trust company. It also provides the attorney or law firm with access to the trust company’s investment asset allocation models at no additional cost.
Can an attorney structure fees with FSP even if his or her client does not select a structured settlement?
Yes, an attorney can choose to maximize fees using FSP regardless of what the claimant decides to do. FSP is available for stand-alone attorney fee structures. However, the ability to utilize FSP must be included in the settlement agreement.
Is FSP limited to physical injury cases?
No, FSP is available to attorneys who represent clients in any type of contingency fee case.
Are the assets within FSP accounts protected from creditors of the attorney or law firm?
While the attorney or law firm would be the payee of the future payments, the assets used to fund the FSP payments are owned by the assignee, Structured Assignments, SCC, through its segregated cell, Class A Cell, pursuant to a non-qualified assignment. Since the attorney and/ or law firm have the right to receive periodic payments but do not have ownership rights of the underlying assets, the assets are not subject to claims of the attorney’s or law firm’s creditors.
Can the attorney designate beneficiaries?
Yes, the attorney can designate both primary and contingent beneficiaries.
What type of tax reporting is required for FSP?
The trust company, on behalf of the assignment company, will issue a 1099-MISC to the attorney or law firm payee during the year(s) in which payments are made. The payee then reports the payments as ordinary income for tax purposes.
Can the attorney view the balances in the FSP account online?
Yes, online view-only access to the account is available.
Do the laws governing ERISA plans and other deferred compensation plans apply to the FSP program?
No, pursuant to the Childs v. Commissioner Tax Court case, a structured attorney fee payment is viewed as non-employee deferred compensation. Further, it falls under Section 83 of the Childs decision and was exempted from the IRC §409A deferred compensation regulations in IRS Notice 2005-1. Copies of the Childs decision and Notice 2005-1 are available upon request.