Does our small group need a CPA or Tax Lawyer for a group settlment?

May 17, 2019 4:38 AM

What kind of financial professional does a group of condo owners need to minimize taxes and structure the disbursement of funds from a lawsuit settlement?

A half dozen abutters from two different condo trusts brought a lawsuit against a developer, which has ended in a settlement. There are two named individual plaintiffs, the closest, most impacted abutters. The entire group, acting as individuals, not their respective condo associations, put up money for the lawyer and put in massive amounts of time and work.

The group wants to structure the settlement funds as follows, if possible:

--Set up one escrow account to repay everyone for their contributions to the legal fund and leave enough money in that account to pay any future legal fees, if needed, to keep the developer in compliance with the settlement.

--Set up two separate escrow accounts with the remaining monies to benefit all condo residents. Half the group belongs to one condo trust, half to another trust within the same development. However, due to current (mis) management, the settlement recipients would like to keep the settlement funds in escrow accounts, separate from the two condo trust accounts. Funds from each escrow account could be used to mitigate assessments, beautification, etc.

Maybe none of this is doable or advisable. What kind of professional does the group need to sort this out, a CPA or a tax lawyer? The group doesn't even know who should get the settlement check, something that has tax implications. The group's lawyer is staying out of this since it's not his area of expertise.

posted by anonymous to Law & Government (2 answers total)

I'm surprised that the group's current attorney doesn't have a recommendation for a tax attorney who is also a CPA. If you really do have to find someone unassisted, that's generally who I think you should be looking for. Experience with trusts and financial planning is also necessary, if I understand your situation. It shouldn't be terribly expensive to get an idea of your options and what the total cost of each would be even if their hourly rate is high. That tends to be the case for people who spend almost all of of their working time figuring out how to ensure the wealthy remain that way for all eternity.

With options in hand, you can choose a way forward with confidence, knowing that you have the best possible information with which to weigh the costs, benefits, and consequences of each.
posted by wierdo at 10:03 AM on May 17, 2019

This forbes article says that your settlement may not be taxed as income but be treated as a reduction in your purchase price. You really need a tax expert before even accepting the check. I would think the checks should be made out to the trusts, but again that is something the expert should know.
posted by soelo at 12:49 PM on May 17, 2019 [1 favorite]