b p g u l f c o a s t o i l s p i l l l i t i g a t i o n – u n d e r s t a n d i n g y o u r r i g h t s

Tens of thousands of lawsuits have been filed against BP as a result

of the catastrophic 2010 oil spill in the Gulf of Mexico. The lawsuits

allege that BP failed to adequately prepare for disaster on a systemic

level; the company deliberately ignored crucial safety protocols and

procedures in order to save time and money. These acts of negligence

resulted in devastating consequences for those in the affected region.

In March 2012, BP reached a $7.8 billion settlement intended to cover claims of medical injuries, economic loss and property damage. With such a broad range of claims, it is imperative that claimants work with trusted advisors who can navigate them through complicated benefit preservation and tax code implications.

As an advocate for the civil justice system,

Milestone Consulting, LLC assists numerous

mass tort firms with settlement-planning advice

on behalf of each of their clients, whether

those clients are business owners or families.

Milestone provides individual consultation

to our clients, educating them on how the

acceptance of a settlement may affect and/

or benefit them. You may want your claim

paid in cash, but we want to let you know

that you also have other options; we are here

to guide you.

Businesses that sold or purchased products from affected areas and/or owned, operated, leased property or vessels in the Gulf Coast areas, or had business interrupted, may qualify for a claim. Tax regulations regarding settlement recoveries are handled differently for individuals than for businesses. At Milestone, we will help guide you through these regulations to determine how taxable income will affect your settlement.

Most business claims are not tax exempt, but settlement monies paid for damaged or destroyed property may be tax free if considered a “recovery of basis.” In other words, a claimant can receive up to the amount s/he originally paid for the property. If the claimant receives more in a settlement than what s/he originally paid for the property, the excess funds may be taxed. A clear understanding of the tax code and what it means for your settlement is critical in allowing you to get the recovery you deserve.

Because the settlement process is voluntary, there is a one-time tax-planning opportunity as part of the resolution of your claim. By taking settlement payments out over time, as opposed to accepting one large, lump sum payment, you may reduce your taxes by remaining below the threshold for many deductions, credits and/or allowances that phase out with increased income.

b u s i n e s s r e c o v e r i e s

w h a t d o e s t h i s m e a n f o r y o u ?

w h at t y p e s o f d e du c t i o n s c a n b e g i n to p h as e o u t w i t h a n i n c r e as e d a d j u s t e d g ro s s i n c o m e ( ag i ) ?

Home mortgage interest

Taxes

Charitable contributions

Miscellaneous itemized deductions subject to the 2% limit, including employee business expenses

Federal estate tax in respect to a decedent

Impairment-related work expenses

Amortizable bond premiums on bonds acquired before 10/23/86

Unrecovered investment in a pension

Repayments of income previously taxed

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There are a number of categories under which individual claimants or injured parties may be included, not limited to: those who live, work and/or were offered work in the Gulf Coast region during the oil spill and those who owned, leased or worked on property or vessels in the Gulf Coast region during the spills. At Milestone, we will help guide you through tax regulations and determine how they will affect your settlement.

Case Example: You are a small business owner whose business has been affected by the BP Gulf Coast Oil Spill. Your annual company income is $100,000. Without receiving a settlement, the average federal income tax for a small business (eligible for various deductions) will be $3,700.

Upon receiving a settlement, your options to consider are:

Lump Sum (receive a $150,000 settlement)

Interest earned on investing that money is fully taxable

Any returns on traditional investments are speculative and will vary over time

Upon receiving a lump sum payment, the average annual federal income tax due would be $49,000 ($45,300 additional tax liability)

Structured Payments2 (using a premium of $150,000)

Overall guaranteed benefits of $165,000.

The increase in annual income may allow you to remain below pre-determined thresholds, which may continue your eligibility for certain tax deductions.

The average federal income tax due would be $2,300 per year for 10 years beginning the year after settlement.

Total interest and tax benefit is $37,070. Lump Sum Net Settlement3 of $104,700 vs. Structured Settlement Net of $141,770

If you were injured, you have the option to take all or a portion of your settlement funds and place it in a tax-exempt annuity. A structured settlement provides you with an open plan design that allows you to choose when and how your funds are paid in the future. You can begin to collect payments right away or you can defer payments until a point in time down the road. It allows an injured claimant an additional option not available to others to plan their financial future.

p e r s o n a l i n j u r y / i n d i v i d u a l r e c o v e r i e s

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1 Milestone Consulting, LLC does not provide legal or tax advice. This document provides general information about

structured settlements. It should not be interpreted as a source of legal or tax advice. Please consult an attorney or tax

adviser if you have questions concerning the legal or taxable/tax-free elements of a proposed settlement.

2 The structured settlement payment is an illustration only and is subject to current rates and Insurance Company approval.

Actual rates used will be in effect on the date the premium is received or a valid lock is executed.

3 Model tax returns and examples provided by Dansa & D’Arata, LLP (www.darata.com)

Section 104 of the Internal Revenue Service Tax (IRS) Code (Compensation for Injuries or Sickness) declares that damages for personal physical injuries or physical sickness are tax free; however, there is still much confusion over what constitutes a “physical” injury or sickness. A clear understanding of the IRS tax code and what it means for your settlement is critical in allowing you to get the recovery you deserve. The guaranteed benefits you will receive from structuring your settlement far exceed the overall funds that you will retain if you accept a cash settlement. Milestone is dedicated to assisting plaintiffs through the complexities of litigation and helping them move ahead with their lives. Please call Milestone for a complimentary consultation of your settlement situation. We will work closely with you and your attorney, financial advisor and/or CPA to provide the expert advice you deserve.

For more information:

Visit: www.milestoneseventh.com

Speak with someone by calling 855.836.2676

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