Tax Benefits Of Structured Settlements In Employment Cases

Law360 (September 25, 2018, 12:14 PM EDT) -- Employment cases are on the rise. With statutory provisions skewing these cases in favor of plaintiffs, including that plaintiffs can recover significant attorney fees if they prevail at trial, defendants can be eager to settle. Settlements often climb into five, six or even seven figures. Attorneys representing plaintiffs in these cases should be aware of the tax implications and plan accordingly.

Generally, settlement proceeds in employment cases are taxable. The post-tax recovery to the client is substantially less than the gross settlement. One strategy to reduce taxes is to structure the settlement proceeds. By spreading the settlement proceeds over several years,...

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