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settlement components

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rhh

Member
What is the name of your state? CA

ok, so i win a wrongful termination or breach of contract case and realize a lump sum settlemnt based on future years lost earnings. i realize that there will be consideration of dollar value etc. my questions are:

will the settlemnt be increased to off set the increase in taxes? i.e. today i'm in say a 25 percent tax bracket, but a lump sum would place me in a 45 percent. fyi, i'm combining state and fed.

also, what about all the fees associated with the recovery of my earnings. will i receive attorney fees, etc. too?


thanks in advance....
 


Beth3

Senior Member
will the settlemnt be increased to off set the increase in taxes? i.e. today i'm in say a 25 percent tax bracket, but a lump sum would place me in a 45 percent. fyi, i'm combining state and fed. Heck, no. They aren't responsible for paying your taxaes.

also, what about all the fees associated with the recovery of my earnings. will i receive attorney fees, etc. too? That depends what you put into your claim but typically, each party is responsible for their own attorney fees and your attorney will receive a % of whatever you receive.
 

rhh

Member
both the increase of taxes and cost to collect are both damages...why wouldn't that be considered?
 

eerelations

Senior Member
If you're currently involved in a wrongful termiation/breach of contract lawsuit to the point where you are starting to expect to win, you MUST by now have an attorney representing you. The questions you asked should be easy-peasy for any attorney to answer and most certainly your own! Ask your attorney these questions and you'll get a much better quality answer than any of us can provide, given that your attorney will obviously be 'way more familiar with your case than we could ever be...
 

rhh

Member
ok...thanks for the responses! much appreciated. i'm not yet under written contract with an attorney. the attorney that i'm discussing my case is evasive about the tax and legal expense questions? his simple commnet is that he is not a cpa and can not give tax advise etc. i respect his comments and undersatnd the cya necessity. however, when he settles a case, he should know the componenets...at least i would think so? to me the increae in tax brackets, is a damage. the cost to collect is a damage.

any further thought(s)?
 

Beth3

Senior Member
both the increase of taxes and cost to collect are both damages...why wouldn't that be considered? Your taxes due on a wrongful termination claim are not damages. As to your attorney's fees, sure you can include that in the claim. You can include anything in the claim you want to. It's a question of what is awarded by a court or settled upon by the parties involved.

If, for example, I agreed to pay you $10,000 as a settlement of a claim, there's simply no way I'd agree to gross it up to $15,000 so you'd have your taxes paid. But then that's just me.
 

rhh

Member
maybe i'm being narrow minded...that's has happened before.....

so, the economist shows that i have been damaged by my employer to the tune of say 1,000,000 that would be based on say 10 years at 100,000 per year. so, the court agrees.... my point and center of my question is...that yes i feel good about my reward, justice was served, but what would have been earnings at the rate of 100,000 (taxed at 25 percent yer year) over the next ten years has become taxed at the 45 percent level. i've been damaged by the lump sum settlement...to the tune of 20 percent. again, shouldn't that be accounted for somewhere? or simply, that's life?

thanks again for all responses..........
 

cbg

I'm a Northern Girl
Look, if you want to try to get your taxes included in the settlement, fine, go to it. But it is not something you are entitled to under the law. No one ever said that settlements were guaranteed to be tax free, which is essentially what you are looking for.
 

rhh

Member
i appreciate your feedback,but think you have missed my point. again, the lump sum settlemnt creates a tax consequence. a substantial one at that, never looked for a free ride on my taxes. i just don't think i should be paying the increase in tax exposure....i didn't create this occurence, my employer did. for this to not be considered is an injustice.....sorry.

thanks again...
 

pattytx

Senior Member
Your point is very clear and everybody gets it. At this point, you should have an attorney representing you who can advise you. If your attorney does not want to address the issues you mentioned, then you can always get another attorney. Or maybe consider a structured settlement (although I am not a CPA, and not positive that would limit your tax exposure in any given year).

And excuse me, but if I were getting a million dollar settlement, I would be more than happy to pay the taxes related to it. :eek:
 

rhh

Member
the suggestion of a structured settlement is the only option that makes sense. i've made some inquires, not sure thou if that is an option.

please ...ALL ...take the time to read and think about my situtation.


here are the probabilities...........and i welcome all comments that any of the assumptions are PARTiALLY OR TOTALLY wrong! please correct me!!!!!!!!!!!!!

i, along with my attorney, do feel that i would receive the 1,000,000. here thou is how it would really look....

lump sum $1,000,000
attorney contingency (40 percent) -400,000
tax - fed & state (43 per cent fed 35 state 8) -430,000
attorney costs -50,000
in my pocket 120,000


yes, i think the numbers are correct!

here is the deal...i walked away from a 100,000 severance. why, because i thought that i'd get "a lot" of money. well, that it COULD BE true, from a top line view. but the net is really only 120,000.

i have risked 100,000 for really a 20 per cent return? 20,000 more or less.

i've made a couple big mistakes in my life.....this appears to be another...damn! yes, i am a willing to take the balme. i made the decision!

please, please, please.....if you are a cpa, an employee lawyer and see a flaw in my scenario...please let me know. based on the number of visits today to this topic, i'd hate to think that i have misslead anyone.

thanks.......crying in my beer!!
 

rhh

Member
no comments reharding my last post? yea or nea? would much appreciate some discussion...

thanks again!
 

pattytx

Senior Member
no comments reharding my last post? yea or nea?
Not from me! With this amount of detail, even if I were an attorney, which I am not, seems to me that advice given at this point could imply an attorney/client relationship which no attorney is going to get into on a message board.
 

rhh

Member
i'm not looking for any discussion of the merits of my case...i'm simply asking is my scenario of money correct or not? while at first glance...the notion of a 1,000,000 settlement is WOW! however, the assumed bottom line number mentioned above is concerning!

fyi.....
 

Katy W.

Member
A settlement negotiation goes like this: you and your attorney decide what your bottom line is. Then you ask for more than that. Then they offer less. ETC. The amount you will accept is decided on by you and your attorney, taking into account anything you want to take into account, including taxes.
 

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