Deferral Program - Optcapital

Optcapital’s deferral program is designed specifically and exclusively for plaintiffs’ attorneys, and offers a demonstrably better alternative to structured fees.

Program Highlights

Invest an unlimited amount on a pre-tax and tax-deferred basis
Deferred fees are invested with your Financial Advisor.
Highest level tax opinion for 15+ years.
Can defer directly from your IOLTA account, without involvement of defense counsel.

Tax deferred investing has two advantages:

You invest fees on a pre-tax basis. If you earn a $1 million fee, you invest the full $1 million rather than the after-tax amount (assume $600,000), providing a greater opportunity for appreciation.
You do not pay taxes on gains so long as the funds are in the account. If your $1 million deferral increases by 10%, you have $1.1 million. On an after-tax basis, if your $600,000 grew by 10%, you would pay taxes on the $60,000 gain, leaving you with roughly $640,000.

The chart below illustrates the power of investing on a pre-tax and a tax-deferred basis.

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How Our Deferral Program Works

BEFORE SETTLEMENT

You and Optcapital execute a deferral agreement prior to final settlement that designates the case(s) and the amount to be deferred. Unlike Structured Fees, the fees are not assigned to an offshore assignment company, so it is not necessary to notify or involve defense counsel or the defense insurance company.

Examples of deferral amounts are:

Defer $100,000
Defer 50% of the fee
Defer 80% of everything over $200,000
Defer 90% of fee received prior to December 31, 2019

AT TIME OF SETTLEMENT

Deferred fees can either be paid directly to Optcapital or to your law firm’s IOLTA account. When a paying agent is involved (like a QSF administrator), the deferred fees are typically paid directly to Optcapital. For single pay or single-plaintiff cases, fees are typically paid to the firm’s IOLTA account.

If fees are paid to your IOLTA account, the deferral amount is sent to Optcapital at the time fees otherwise would have been transferred to your operating account.

Once Optcapital receives the deferred fees, we credit your deferred amount with 100% of the fee received. There is no up-front fee, so if you defer $100,000, your starting balance will be $100,000.

INVESTMENT OF FEES

You designate the firm and individual that you want to manage the investment your fees (e.g., Jane Smith at ABC Wealth). Optcapital opens an account with that firm and your fees are held by that firm in a separate account.

Based on your objectives and risk tolerance, Optcapital sets the investment parameters for the account.

You also have the ability to:

Change your investment goals
Transition to another investment manager

WITHDRAWING FUNDS

Unlike traditional Structured Fees, you do not have to schedule withdrawals at the time of deferral. Optcapital’s deferral program has a 99-year life, so you can invest fees on a pre-tax and tax-deferred basis for as long as you want. In fact, you can incorporate your deferral account in your estate planning.

When you decide to withdraw funds, you can do so, subject to two rules:

You can withdraw up to 5% of your funds each quarter. So, if you wanted to withdraw all funds, you could do so over 20 quarters, or 5 years.
You must request a withdrawal 365 days in advance.

These restrictions are based upon IRS rules and are required for tax deferral. If you need to access funds greater than this amount, you can borrow from your Optcapital Line of Credit.

FAQ'S

Still have more questions about our deferral program?

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LOANS

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FOR FINANCIAL ADVISORS

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