The best time to protect a client and your firm is before anyone signs.
By Kimberly Drew Collins
Every year around this time, the pace begins speeding up for plaintiff firms. November and December bring a run of resolutions. Mediations scheduled months ago finally happen. Defendants and carriers look to close files before the year ends. Settlement agreements arrive with short turnaround times.
Each of those resolutions carries decisions that are easiest to make early and hard, or impossible, to make late. How the client receives the money. Whether the client keeps the benefits they rely on. When the firm recognizes its fee. Once the agreement is signed and the funds move, many of those options are already gone.
If you have matters resolving before December 31, now is the time to work through them.
The Rate Backdrop
The Federal Reserve raised its benchmark rate to a range of 3.75% to 4.00% in September, its first increase since 2023. On October 28, the Fed held that range steady, though two members dissented in favor of another increase, so I wouldn’t count on borrowing costs easing before year-end.
Rates reach settlement planning in two ways. Structured settlement payments are priced from insurer annuity rates, which track longer-term bond yields more closely than the Fed’s benchmark. In short, a structure quote from the spring may look different today. If your firm finances case costs on a variable-rate line of credit, you feel the Fed more directly, in the cost of carrying your inventory into next year.
For Your Client: Structure Before Signing
When damages arise from personal physical injury or sickness, a properly arranged structured settlement can provide future payments that are excluded from federal income tax. That treatment depends on building the structure into the settlement before the client receives the funds or gains an unrestricted right to them (spoiler alert: receiving funds into escrow closes this door). Once proceeds are paid to the client, the opportunity to structure that portion is generally lost.
That’s why timing is always my first question, and why I’d much rather meet a client before the settlement than after. After all, settlement planning works best when it begins before the settlement. A client who needs to think through a structure, consult family, or compare options needs that time before the terms are final. A short December turnaround can squeeze a decision that will shape the next twenty years of someone’s life into a few days.
Benefits eligibility deserves the same attention. For clients who rely on Supplemental Security Income or means-tested Medicaid (i.e., programs that have Income and Asset tests), settlement proceeds most definitely affect eligibility if they arrive without planning. Depending on the client’s situation, a special needs trust or similar arrangement may preserve those benefits while still giving the client access to their settlement. Spotting the need before disbursement gives the client and their advisors time to put protections in place.
Liens work the same way. Medicare conditional payments, Medicaid claims, and health plan reimbursement rights all have to be resolved, and each one changes how much the client actually takes home. When lien work starts after the agreement is signed, it’s usually the client, the person who has been affected the most and has waited the longest, who ends up waiting longer.
For the Firm: Fee Timing Is Decided Early
Our team talks a lot with firm owners who plan their own income only after a strong year is already on the books. By then, some of the most useful options have passed.
In the right circumstances, attorneys and firms can structure their contingency fees so the compensation arrives over future years. The arrangement generally has to be in place before the attorney has an unconditional right to receive the fee, and the tax treatment depends on how it is set up. A fee that has already been paid, or that the firm can already demand, generally cannot be deferred after the fact.
So if you’re closing a significant matter in December, you have a real choice. The fee can come in this year, which may already be a high-income year, or it can be scheduled over time to support cash flow, retirement planning, or succession. Making that decision before signing keeps both doors open.
When the Calendar Is Tighter Than the Decision
Sometimes the defense wants to close before year-end, and the claimants need more time to plan their distributions. That’s where a qualified settlement fund can help. Settlement proceeds move into a separate fund, established under a court order or other qualifying approval, where lien resolution, structured settlements, benefits planning, and distributions can be coordinated without rushing everyone.
In mass tort and multi-plaintiff matters especially, a QSF can turn a rushed December closing into an orderly distribution. The key is deciding whether one fits early enough to build it into the settlement.
Three Conversations Worth Having This Week
With clients whose cases may resolve before the year ends: whether a structure, a trust, or both belongs in their plan, and how much time they need to decide.
With your settlement consultant: which matters are approaching resolution, what lien and benefits work is outstanding, and whether a QSF makes sense for any of them.
With your tax advisor: whether this year’s fee income should arrive this year at all.
The weeks before a settlement closes are when the most consequential decisions are still open. The most valuable options often depend on choices made well before the money changes hands. Use them well, and you protect your clients and give your firm more room in the year ahead.
Mirena and Company works with plaintiff firms on settlement planning, structured attorney fees, and qualified settlement fund administration. If you have matters closing before the year ends, we’re glad to help you plan them.
Kimberly Drew Collins has helped firms and plaintiffs navigate strategic planning decisions since 2007. She is a Registered Settlement Planner, a licensed agent focusing on incorporating traditional insurance options into Settlement Plans and client portfolios, the Vice-President-Elect of the Society of Settlement Planners, and a Fiduciary Settlement Consultant working on behalf of Mirena and Company.