A non-fungible token (NFT) represents ownership of an asset. The asset could be almost anything, digital art is popular. Assigning a contingency fee (the asset) to an NFT opens up tax and risk management strategies.
Attorneys can treat each case as a mini-business where they earn "sweat equity" by having the plaintiff assign the contingency fee to NFTs (Contingency Fee NFTs) that are then transferred to the attorney. This can convert ordinary income into tax-advantaged capital gains.
1| The plaintiff has a right to A recovery that can be assigned:
A) In a traditional contingency fee agreement, and/or
B) To the owner of a NFT (making the NFT a contingency fee NFT).
2| the plaintiff splits the recovery Into two Parts:
A) One part to which the plaintiff retains the rights and keeps.
B) Another part is assigned to NFT owners (CFNFTs) to be used as payment for representation. The plaintiff is the initial owner of the CFNFTs.
3| The plaintiff TRANSFERS the CFNFTs to his/her attorney as payment for REPRESENTATION.
4| With an nft based fee AGREEMENT (CFNFT) in place prior to recovery THE PLAINTIFF'S ATTORNEY CAN:
A) Pay tax advantaged capital gains by selling CFNFTs to the mint (see below) for the value of the contingency fee after a recovery.
B) Pool CFNFTs with other attorneys to manage risk./p>
5| The plaintiff and his/her ATTORNEY work with the CFNFT mint to handle the TECHNICAL details of the CFnft transactions, such as:
A) Creating digital wallets.
B) Automatically transferring CFNFTs between wallets.
C) Holding the contingency fee funds (after a recovery has been made) on behalf of the CFNFT owner.
No cost to the client
Attorney pays a small fee of $100 plus 1% of the recovery ($1,000 max) to the mint.
One and done
Once the client agrees to the CFNFTs and the client has assigned the contingency fee to the CFNFTs, the client does not need to do anything else
There is no hassle for the client and the plaintiff's attorney is in control of the fee process.
Keeps fees down and saves client money
Effective tax management benefits everyone.
Not just for new cases
Any case with a likely recovery a year more away can realize long term capital gains.